|
Jan-Dec' 20 |
Jan-Dec' 19 |
Change |
Like-for-like* |
Revenue |
912,160 |
849,697 |
7.4% |
8.3% |
EBITDA |
234,433 |
200,957 |
16.7% |
27.7% |
EBITDA Margin |
25.7% |
23.7% |
2.0 p.p. |
4.2 p.p. |
Operating profit |
162,907 |
130,283 |
25.0% |
|
Net Profit |
122,513 |
105,577 |
16.0% |
* The like-for-like results exclude the impact of the fluctuations in the different exchange rates during 2020, and the non-recurring impacts the business recognised in 2019 on the operating profit €2.9 million euros for the 2019 financial year originating from the net amount of the business combinations due to the acquisition of Nitta Casings Inc. (USA) and Nitta Casings (Canada) Inc., legal and advisory expenses associated with the acquisition, the impairment of the goodwill of Nanopack Technology & Packaging S.L. and the impact of the strike in the United States
The spread of COVID-19 during 2020 has created an environment of uncertainty, volatility, as well as a healthcare and economic crisis, which have affected practically every economy in the world, and having implications on the behaviour and eating habits of a multitude of countries. Within this context, in general terms this has resulted in an increase in the consumption of sausages and other cold meats with the subsequent increase in demand for casings on a global level.
The spread of COVID-19 during 2020 has created an environment of uncertainty, volatility, as well as a healthcare and economic crisis, which have affected practically every economy in the world, and having implications on the behaviour and eating habits of a multitude of countries. Within this context, in general terms this has resulted in an increase in the consumption of sausages and other cold meats with the subsequent increase in demand for casings on a global level.
Protecting health:
To ensure supply:
With the aim of combating the spread of the virus and its effects:
With regard to liquidity, the company has a positive working capital of €331 million as at 31 December 2020. No liquidity stress is anticipated for 2021 as a result of the forecast performance of the Group, which contemplates a positive generation of cash during 2021. For those bank borrowings where compliance with certain ratios is established, there have not been, nor are they expected to be, any breaches of these ratios in 2021.
No significant signs of impairment have been identified from the analysis of the fixed assets, intangible assets, property plant and equipment, customers or inventory.
As a result of the growth in the market and the measures implemented to mitigate and control risk, the COVID-19 pandemic has not resulted in any changes to the strategic direction, operations, financial results, economic situation and cash flows that have significantly affected the fulfilment of the objectives presented the market for the whole of 2020 and the plans for 2021.
2020 has been marked by the COVID pandemic, which among many aspects of our lives, it has affected the food habits in many countries due to the measures to prevent the spread of the virus, with home confinements, social distancing and mobility restrictions. This situation has generated a greater demand for products aimed at applications that generally have a greater consumption in the home, to the detriment of others that are generally consumed in the street, restaurants and social events.
In this environment, casings have demonstrated to be an essential ingredient for the production of basic foodstuffs for millions of homes around the world, and the market has grown throughout the year above the pace observed in recent years, especially in the case of cellulose and fibrous casings, which are greatly used in the production of sausages destined for home consumption.
During these years of the rollout of the MORE TO BE strategy, Viscofan has increased its production capacity, developed a new production technology, increased its range of products, launched innovative products and reached a more diversified geographic positioning that is closer to the end markets with the acquisition of companies in Germany, Australia, Belgium, Canada, United States and New Zealand.
This operational and financial strength has allowed us, within the context of this pandemic, to quickly attend to a higher market demand by increasing the capacity at our production centres (thus highlighting the greater available capacity thanks to the new cellulose and fibrous technology installed in Cáseda), while in parallel, the healthy balance sheet and the focus on service has allowed us to generate a safety inventory to tackle any possible contingencies deriving from mobility restrictions or capacity constraints caused by the pandemic. All this guaranteed the supply of casings during the most critical months of shortages and restrictions.
With this backdrop of global uncertainty, customers have reinforced their trust in Viscofan as their preferred option in the casings market, with an increase in sales volumes above the growth observed in the market. Part of this growth is also due to the success of the new products launched in recent years, of particular note being the Marathon Line cellulose casing, the Natur casing aimed at replacing pig gut casings, new fibrous products, added value plastics, the transference of spices and the “veggie casing” as a new proposal for a vegetable-based edible casing.
The improvement in the market share has been accompanied by the consolidation in 2020 of projects focusing on increased efficiency and automation in production plants. Thus, the growth in sales, greater production level and use of a higher installed capacity has driven the operating margins. In this regard, special mention should be made of the efficiencies and savings obtained using the new cellulose and fibrous technology at Cáseda in scarcely two years since its start-up.
