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August 19, 2019

Orior’s organic growth suffers amid contract termination as further Casualfood stake planned

Orior said it posted a 1.8% decline in organic revenues in the first half after the Swiss fresh meats and pasta business terminated a contract in the convenience segment.

By Dean Best

Orior said it posted a 1.8% decline in organic revenues in the first half after the Swiss fresh meats and pasta business terminated a contract in the convenience segment with annual sales of CHF8.2m (US$8.3m).

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Orior added that it snapped up Swiss juices maker Biotta in May last year which helped revenues in the half with an “acquisition effect of 4.8%”. It also plans to take an additional stake in Casualfood to add to the 35% it bought in the Germany-based foodservice business in September last year.

The Zurich-listed firm cited “insufficient margins” behind its decision to quit the contract as it reported a 7.4% increase in net profit during the six months to CHF14m despite “challenging” conditions in its home market.

Orior said in its earnings statement today (19 August): “The Orior convenience segment with the Fredag, Le Patron, Pastinella and Biotta competence centres was unable to achieve organic growth despite a steady stream of new products and investments in sales and marketing teams. The main reason for this lack of organic growth is Orior’s decision to terminate a contract with an annual revenue volume of CHF8.2m in favour of a healthier level of profitability.”

Revenues climbed 2.2% to CHF279.6m, while EBITDA rose 3.7% to CHF28.4m. EBIT was up 7.1% at CHF17.4m.

“The benefits of the group’s broader strategic positioning are becoming more apparent and making it more resilient,” the company said. “Despite challenging conditions in the Swiss market, high raw material prices and stiff competition, gross profit increased 2% to CHF124.1m and the gross profit margin was held at the good year-ago level of 44.4%.”

It continued: “Overall segment performance was diminished by the aforementioned decision to terminate the low-margin contract; approximately half of the total revenues lost from this contract were reflected in the revenues reported for the first half. That decision, a weak Easter season and high poultry prices led to the decline in organic growth. These negative factors aside, the convenience segment launched great innovations and continued to grow and strengthen its customer base.”

Orior also said it has embarked on a new strategy focused on 2025, more details of which will be unveiled at its investor day in the spring. However, the company expects a negative organic revenue footprint in the second half of the year of 1% to 2%.

“The core elements of the current Orior strategy – house of innovation, brand strengthening and expansion, agility and cost efficiency, the Orior responsibility and ‘We are Orior’ – will also be part of the 2025 Strategy as will the overriding aim of steady value creation to the benefit of all stakeholders,” the company said.

Orior said it plans to issue more detailed guidance when it publishes its annual results including a “quantitative target range” for revenues, EBITDA, the tax rate and capital expenditure. It plans to take another 35% stake in Casualfood in September.   

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What’s the forecast for the food and grocery industry?

The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
by GlobalData
Enter your details here to receive your free Report.

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