July 18 2018
Froneri 2018 Half year Statement
Froneri provides its mid-year update for the six months ended 30 June 2018
Strong growth for Froneri
- Sales +4% ahead of prior year for the six months to 30 June 2018
- Market volumes boosted across major European markets, especially in Q2
- Profitability improving as expected, supported by strong sales volumes
- “A Brand” sales increased at double-digit rate year-on-year
- Southern Hemisphere growth continues to diversify earnings
- Post-merger integration continues to go well
- Further migrations of former Nestlé businesses onto Froneri systems
- Record capital investment to improve the efficiency of our operations and to drive growth
Froneri’s performance for the half-year ended 30 June 2018 has been strong, with sales boosted by particularly high volumes across many major European markets, such as Germany and Italy. Froneri also captured market share in key areas, driven by investment in ‘A Brands’, such as Mondelez, Extrême and Kids brands. This investment includes advertising and promotional support and record investment in freezers for out-of-home sales. There has also been further upside from the launch of ‘A Brands’ into new markets, such as the launch of Extrême in the UK market and Oreo in Russia and Egypt.
Froneri also benefitted from the diversity of sales channels, with excellent performance across the take home (retail) and out of home channels. The private label business has also grown year-on-year, mirroring the growth in the markets where private label is well-established. As expected, the frozen food and frozen bakery businesses have remained flat on the prior year.
The integration programme continues to go well and Froneri is on track to deliver the synergy gains and other costs savings expected, through more effective purchasing of raw materials and reduction of overhead costs in support functions.
These factors, together with returns on capital investments made in 2017, contributed to growing margins year-on-year and a reduced cost base. However, foreign exchange rates had a negative impact in 2018. Over half of the business is conducted in non-euro markets, and the general trend was a weakening of those currencies in the period. Froneri’s cash flow performance was strong, supported by the growth in trading volumes in the middle of the period, and cash flow was better than the previous period notwithstanding a substantially increased capital investment. Froneri also completed a very successful refinancing in the first quarter, which has substantially reduced the group’s interest costs and provided further resources to grow the business.
Froneri now looks forward to making further progress in the second half of the year, where the performance of the European business in Q3 will be crucial, together with the increasing importance of our Southern Hemisphere businesses, such as Australia and Brazil. Froneri is cautious about the trading environment after the upturn in market volumes in Europe during the first half of the year, and about the outlook for raw materials, other input costs and exchange rates.
From an operational perspective, Froneri has made further progress in integrating and rationalising its manufacturing and distribution operations, in line with the strategy to Buy Better and Take Costs Out. This is exemplified by the transfer of businesses in Russia, Egypt and the Philippines from legacy systems to Froneri’s operating systems.
Notes for editors:
In October 2016, Nestlé and R&R successfully launched Froneri, a new, joint-venture brand in the ice-cream, frozen food and chilled dairy sector.
Froneri combines Nestlé and R&R’s ice-cream activities in Europe, the Middle East (excluding Israel), Argentina, Australia, Brazil, the Philippines and South Africa. It also incorporates Nestlé’s European frozen food business (excluding pizza and retail frozen food in Italy), as well as its chilled dairy business in the Philippines.
Today, Froneri operates in more than 20 countries across the world, employs around 10,000 people and we have our headquarters located in the UK. At the head of our business, the Froneri leadership team integrates unrivalled industry expertise and business acumen from across the Nestlé and R&R portfolios, with the Company’s board of directors being chaired by Luis Cantarell, (previously Nestlé Executive Vice President, Europe, Middle East and North Africa), while our CEO is Ibrahim Najafi (formerly CEO of R&R).