. Grocery operations continue to perform well
. Creation of IZICO, integrating our frozen food business
. Execution of reorganisation progressing well
CEO statement
2012 was a turbulent year for the global economy. The Eurozone in particular witnessed much instability while low consumer confidence led to sluggish demand. The organic food market seemed almost untouched by these conditions, trending positively with mid-single digit growth.
2012 could be characterised as a challenging year for Wessanen as well. It was the first year of executing our three-year strategic objectives: managing topline growth, profitability improvement and enablers. We have made clear progress in numerous areas, however not all of our initiatives have resulted in the desired outcome. Consequently, we have launched a transformation process - Wessanen 2015 - to improve our focus and substantially reduce complexity.
The grocery channel was once again the driving force behind the growth of organic food. We achieved 4.6% organic growth in this channel with our core categories and brands in 2012. In the fourth quarter we realised 6.9% autonomous growth. Newly acquired Clipper showed a strong performance as well, posting 11% growth versus last year. The health food stores channel only grew modestly. Our HFS performance was disappointing, particularly due to our wholesale and distribution activities.
At Frozen Foods we are integrating under new leadership both businesses into one stronger company, newly named IZICO. A sharpened, focussed strategy will establish IZICO as a more profitable business by the end of 2013.
ABC capitalised on improvements in the previous years, leading to ongoing autonomous revenue growth. Daily's maintained its leading position in the attractive ready-to-drink cocktails market thanks to strong advertising campaigns across diverse media channels, innovations and an increase in distribution. Postponing the divestment process was a setback. After a comprehensive process to divest ABC, we had to conclude that the bids received did not adequately reflect ABC's fundamental value, resulting in the decision to postpone the sale in December.
Although Wessanen realised 0.7% autonomous growth in 2012, we had to report a full year net loss of €53 million, driven by the weakened performance in parts of our business, costs incurred for our transformational programme and impairment losses at Allos, Kallo, Tartex and IZICO.
To make Wessanen more profitable, we are conducting a transformation to realise cost savings and be a more consumer- and customer-led company. By becoming more agile, more focussed, less complex and more efficient, Wessanen should be growing profitably in all business segments in the near future.
I fully acknowledge the consequences this reorganisation will have for many of our colleagues, who will be leaving. I am grateful for their considerable contributions in building our businesses.
Whilst 2013 will be another challenging year, I am confident that with the dedication and commitment of our people we will be able to further boost the sustainable growth and long term value for all stakeholders.
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Q4 2012 highlights
Autonomous revenue growth of 0.7%, Grocery operations continue to perform well (+6.9%)
Majority of core brands and categories showing growth, including number one brand Bjorg
Initiated and executing reorganisation impacting 300 FTEs; expected cost savings €15 million per
annum as of 2014
Creation of one integrated frozen foods company, named IZICO
Sizeable goodwill impairments for Kallo, Allos and Tartex; PP&E impairment for IZICO
Divestment ABC postponed; bids received did not adequately reflect ABC’s fundamental value
Full year highlights
Acquisition and seamless integration of Clipper, UK market leader in organic and fair trade teas
Grocery continues to perform well; performance at HFS businesses disappointing
Supervisory Board strengthened; Nutrition, Food Safety & Sustainability Committee established
Dividend per share €0.05, representing a 40% pay-out of net result, excluding exceptional items
Consolidated key figures Q4 and FY 2012
in € million, unless stated otherwise Q4 2012 Q4 2011 FY 2012 FY 2011
Revenue 163.8 157.2 710.8 706.0
Autonomous revenue development
1
0.7% 0.7%
Normalised operating result (EBITE) 1.9 (1.3) 18.8 23.7
as % of revenue 1.1% (0.8)% 2.6% 3.4%
Operating result (EBIT) (61.6) (39.9) (45.8) (19.0)
Net result, attributable to equity holders (61.5) (35.1) (53.2) (17.1)
Cash flow from operating activities 3.7 7.9 14.6 8.8
Net debt 54.9 32.2 54.9 32.2
Earnings per share (in €) (0.81) (0.46) (0.70) (0.23)
Average nr. of outstanding shares (x 1,000) 75,682 75,665 75,688 75,343
1)
Including adjustments for currency effects and acquisitions/divestments
CEO statement
2012 was a turbulent year for the global economy. The Eurozone in particular witnessed much instability while low consumer confidence led to sluggish demand. The organic food market seemed almost untouched by these conditions, trending positively with mid-single digit growth.
