Comments by the CEO – Interim Report January-September 2021
The third quarter of the year was marked by intensive preparations for Christmas, which is our high season for many product groups. For the Group, the trend was mixed, with good profits in many parts of the operations, although we saw poorer profits in other parts due to continued delivery disruptions and poor harvests.
Shortages of raw materials and delivery disruptions burdened sales and earnings
Net sales increased 9 percent to SEK 893 million, mainly due to the acquired System Frugt at the same time that organic growth declined somewhat. Our own brands performed significantly better than licensed brands and private labels. Because we sold relatively more of our own brands, the gross margin rose to 27.5 percent. EBITDA profit rose by 11 percent to SEK 80 million.
The decline in sales was attributable primarily to shortages of raw materials and getting certain raw materials delivered. There were several reasons for this – on the one hand, for some of our product groups, we saw poor harvests, while on the other, the global supply chain continues to struggle with transport problems, particularly from Asia. We also experienced some production issues. The greatest disruptions were noted in our Danish production unit in Tilst. System Frugt is approaching its high season and our outbound volumes of nuts and dried fruit ahead of Christmas were impacted severely.
It is our ambition and hope that we will ultimately receive the great majority of the goods we need.
For large parts of Nordics and for North Europe, sales were maintained relatively well. The roll-out of Happy Bio and Davert in the European grocery trade continued at a good pace, particularly for South Europe with Happy Bio. The launch of Happy Bio in the grocery trade is exceeding expectations, with sales rising 38 percent compared with the preceding year.
In some countries, a certain negative effect was observed during the quarter as economies opened up following the summer as the pandemic subsided, where trade declined somewhat in favour of the restaurant industry. The effect was particularly noticeable in southern Europe, where the trend among French and Spanish healthfood stores in particular was very weak. Although we gained market share during the period, we experienced a significant decline in sales.
Price increases to be expected
During the quarter, we saw increased world market prices for several key raw materials. Plastics and other packaging materials became significantly more expensive. Cost increases for raw materials, input goods and transport have led us to prepare price increases. In some cases quite substantial ones. As supply chain disruptions are a global and well-known problem, we believe that our planned price increases will be accepted. At the same time, we are working hard to meet the challenges within the supply chain and are monitoring the global situation closely.
Value-generated acquisitions completed and on the agenda
The acquisition of Vitality and Oy (Vitality) in Finland, which was announced during the quarter and will be consolidated as of 1 October, significantly strengthens our position in Finland. With a product range that complements our own very well, we perceive sales and cost synergies. Vitality also has a good presence among pharmacies, making us strong now in all significant sales channels in the Finnish market. On the whole, Vitality is exactly the type of acquisition that has added most value for Midsona historically.
During the quarter, we implemented a directed new share issue to institutional investors for approximately SEK 500 million to finance continued value-generating acquisitions. I would like to take this opportunity to thank our shareholders, old and new alike, for their confidence in us. We are seeing the acquisition market around Europe thawing and currently have several interesting processes in progress – we hope to bring more news on these soon. Right now, we are mainly focused on addressing the challenging situation with regard to raw materials and transport, and I look forward to the remainder of 2021 with confidence.
President and CEO