8 September 2009 - Today, Xavier Govare, CEO of Alfesca said:
“The 2008/09 financial year has been a challenging year for Alfesca during which we have experienced a substantially more difficult trading, economic and credit environment.
“During the 2008/09 financial year we have seen the economic conditions in Europe deteriorate dramatically with our key markets in UK, France and Spain entering into recession; experiencing rapidly rising unemployment, pushing consumer confidence to its lowest levels and prompting retailers to introduce promotions and discounts to entice consumers to shop.
“The first and second halves of the 2008/09 financial year showed marked differences in the economic environment and also the trading patterns of Alfesca.
“The first half of the year was dominated by a strong drop of the markets in which Alfesca operates due to the collapse of consumer confidence. In the second half of the year we saw rapid changes in consumer behaviour favouring more value products impacting our sales and margins, as well as a sharp increase in salmon raw material prices, which is the single largest raw material component of the Group's input costs.
“In these very challenging economic circumstances, Alfesca's net sales for 2008/09 financial year was €623.7 million, down 3.7%, and EBITDA was €54.6 million, down 12.6%.
“The fall in the Group's EBITDA was as a result of a number of key factors which included the development of an adverse sales mix as consumers “traded down” by favouring private labels over national brands thereby accelerating the trend towards less expensive and lower margin value products.
“In addition, our results were also adversely impacted by sharp increases during the year in raw material prices for salmon, which saw prices rising close to the historically high levels last seen in 2006. The price increases were primarily due to shortage of salmon supply experienced as result of the Chilean salmon industry being hit by the infectious salmon anaemia (ISA) virus which significantly reduced production levels in Chile (estimated to be over 50% for 2009) and placed exceptional demand on Norwegian salmon supplies, from which Alfesca sources the majority of its salmon.
“The Group's results were also negatively impacted by adverse currency fluctuations, such as due to the falling value of the pound. This devaluation not only raised the cost of prawn raw materials that needed to be imported, such as into the UK where the market prices are set in dollars but it also had a negative influence when the results of our UK operations were translated into euros. The adverse euro:pound exchange rate volatility negatively impacted our Group EBITDA by over €3.0 million if constant year on year exchange rates are assumed.
“During 2008/09 we took decisive action to manage the business through the recession and to compensate for rising salmon prices. To manage our margins, we partly obtained necessary price increases but this was difficult to do fully in the poor economic environment. Instead, we invested in price to support our customers and consumers; a situation that we expect to continue into 2009/10.
“As the economy worsened and our results deteriorated, we also took a series of action to reduce our costs in 2008/09 and to help support profitability going forward. We did this by completing a key stage of our rationalisation programme involving the merger of certain central functions, implementing a common IT platform and putting in place a more optimal organisational structure in France. In addition, we completed the integration of the production facilities of Blini and LTG, as well as closing one of our duck slaughtering factories and consolidating the operations into one site in south west France. In addition, we continued with our focus to increase our industrial efficiency.
“The economic conditions and outlook for 2009/10 remain uncertain and we expect that high salmon prices will continue to have an impact on the Group's results going forward. Although demand for our food products should remain broadly stable, the trend for “trading down” looks set to continue and our ability to meet the demands of the changing market conditions will be critical.”