With regard to raw material costs, the early months of the confinement in Europe caused a shortage of hides for their use as a raw material for collagen, thus increasing its cost. This increase tapered off throughout the year and has been offset by the low cost of some auxiliary raw materials, such as caustic soda or glycerine and the depreciation of the US$ against the €.
Viscofan has adapted to the mobility restrictions of people and materials through changes to its production, logistics and investment plans. Among these projects are those aimed at improving the production speed and efficiency of the collagen production assets in the United States and Canada acquired in December 2019 from Nitta Gelatin Inc. -renamed Viscofan Collagen USA Inc. and Viscofan Collagen Canada Inc.-, which after the initial delays are proceeding favourably and currently expected to be concluded during 2021.
The new fibrous technology in Cáseda (Spain) is exceeding the initial expectations and reaching double-digit growth in sales for the year. As a result, in 4Q20 Viscofan commenced its investment in Cáseda to install new fibrous lines, an additional capacity that will be available during the second half of 2021.
In December 2019, the Viscofan Group included the collagen casings companies in the United States and Canada acquired from Nitta Gelatin Inc. (renamed Viscofan Collagen USA Inc. and Viscofan Collagen Canada Inc.) thus improving customer proximity and completing the production portfolio with this new technology in the United States.
For the whole of 2020, the acquired companies contributed €29.8 million to revenue and €0.04 million to the consolidated EBITDA.
Revenue
EBITDA
Net profit
The results for 2020 demonstrate the robustness of Viscofan’s business model during the year marked by the impact of the pandemic and the weakness of the main currencies against the Euro, with growth in the main financial figures, which reached new all-time highs in revenue and in EBITDA.
Revenue stood at €912.2 million after growing 7.4% year-on-year, EBITDA totalled €234.4 million showing a growth of 16.7% compared to the previous year, and net profit was €122.5 million, 16.0% higher than the previous year.
These results are in line in revenue, and above in terms of EBITDA and Net Profit compared with the Guidance3 for 2020 full year announced in February 2020
Capex in 2020 totalled €56.9 million, 8.4% down on the €62.1 million invested in 2019. This amount includes the projects concluded during the last quarter of the year, of particular note being the installation of two cutting-edge cogeneration engines with the capacity to use green hydrogen as a fuel and the first works for the installation of new fibrous production lines in Cáseda (Spain) with the aim of meeting the expected growth, which places capex in the year 5.3% higher than that initially planned.
A stronger balance sheet at the end of December 2020 thanks to the generation of cash flow from operations, with net bank debt of €38.2 million, a decrease of 10.2% compared to the €42.5million as at December 2019, even after a major dividend cash outflow in the year of €109.4 million in 2020 compared to €74.3 million in 2019.
The Board of Directors has approved to propose a final dividend of €0.29 per share payable in the month of June and to continue with a growing remuneration for shareholders. This proposal represents a total remuneration charged to profit for 2020 of €1.70 per share, 4.9% more than the total remuneration for 2019.
Revenue
Viscofan has reinforced its global leadership by combining higher sales in all reporting geographic regions and in all product families
Consequently, revenue in 2020 amounted to €912.2 million, a growth of 7.4% vs. 2019, +9.3 p.p. of which correspond to like-for-like[2] casings sales thanks to volume growth and the improvement in the sales price mix, and +3.5 p.p. are due to the incorporation of Nitta Casings, compared to a decrease of -1.0 p.p. due to lower comparable sales of co-generation and -4.4 p.p. due to the variation in exchange rates.
In like-for-like terms, revenue for 2020 was up 8.3% on 2019 once the change in the scope of consolidation and the variation in exchange rates was excluded.
Of the total revenue, €875.3 million correspond to casing sales, up +8.8% vs. 2019, and €36.9 million to revenues from the sale of co-generation energy, which decreased by -18.4% vs. 2019 due to the lower remuneration of energy in Spain and the lower electricity produced as a consequence of the engine shutdown carried out to install the new cogeneration engines in Cáseda
For the year as a whole, all reporting regions contributed positively to revenue growth. The geographical[3] breakdown of revenue in 2020 is as follows:
Operating expenses
For the year as a whole, cost of consumption[4] grew 0.3% to €272.5 million during a year in which the shortage of hide increased the cost of the main collagen raw material, offset by the lower cost of some auxiliary raw materials, such as caustic soda or glycerine, savings in production and the depreciation of the US$ giving rise to a gross margin of 70.1% (+2.1 p.p. vs. 2019). In the fourth quarter, cost of consumption grew by 0.9% to €77.0 million, placing the gross margin at 68.0% (+2.1 p.p. vs. 4Q19).