2012 could be characterised as a challenging year for Wessanen as well. It was the first year of executing our three-year strategic objectives: managing topline growth, profitability improvement and enablers. We have made clear progress in numerous areas, however not all of our initiatives have resulted in the desired outcome. Consequently, we have launched a transformation process -
Wessanen 2015 - to improve our focus and substantially reduce complexity.
The grocery channel was once again the driving force behind the growth of organic food. We achieved 4.6% organic growth in this channel with our core categories and brands in 2012. In the fourth quarter we realised 6.9% autonomous growth. Newly acquired Clipper showed a strong performance as well, posting 11% growth versus last year. The health food stores channel only grewmodestly. Our HFS performance was disappointing, particularly due to our wholesale and distribution activities.
At Frozen Foods we are integrating under new leadership both businesses into one stronger company, newly named IZICO. A sharpened, focussed strategy will establish IZICO as a more profitable business by the end of 2013.
ABC capitalised on improvements in the previous years, leading to ongoing autonomous revenue growth. Daily’s maintained its leading position in the attractive ready-to-drink cocktails market thanks to strong advertising campaigns across diverse media channels, innovations and an increase in distribution. Postponing the divestment process was a setback. After a comprehensive process to divest ABC, we had to conclude that the bids received did not adequately reflect ABC’s fundamental value, resulting in the decision to postpone the sale in December.
Although Wessanen realised 0.7% autonomous growth in 2012, we had to report a full year net loss of €53 million, driven by the weakened performance in parts of our business, costs incurred for our transformational programme and impairment losses at Allos, Kallo, Tartex and IZICO.
To make Wessanen more profitable, we are conducting a transformation to realise cost savings and be a more consumer- and customer-led company. By becoming more agile, more focussed, less complex and more efficient, Wessanen should be growing profitably in all business segments in the near future.
I fully acknowledge the consequences this reorganisation will have for many of our colleagues, who will be leaving. I am grateful for their considerable contributions in building our businesses.
Whilst 2013 will be another challenging year, I am confident that with the dedication and commitment of our people we will be able to further boost the sustainable growth and long term value for all stakeholders.
Dividend 2012
Wessanen’s dividend policy is aimed at paying out a dividend of 35-45% of the consolidated net result excluding major non-recurring effects. It is therefore proposed to the Annual General Meeting of Shareholders to pay a dividend of EUR 0.05 per share representing 40% of the consolidated net result, excluding major non-recurring effects. The dividend will be paid wholly in cash.
Time table: AGM and dividend 2012
4 March Publication Annual Report 2012 and Agenda AGM (online)
19 March Record date
16 April Annual General Meeting of Shareholders (Sheraton Schiphol) (14h00)
18 April Ex-dividend date
26 April Payment date dividend
Supervisory Board rotation plan
In accordance with the rotation plan, Mr Frank van Oers will step down after the AGM. The Supervisory Board proposes to reappoint him for a second term of four years as his extensive knowledge and experience in both financial and general management will be of great benefit in view of the transformation process that Wessanen is undergoing.
Mr Hautvast will retire after the AGM. He has been a member since 2004 and the Company has benefited in particular from his in-depth knowledge in the area of nutrition. The Supervisory Board is grateful for his contribution during this period.
‘Wessanen 2015’, our transformational programme
As announced last November, we have launched a sizeable reorganisation - labelled ‘Wessanen
2015’ - to restructure our European and IZICO activities, impacting approximately 300 FTE. To address the structure and cost base of the company, a wide range of actions have been initiated to increase focus and substantially reduce complexity. In addition, we are addressing low-yielding and non-performing activities.
Within our core business, we are to build a better integrated European organisation in order to make our organic brands most desired in Europe. We will transform into an organisation which will be marketing-led and with corner stones to leverage our scale in innovation and category alignment through Category Brand Teams, central sourcing, manufacturing, quality and ICT. To further improve our performance, we will create more focus on our activities in the countries, reduce complexity and simplify processes. As part of this reorganisation, we are reducing the size of our fixed overheads in line with the reduced size of the group following numerous divestments over the last few years.
At IZICO, Beckers Benelux and Favory will become one integrated company with the aim to strengthen its Benelux market positions, improve profitability and enable it to better cope with the challenging environment. This integration will affect various departments such as marketing, sales andfinance. In March 2013, the Favory snacks plant in Deurne will be closed for which an impairment loss on property, plant and equipment of €7.0 million has been recognised.
Cost savings in the order of €15 million per annum are expected from 2014 onwards. The one-off costs, which will have a cash effect, are estimated to be €(21) million. €(16.3) million of these costs have been accounted for in Q4 2012.
