Leading Swiss food group ORIOR, which specialises in fresh convenience foods and refined meats, performed well in a challenging environment in the first half of 2015, increasing operating income (EBIT) by 6.9% to CHF 15.0 million and the margin by 66 basis points to 6.2%. Exchange rate-adjusted profit increased by 6.4 % to CHF 11.5 million. In a shrinking overall market the Group largely maintained its volumes and won some additional market shares thanks to strong partnerships and a high pace of innovation. The operating environment was affected by the strong Swiss Franc, and this was reflected in revenues, which declined by 4.6%. Favourable purchasing conditions and a focus on operational efficiency led to a 48 basis points improvement in the EBITDA margin to 9.3%. Thanks to an increased focus on working capital, operating cash flow increased sharply, from CHF 2.3 million to CHF 13.9 million.
The strength of the Swiss Franc had a significant impact on the first six months of 2015. The retail and food service businesses both felt the effects, especially in tourist areas and border regions. The strong Swiss Franc and associated price discounts, allied with the negative inflation caused by current low raw materials prices and a decline in nominal export sales, had a negative impact on ORIOR's revenues. However, thanks to its strong market positions and innovation power, the Group largely maintained its volumes.
ORIOR Segments on the right track
The Convenience Segment outperformed the market once again. The main drivers were vegetarian and vegan products and fresh ready meals. Only the fresh pasta sector, as expected, remained under pressure from foreign suppliers. Revenues were down slightly as a result, slipping by 1.5% to CHF 97.6 million. EBIT couldn't quite be maintained at the prior-year level, owing to higher investment in marketing and sales, as well as higher production costs resulting from a broader and deeper range. It fell 4.4% to CHF 11.1 million. Success in this segment still depends on a high pace of innovation and the flexibility to respond quickly to new trends.
The Refinement Segment expanded its already strong market position and significantly increased profitability. Thanks to their strong market and brand positions, Rapelli and Möfag remain the segment's main growth drivers. The Refinement Segment generated revenues of CHF 144.8 million in the first half of 2015. EBIT went up 34.1% and the EBIT margin increased by 147 basis points from 3.4% to 4.9%. The low price of raw materials and correspondingly decreased selling prices in the retail trade had a negative impact on revenues, but a positive one on the EBIT margin.
Pleasingly, there was a small rise in the volume of export sales. However, in nominal terms exports were lower than in the previous year owing to currency influences. This, together with the sale of Lineafresca, caused a decline in sales from CHF 14.3 million to CHF 10.0 million.
Rigorous focus on innovation
With its innovative power, craftsmanship and consistent focus on freshness and quality, ORIOR is underlining its leading position in attractive niches and shaping the market as a ground-breaking pioneer. In response to the fashion for ultra-fresh ready meals, ORIOR created new recipes and further expanded its vegetarian and vegan range; it gained market shares again in both areas. The Refinement Segment also developed and launched new concepts. Regional specialties such as the Rapelli and Ticinella Limited Edition, Möfag's "Meat Chips", and Grisons delicacies from Albert Spiess have helped expand already strong market positions. The segment has always nurtured deeply-rooted traditions and craftsmanship, so it is very much in tune with the trend towards authentic regional products, which looks set to continue and intensify.
Pressing ahead with growth initiatives and the ORIOR 2020 strategy
The new management team has launched immediate growth initiatives in various areas, as well as measures to improve profitability. These include sharpening up the "Ticinella" and "Albert Spiess" brands, streamlining the product portfolio, wide-ranging manufacturing plans across all the competence centres and sites, and group-wide purchasing of raw materials. In May 2015 the new management launched a strategy process called "ORIOR 2020", which involves not only the Board of Directors, Management Board and Extended Management Board, but especially middle managers and other key personnel. The 2020 strategy will provide the basis for the next chapters in ORIOR's success story.
ORIOR expects operating conditions to remain challenging in the second half of 2015, so revenues are likely to remain under pressure. On the other hand, the favourable conditions for purchasing raw materials are expected to continue, which should have a positive effect.
ORIOR continues to invest in innovation and in its brands so it can expand its leading market positions in selected niches. At the same time, it is sharpening up its product portfolio and concentrating even more rigorously on long-term profitable growth. Continuous work on cost structures, efficiency and agility remains a priority. In summary, ORIOR is confident about the second half of the year.