Froneri provides its mid-year update for the six months ended 30 June 2021

Sales and EBITDAE¹ higher than 2020 as out-of-home² (OOH) markets start to reopen with some challenges due to poor weather in Europe. Integration of the US gaining momentum, exceeding expectations, and gaining market share. 

Highlights

Financial performance

• Sales and EBITDAE in the six months ended 30 June 2021 higher than prior year, with A-Brands sales³ growing ahead of total sales (+8.2%)

• Froneri Group branded market share is up 0.1% compared to prior year

• Retail⁴ sales continue to benefit from more eat-at-home opportunities and OOH sales are higher, a strong performance given the varied timing of re-opening of OOH sales outlets during 2021 (including Foodservice)

• Integration of the US business is gaining momentum as our investments in factories, innovation, and media result in strong market performance, with sales and EBITDA out-performing prior year. US market share is up 0.9% compared to prior year

• Poor weather in Europe, particularly in France, Germany, and Switzerland in Q2 2021, partially offset some of the Retail gains in Q1 2021

• Strong cash generation and continued discipline on working capital management allowed for the early repayment of the 2L Term Loan (€450m) in June 2021, saving c.€2m interest per month. The group’s €600m RCF facility is fully undrawn at 30 June 2021

Operational performance

• Capex projects in the six months ended 30 June 2021 focussed on US projects including factory improvements and increased capacity to drive sales growth

• New product launches and media campaigns in 2021 (including the new Häagen-Dazs campaign in the US, new Extrême Cookie Cone launch in France and new Nuii Texas Pecan with caramel across Europe) have been well received by consumers

• New Zealand and Puerto Rico businesses were successfully migrated onto Froneri IT and reporting platforms in April/May 2021 and the Israel migration is ongoing and expected to go live in Q4 2021, following some delays due to COVID-19 travel restrictions

Performance review

Froneri’s sales performance in the six months ended 30 June 2021 was strong mainly driven by Retail ice cream sales, benefitting in Q1 2021 from lockdown restrictions providing more eat-at-home opportunities, particularly in the US and UK. OOH ice cream sales are up versus prior year, a strong performance given COVID-19 restrictions are still impacting sales with foodservice outlets being closed or operating with restricted capacity and travel restrictions impacting tourism levels in many countries. The COVID-19 restrictions and poor weather in France, Germany and Switzerland from the end of May 2021 were offset by strong gains in other countries. A-Brand sales have performed well, now representing 51% of total sales, up from 26% in FY19.

Gross margin is up compared to the prior year, as benefits of cost saving and efficiency plans continue, particularly in the US, and we have benefitted from a higher proportion of OOH and export sales which typically have a higher gross margin than Retail sales. Profitability has been impacted by higher distribution costs in the US due to an exceptional demand for cold logistics leading to rising costs and driver shortages related to the COVID-19 pandemic. Overheads are higher than 2020 as we have invested marketing support behind our A-Brands and Retail sales growth. During 2020, during the height of the COVID crisis, some non-committed marketing support on non-critical plans were put on hold.

The transformation programme for the recent acquisitions is on-track with New Zealand and Puerto Rico successfully transferred onto Froneri’s IT and reporting systems in 2021 and Israel expected to go live in Q4 2021 following some delays due to COVID-19 travel restrictions. The transition of the US onto Froneri systems is scheduled for H2 2022 and planning is well underway.

Product Recall Update

A supplier informed us that a number of batches of stabiliser it had provided to Froneri contained levels of Ethylene Oxide (‘EO’) in excess of the Maximum Residue Limit permitted under European Regulations. We understand other ice cream manufacturers and other categories have also been affected.

Due to the very low levels of stabiliser used in ice cream production and since scientific assessments demonstrate that EO is broken down in the heating process in ice cream manufacturing, no detectable EO residue should remain in the finished product and it is therefore considered highly unlikely to pose any health risk to consumers. However, the European Commission has issued guidance and certain EU countries have requested a recall of affected products as a precautionary measure. Froneri is fully cooperating with the authorities in these countries and has stopped production using the affected batches of EO; notified all distributors to block identified batches; and implemented additional checks on supplier shipments.

It is not possible to precisely quantify the overall impact on Froneri at this juncture and all loss recovery mechanisms are being evaluated. We do not anticipate any material impacts to our profitability beyond 2021.

Notes for editors:

Froneri is a fast-growth international business with a vision to build the world’s best ice cream company. A passionate challenger brand, we are building the market through a focus on ice cream, delivering value for retailers and consumers. Created in 2016 as a joint-venture between PAI Partners and Nestlé, we have since acquired a number of businesses, the most recent being the acquisition of Dreyer’s (Nestlé’s US ice cream business). We are now the second largest manufacturer of ice cream and the number one private label producer worldwide. We are present in 23 countries with annual revenue of circa €4 billion and over 13,000 employees worldwide. For more information visit: www.froneri.com

1. EBITDAE is a non-GAAP measure. EBITDAE is EBITDA before exceptional items
2. Out-of-home (OOH) refers to sales of single ice creams that are consumed outside of the home
3. A-Brands sales represents sales of our strategic ice cream brands (including Häagen-Dazs, Extrême, Maxibon, Cadburys brands and Oreo)
4. Retail refers to sales of mainly take-home ice cream products (sold to retailers) which are consumed at home