Impairment losses Allos, Tartex and Kallo
The annual impairment test for all cash generating units resulted in goodwill impairments. Our UKbusiness had to impair €15.8 million of goodwill, mainly due to lower growth projections for Kallo dairy alternatives, the loss of a private label contract and an adverse movement in the pre-tax discount rate.
Mainly lower growth projections for the Reformhaus channel and insolvency of one of our private label customers resulted in an impairment loss of €19.9 million at Tartex. At Allos an impairment of €3.5million was recorded, mainly due to lower growth projections for two product categories and limitations in our ability to translate factory input costs into price increases.
Financial guidance FY 2013
Net financing costs expected to be €3-4 million
Effective tax rate expected to be around 35%
Capital expenditures expected to be €8-10 million
Depreciation and amortisation expected to be €14 million
Non-allocated expenses (including corporate expenses) expected to be €11 million
Bridge from normalised EBIT to operating result
in € million, unless stated otherwise Q4 2012 Q4 2011 FY 2012 FY 2011
Normalised EBIT 1.9 (1.3) 18.8 23.7
Impairments (46.7) (37.0) (46.8) (39.6)
Restructuring ‘Wessanen 2015’ (16.3) - (16.3) -
Other exceptional costs (0.5) (1.6) (1.5) (3.1)
Reported EBIT (61.6) (39.9) (45.8) (19.0)
Segment overview
in € mln, unless stated otherwise
Grocery HFS IZICO ABC Non-allocated Wessanen
Q4 12 Q4 11 Q4 12 Q4 11 Q4 12 Q4 11 Q4 12 Q4 11 Q4 12 Q4 11 Q4 12 Q4 11
Revenue 68.9 58.7 50.9 53.3 29.0 29.1 16.9 18.0 (1.8) (1.9) 163.9 157.2
EBIT (13.0) (1.6) (29.6) (19.5) (12.5) (14.4) (3.0) (0.3) (3.5) (4.1) (61.6) (39.9)
Impairments (15.8) (3.0) (23.9) (19.8) (7.0) (14.3) - 0.1 - - (46.7) (37.0)
Other exceptionals (3.5) (0.5) (6.5) (1.0) (6.2) (0.3) - 0.1 (0.6) 0.1 (16.8) (1.6)
Normalised EBIT 6.3 1.9 0.8 1.3 0.7 0.2 (3.0) (0.5) (2.9) (4.2) 1.9 (1.3)
€ mln, unless
stated otherwise
Grocery HFS IZICO ABC Non-allocated Wessanen
FY 12 FY 11 FY 12 FY 11 FY 12 FY 11 FY 12 FY 11 FY 12 FY 11 FY 12 FY 11
Revenue 272.8 243.9 204.8 247.5 112.5 113.1 128.6 112.6 (7.9) (11.1) 710.8 706.0
EBIT 1.5 15.6 (30.4) (21.8) (11.4) (12.3) 6.3 11.1 (11.8) (11.6) (45.8) (19.0)
Impairments (15.8) (3.0) (23.9) (23.1) (7.0) (14.3) (0.1) 0.8 - - (46.8) (39.6)
Other exceptionals (4.7) 0.6 (6.5) (3.7) (6.2) (0.3) 0.1 0.4 (0.5) (0.1) (17.8) (3.1)
Normalised EBIT 22.0 18.0 - 5.0 1.8 2.3 6.3 9.9 (11.3) (11.5) 18.8 23.7
Grocery
in € million, unless stated otherwise Q4 2012 Q4 2011 FY 2012 FY 2011
Revenue 68.9 58.7 272.8 243.9
EBITDAE 6.9 2.1 24.0 19.0
Normalised EBIT 6.3 1.9 22.0 18.0
Operating result (EBIT) (13.0) (1.6) 1.5 15.6
Revenue has grown 17.2% to €68.9 million.
Autonomous revenue growth was 6.9% with price/mix contributing 2.1% and volume 4.8%. The appreciation of the British pound added 1.0% and Clipper contributed €5.5 million (9.3%). All countries reported autonomous revenue growth.
Normalised EBIT was up to €6.3 million as a result of higher sales, a slightly decreased gross margin,reduced warehouse and transportation costs and lower marketing spending (mainly due to phasing) and other selling expenses.
In France, Bjorg continued to grow market share driven by strong performances of amongst others dairy alternatives and sweets-in-between. In a modestly growing French dietetic market, Gayelord Hauser reported stable revenues, while Dr Schär gained market share. After the launch of Clipper in France early 2013, we continue to increase distribution. Other brands such as Krisprolls continue to grow as well.
