CEO Leif Bergvall Hansen comments on the fourth quarter and year-end report 2018
The Group’s net sales increased by 7 percent pro forma to MSEK 8,797 compared to MSEK 8,207 pro forma in 2017. Growth in the fourth quarter was 5 percent and net sales amounted to MSEK 2,166. All segments contributed to the growth in the quarter and for the full year.
Adjusted operating income for 2018 amounted to MSEK 372 compared to MSEK 376 pro forma 2017, corresponding to a margin of 4.2 (4.6 pro forma) percent. Adjusted operating income for the fourth quarter amounted to MSEK 102 (116) corresponding to a margin of 4.7 (5.6) percent. Significant raw material cost increases impacted the result by MSEK 85 in the quarter. Price increases already carried out compensated by MSEK 79. During the fourth quarter we reviewed and aligned the practice for depreciation within the Group. The increased useful lifetime of our assets concluded by the analysis will have a positive effect on our operating margin going forward. The effect on adjusted operating income was around MSEK 28 in the fourth quarter 2018. The fourth quarter 2017 had a positive effect of MSEK 27 from third party compensation. In 2019, the quarterly depreciation expense is estimated to be around MSEK 45 (before effects of the implementation of IFRS 16).
Strong development in the chilled and Ready-to-eat categories had a positive contribution to the margin while stock clearance in the frozen category had a negative impact. Thanks to a strong operating cash flow, net interest-bearing debt decreased by MSEK 180 in the quarter to MSEK 1,913.
The Ready-to-eat category continued to grow at a higher rate than the rest of the business in the fourth quarter. With 18 percent of revenue it is about to become our second largest category, as the less profitable frozen category is continuing to decline. Following the recent investment to expand our largest Ready-to-eat plant, we are well positioned to meet a high order intake which bodes well for sales growth and fixed cost dilution within the Ready-to-eat category.