This improvement in the gross margin is due to the higher capacity utilization and production output in all technologies while at the same time obtaining high production efficiencies at the manufacturing centres. In turn, cellulose and fibrous production with the new technology installed in Plant 4 in Cáseda (Spain) has exceeded the €8 million in production savings forecast for the year during a period of high demand for these products.
The accumulated average workforce at December 2020 stood at 4,967 people, showing an increase of 7.3% compared to the previous year, mainly due to the incorporation of Nitta Casings staff in the United States and Canada. Without taking into account the Nitta Casings staff, the average workforce grew by 3.1% compared to the previous year.
Personnel expenses increased by 10.7% in 2020 vs. 2019 to €222.7 million including the extraordinary bonuses for attendance and COVID-19 grants; and by 10.0% in 4Q20 vs. 4Q19 to reach €55.1 million. This increase is mainly due to the incorporation of Nitta Casings personnel in the United States and Canada. Excluding Nitta Casings personnel in the United States and Canada, personnel expenses grew 3.7% in 2020 vs. 2019 and by 3.7% in 4Q20 vs. 4Q19.
Other operating expenses grew 0.2% in 2020 compared to 2019 to €190.4 million. Plant expenses have increased, including cleaning and other expenses, and transportation expenses, which have been largely offset by the 7.4% decrease in energy supply expenses, and lower travel expenses as a result of the restrictions imposed on the movement of people due to the pandemic.
Operating profit
Higher revenues in a context of high productive activity, the efficiencies achieved and the savings from the new cellulose and fibrous technology in Spain translate into higher EBITDA and improved operating profitability in both reported and like-for-like terms
The accumulated EBITDA in 2020 grew by 16.7% vs. 2019 to €234.4 million, resulting in a EBITDA margin of 25.7% (+2.0 p.p. vs. 2019). In like-for-like terms, the EBITDA for 2020 grew 27.7% compared to 2019, with a comparable EBITDA margin of 27.5% (+4.2 p.p. vs. 2019).
The amortisation and depreciation costs in 2020 were €71.5 million, 1.2% higher than in 2019. As a result, the Group obtained an accumulated annual operating profit of €162.9 million (+25.0% vs. 2019).
Net financial result
In the year to date at 2020, the net financial result was a negative -€3.3 million owing to the negative exchange differences of -€2.3 million, which compares with a negative net financial result of -€0.2 million in 2019, when exchange differences were positive in the amount of +€1.1 million.
Net profit
The accumulated profit before tax at December 2020 reached €159.7 million (+22.8% vs. 2019). From this figure, €37.1 million of corporate income tax is deducted, which increased by 51.7% compared to the same period of the previous year with an effective tax rate of 23.3% in 2020 compared to 18.8% in 2019.
The difference between the theoretical tax rate for 2020 (28%) and the effective tax rate (23.3%) is basically due to the different taxes paid by non-resident subsidiaries in Navarre (Viscofan S.A. tax domicile) which pay tax in all countries in which they operate, applying the corporate (or similar) tax rate in force on profits for the period and tax allowances for investments by various Group subsidiaries.
Finally, Net profit stands at €122.5 million, up 16.0% vs. 2019.
Non-recurring results
In 2020, there were no recurring results, however for a better comparison of the information the non-recurring impacts of the business recognised in the previous year are detailed below:
The net impact on non-recurring results after including the tax effect is a net profit of €4.1 million.
Investment
For the whole of the year, a total of €56.9 million have been invested, 8.4% less than the €62.1 million invested in 2019. The breakdown by type is as follows:
Of the main projects, the most noteworthy are the initial works to increase the fibrous capacity in Cáseda and the installation of new co-generation engines prepared for the transition to green hydrogen as a main energy vector in Cáseda for 2030.
At the end of 2020, investment commitments amounted to €12.9 million (€1.6 million at the close of 2019)
Dividends and Shareholder remuneration
The Board of Directors of the Viscofan Group has agreed to propose to the General Shareholders’ Meeting the distribution of a final dividend of €0.29 per share, with an amount of €13.4 million to be paid out on 3 June 2021.
Thus, total shareholder remuneration for the 2020 financial year stand at €1.70 per share, equivalent to a distribution of 64.3% of net profit. This can be broken down as follows:
This proposed remuneration is 4.9% higher than the ordinary remuneration of €1.62 per share approved in the previous financial year, implying a total distribution of €78.8 million.