As of January 2013, Kallo and Clipper organisations are fully integrated. Both Kallo and Whole Earth showed autonomous growth, while Clipper gained market share in a stable tea market. Bread replacers and sweet spreads continue to trend favourably. The disappointing results of the launch late 2011 of Kallo soy was one of the key drivers for the goodwill impairment at our UK business. Almond Breeze is showing good growth in dairy alternatives benefiting from increased distribution.
In Dutch supermarkets, Zonnatura and Dr Schär both showed year-on-year growth. We have ended 2012 with 250 Biobest shelves, our modular dedicated organic shelf. Despite good growth in the number of shelves, product rotation on the shelves remained at a low level. We expect a range of Clipper teas to be launched during the first half of the year at multiple grocery chains.
In both Italy and Germany we have been addressing our loss-making grocery operations, which should contribute to an improvement in margins and earnings in 2013.
Health Food Stores (HFS)
in € million, unless stated otherwise Q4 2012 Q4 2011 FY 2012 FY 2011
Revenue 50.9 53.3 204.8 247.5
EBITDAE 1.2 1.8 1.7 7.1
Normalised EBIT 0.8 1.3 - 5.0
Operating result (EBIT) (29.6) (19.5) (30.4) (21.8)
Revenue declined to €50.9 million. An autonomous revenue decline of 4.5% was reported with a positive price/mix of 0.4% and volumes being 4.9% lower.
Normalised EBIT was lower at €0.8 million mainly due to a lower gross profit as a result of lower sales volumes and increased marketing expenses due to phasing.
In France, Bonneterre reported lower sales for its wholesale distribution as well as its own brands, mainly due to fruits and vegetables. Fresh distributor Biodistrifrais showed growth in the quarter. The process of transferring Bonneterre into a branded business is progressing. A cutting the tail programme has been started to reduce the number of SKUs, including exiting the frozen range. The marketing team will move to Lyon and be integrated with the Grocery team and transportation will be outsourced to a third party.
In the Benelux, revenue was lower as a result of the impact of previously lost customers and a decrease at fresh supplier Kroon. Our existing formula stores and independent stores continue to increase their volumes. Going forward, we have decided to focus on one formula store, being Natuurwinkel. It is a strong franchise formula existing for over 20 years and benefiting from a refresh operation for its stores started earlier in the year.
The German market is trending in line with previous quarters with general HFS stores being up, while the channel of specialised stores (‘Reformhaus’) is declining. We are revitalising our brands, putting more focus on consumer-led innovations and working on product portfolio rationalisation.
Savoury spreads showed a decline, mainly due to lost volumes in relation to the insolvency of an important customer. Both Allos and Tartex showed a decline, the latter impacted by the decline at the ‘reformhaus’ stores.
American Beverages Corporation (ABC)
in € million, unless stated otherwise Q4 2012 Q4 2011 FY 2012 FY 2011
Revenue 16.9 18.0 128.6 112.6
EBITDAE (1.1) 0.3 10.3 12.9
Normalised EBIT (3.0) (0.5) 6.3 9.9
Operating result (EBIT) (3.0) (0.3) 6.3 11.1
in US$ million, unless stated otherwise Q4 2012 Q4 2011 FY 2012 FY 2011
Revenue 22.3 23.4 166.3 157.4
Normalised EBIT (3.8) (0.8) 8.1 13.9
Operating result (EBIT) (3.8) (0.7) 8.1 15.5
Revenue amounted to US$22.3 million. Autonomous growth was (4.7)% as a result of 6.0% lower volumes and a positive price/mix of 1.3%. This revenue decrease is primarily due to lower ready-todrink frozen pouches sales, driven by increased competition and existing channel inventories, and the lower release from over-accrued performance trade spend in Q4 2012 in comparison with last year.
Daily’s remained its position as the clear market leader in the RTD frozen pouches segment.
The strong performance of Little Hug did partly offset these developments. Little Hug continued to benefit from its revitalisation process, showing strong growth in both 20-count and 40-count boxes.
EBITE decreased to $(3.8) million as a result of a lower gross profit mainly due to lower sales volumes, increased incidental depreciation expenses and lower production cost absorption as a result of the six weeks close-down of the production plant.
During the second half of the year, we conducted a comprehensive process to divest ABC. It showed a good level of interest from strategic and financial parties alike. In December, however we had to conclude that the bids received did not adequately reflect ABC’s fundamental value, resulting in the decision to postpone the sale of ABC. Despite ABC’s continued success, the uncertainties attached to its relatively short track record in the emerging RTD frozen pouch category appeared to have held back interested parties’ views on value. In light of this and ABC’s outlook for 2013, we view a postponement to be the right course of action in order to realise better value for our shareholders at a later stage.
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