CEO'S COMMENTS ON THE THIRD QUARTER 2020

Comment by the CEO

A DIVIDED QUARTER

The third quarter brought divided fortunes for Midsona. In connection with the restrictions associated with the pandemic being lifted, sales were weak in the latter half of July and throughout August, probably due to inventories being phased out among customers and consumers alike. We then saw clear improvement towards the end of the quarter. Apart from the exceptionally strong stockpiling month of March, September was our strongest month in terms of sales this year, indicating that the decline in sales during the summer was temporary. For the Group as a whole, sales rose by 7 percent compared with the corresponding period last year although, organically, sales decreased by 1 percent. Overall, I am proud of how the organisation has dealt with the effects of the pandemic. Over the first nine months of the year, we increased our sales by 16 percent while almost doubling our profit for the period compared with the corresponding period last year.

Sales and earnings

The Group’s prioritised brands showed growth of slightly more than 2 percent for the quarter. Although inventory phase-outs generally had a negative impact on sales, we saw strong growth for several brands. In the South Europe segment, we continued our launch of Happy Bio among FMCG retailers in France and Spain. The brand grew by 32 percent over the period. The North Europe segment experienced a slight increase in sales over the quarter, although this was lower than expected. This was primarily due to a previously announced launch of the Davert brand to a major FMCG customer being postponed because of the pandemic. The broad roll-out in stores could not commence until late in the quarter, although distribution has built up rapidly since then. The customer placed new orders early in the fourth quarter. In the Nordics segment, the Friggs, Urtekram and Helios brands continued to grow, while Kung Markatta and several brands in the consumer health products category experienced a weaker trend.

Besides a slightly weaker sales trend, profit was impacted negatively by temporary costs associated with production maintenance following the high level of capacity utilisation in the first half of the year. Before items affecting comparability, EBITDA decreased slightly compared with last year, amounting to SEK 72 million (77). The EBITDA margin, before items affecting comparability, amounted to 8.8 percent (10.1).

Acquisitions lay foundation for expansion and further acquisitions

Following the end of the quarter, we announced the acquisition of System Frugt, a leading Nordic player in plant-based foods, strengthening our position in dried fruit and nuts. System Frugt holds a particularly strong position in Denmark with its premium brand Earth Control – the acquisition making this our third-largest brand. We see System Frugt as a platform for continued growth in dry plant-based foods, while we also gain increased production capacity, offering excellent synergies. We expect synergies of SEK 34 million on an annual basis, achieving full effect from late 2022. On 1 September, we also gained control of the Gainomax brand, strengthening our position in sports nutrition. In September, sales got off to a good start under our management.

We have a strong financial position and are continuing to assess possible acquisitions in Europe. The acquisition of System Frugt increases Midsona’s strength in health and well-being, increasing our attractiveness as a market partner. With appealing acquisition opportunities having arisen in the wake of the pandemic, we hope, in the near future, to make further complementary acquisitions in one of our three regions, in accordance with our strategy.

Consumers demonstrate clearly that they appreciate healthy products and Midsona has built favourable conditions on which to meet their expectations, so I view the future with confidence. We stand by our humbly optimistic outlook and I look forward to bringing you more information.