Equity
Equity
Net Bank Debt
The Group’s net equity stood at €736.2 million at the end of 2020, down 6.1% year-on-year in spite of an increase in Net Profit. This change is due to a higher distribution of the interim dividend, €64.9 million in 2020 compared to €30.1 million in 2019, and to the increase in the negative translation differences from the consolidation of the subsidiaries whose currencies have depreciated significantly against the euro in 2020 (mainly Brazil and Mexico).
Treasury shares
During 2020, 10,558 treasury shares were delivered to Viscofan staff within the framework of the company’s variable remuneration plans. Thus, on 31 December 2020, the company had 139,442 treasury shares representing 0.30% of the voting rights acquired at a total price of 6,031 thousand euros.
At 31 December 2019, Viscofan, S.A. held a total of 150,000 treasury shares that represented 0.32% of the voting rights, acquired at a total price of 6,487 thousand euros. These shares were acquired within the framework of the Company’s Incentives Plan under the authorisation granted by the General Shareholders’ Meeting of 25 May 2018.
Financial liabilities
The net bank at the end of December 2020 stood at €38.2 million, a decrease of 10.2% compared to the €42.5 million as at December 2019. The results strength in the year has allowed us to continue reinforcing the balance sheet while the outflow of cash has increased due to dividends.
IFRS 16 update entered into force on 1 January of 2019, and stated that the majority of non-cancellable operating leases should be recorded in the balance sheet as a right-of-use asset and a liability for future payments to be made.
So, the breakdown for Net Financial Debt is as follows:
|
Dec' 20 | Dec' 19 | Change |
Net Bank Debt * | 38,212 | 42,546 | -10.2% |
Debts related to right-of-use assets | 15,685 | 19,295 | -18.7% |
Other net financial liabilities ** | 28,549 | 27,606 | 3.4% |
Net Financial Debt | 82,446 | 89,447 | -7.8% |
* Net bank Debt= Non-current bank borrowings + Current bank borrowings - Cash and cash equivalents.
** Other net financial liabilities consisting mainly of loans with an interest rate subsidised by entities like the CDTI and the Ministry of Economy, as well as debt with fixed asset suppliers netted by other current financial assets
The net financial debt is the equivalent of 11.2% of the equity, with a leverage level that is sufficient to be able to attend to all Viscofan’s liquidity needs.
Outlook for 2021
Revenue outlook
EBITDA outlook
Net Profit outlook
In the MORE TO BE Plan, the group is making a significant leap in the areas of Service, Technology and Costs with a multitude of investment projects of an organic and inorganic nature, resulting in a greater leadership in a resilient market.
The persistence of the COVID-19 pandemic continues to generate an uncertain environment in which governments and other institutions may continue to adopt confinement measures, social distancing, mobility restrictions and others aimed at mitigating its spread while preparing vaccination plans with different schedules, all of which may affect the consumption habits in different countries. Meanwhile, our plants, customers and suppliers are still at risk of contagion.
Subsequently, the MORE TO BE Strategic Plan has been extended into 2021, to provide continuity to existing projects and as a driving force for others that continue to foster the company’s growth and strength in the long term. Among these are projects; of particular significance is the increased fibrous capacity at the Cáseda plant using the new technology, and the termination of the process to update the technology at the collagen casings plant in the United States.
The Viscofan Group faces 2021 with growth prospects in the main financial figures, accompanying the expected growth of the market with the boost in volumes, commercial discipline, and improvements in profitability without the need for large additional investments
As such, the Viscofan Group expects to increase revenue by between 3% and 4%, EBITDA by between 3% and 5%, and Net Profit by between 4% and 6%, based on an investment of €70 million and despite a worse forex scenario considering an average exchange rate of US$/€ 1.20 vs. 1.14 in 2020.
For questions regarding this report, please contact the Department of Investment Relations and Communication:
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[1] 2020 Guidance: Growth in revenue between 6% and 8%, in EBITDA between 7% and 9% and in Net Result between 6% and 9%, with a capex of € 54 million.
[2] Like-for-like: Like-for-like growth excludes the impact of changes in the consolidation scope, fluctuations in exchange rates and the non-recurring gains of the business.
[3] Revenue per origin of sales.
[4] Cost of consumption = Net purchases +/- Changes in inventory of finished goods and work in progress.
[5] Gross margin = (Revenue – Cost of consumption) / Revenue.
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