COMPANY ANNOUNCEMENT NO 4/2017-29 NOVEMBER 2017
Axzon improved profitability in Q3 2017
Axzon reported stable revenue of DKK 384 million in Q3 2017 (Q3 2016: DKK 387 million) as a decline in pig prices in Poland at the end of September 2017 reduced the Group’s herd value and reported revenue.
Earnings before interest, tax, depreciation and amortization (EBITDA) for Q3 2017 increased to DKK 110 million (Q3 2016: DKK 100 million), corresponding to an EBITDA margin of 28.8% (Q3 2016: 25.8%). Earnings growth in the quarter was mainly attributable to a higher contribution from the Group’s Pig and Arable segments.
The Pig segment maintained a high efficiency level and lifted earnings based on a relatively high price level on live pigs in Axzon’s three markets; Russia, Ukraine and Poland. The impact of declining pig prices in Europe in late Q3 was mitigated by Axzon’s diversified geographical presence as prices in Russia and Ukraine were stable.
The higher average prices on live pigs had an adverse impact on Axzon’s Food segment in Q3, which was partly offset by increasing sales of Axzon’s new RWA (raised without antibiotics) and GMO-free product groups. These innovations ensure diversification from ordinary products and should contribute to reducing the impact from the volatile and fluctuating markets for live pigs and bulk meat products.
Despite challenging weather conditions in the quarter, Axzon’s Arable segment performed well and built a large stock of good-quality grain for the coming feeding season with satisfactory yields above the level in the comparison period.
The Energy segment increased production and efficiency in Q3 2017 compared to a Q3 2016 marked by technical challenges.
Free cash flow for Q3 2017 amounted to DKK -37 million (Q3 2016: DKK 1 million). While Axzon’s operating cash flow improved significantly to DKK 104 million in Q3 2017, the Group’s financing activity was higher due to payment of dividends of DKK 78 million and capital expenditures at the level of DKK 42 million.
Outlook for 2017
Based on positive developments in the first nine months of 2017, Axzon now expects the EBITDA margin to reach 27-28 % against former expectations of 26-27 %, reflecting continued high efficiency. Revenue guidance is adjusted to DKK 1,600-1,700 million against former expectations of DKK 1,700-1,800 million in 2017, reflecting assumptions of fewer slaughter pigs in the Food segment and declining market prices on live pigs in Q4.
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“We improved profitability and maintained revenue largely unchanged in the third quarter of 2017, which was positively impacted by relatively high pig prices and a continuation of Axzon’s high production efficiency. The good financial and operational results this quarter were realized despite challenging weather conditions as the harvest and reseeding of grain and oilseeds were complicated by the wet and relatively cold summer in Poland in particular. We have secured the significant stock of quality grain needed for the coming feeding season, and based on our well-diversified business, Axzon remains on-track to deliver growth and a significantly higher level of profitability in 2017 despite the volatile market situation,” says CEO Tom Axelgaard.
Selected financial highlights and key ratios
| DKK million | Q3 2017 | Q3 2016 | 9M 2017 | 9M 2016 | 2016 |
| Total revenue | 384 | 387 | 1,326 | 1,172 | 1,494 |
| EBITDA | 110 | 100 | 382 | 266 | 328 |
| EBITDA margin | 28.8% | 25.8% | 28.8% | 22.7% | 21.9% |
| EBITDA fixed herd price | 114 | 61 | 332 | 192 | 281 |
| Net income | 29 | 36 | 150 | 88 | 95 |
| Free cash flow | (37) | 1 | 101 | (13) | 18 |
| Net interest-bearing debt | 1,186 | 1,220 | 1,185 | ||
| *EBITDA 2016 includes special items of DKK 16 million due to African Swine Fever outbreak on a Russian farm | |||||
The Axzon interim report Q3 2017 has been prepared in English.
The present text has been prepared in both English and Danish. In case of discrepancy the English version shall prevail.
