The good times continue to roll for FRoSTA AG, which logged a 7% increase in sales during the first four months of 2015 in comparison with the same period last year. The Bremerhaven, Germany-headquartered frozen food company especially noted stronger sales of seafood products in the domestic and East European markets.
The latest results followed a positive annual report for 2014, during which time revenue rose by 5% to EUR 408 million. Consolidated net income increased to EUR 17.3 million, compared with EUR 12 million the previous year. The equity ratio edged up to 53.5%, compared with 52.5% in 2013.
The uptick was largely attributed to brand sales in Germany, which registered a 15% gain in value. The positive development was primarily driven by successful new product launches, such as fish gourmet fillets (Schlemmerfilets). In addition to banning the use of additives and artificial flavorings, a commitment to transparent country of origin labeling of ingredients continues to pay dividends 11 years after the adoption of Reinheitsgebot (purity law) standards for FRoSTA’s extensive product line – which ranges from fruits and vegetables to pasta, fish dishes and other protein-based ready meals.
According to a recent study commissioned by TNS Infratest, 72% of consumers want to know where ingredients come from – even for products that contain many different components.
FRoSTA has been disclosing the origin of every single ingredient for all its products on the Internet since 2013 through its “Ingredients Tracker” (www.zutatentracker.de), which was clicked 50,000 times in 2014.
“Consumer confidence is one of the pillars for the continued success of our brand,” said FRoSTA board member Hinnerk Ehlers, who responsible for marketing and sales. “It is important to provide information as transparent as possible about our ingredients, the countries of origin and the processing. Only then consumers understand and trust our uncompromising renunciation of all food additives.”
This year FRoSTA has taken a further step towards transparency – literally. A glass facade has replaced the outer wall of its production hall in Bremerhaven. As such, consumers are able to view the production of fish products directly from the “Am Lunedeich” street.
In the spring of 2014 FRoSTA brought fish sticks back to its seafood line, while continuing to enjoy success in value added marine product sales that began at the end of 2013 with the reintroduction of the Schlemmerfilet range.
Positive Developments Abroad
More than 40% of FRoSTA’s turnover is rung up abroad. Sales outside of Germany rose from EUR 162 million to EUR 177 million last year. Meanwhile, the company’s leading market position in Eastern Europe could be further developed in Poland and Hungary. Steps are being taken toward that end.
Private Label
The private label business was again impacted by strong price pressure in 2014. Nonetheless, with turnover of EUR 264 million (compared with EUR 247 million in 2013) the segment grew by 7%, largely due to increased sales abroad. This was achieved by focusing on core products offered to the trade at compatible prices.
Financial Position and Results
With profit (from ordinary activities) before tax reaching EUR 23.9 million, the previous year’s result of EUR 15.9 million was significantly improved. Consolidated net income – earnings after tax – rose to EUR 17.3 million (previous year: EUR 12 million). Consolidated cash flow also developed positively, rising from EUR 29.9 million in 2013 to EUR 32.4 million in 2014.
Two reasons were cited for this positive trend. First, the costs of production and materials were stable. Secondly, focusing on products with greater added value paid off. Schlemmerfilets, featuring high quality sauces, is an example of this.
Personnel expenses increased by EUR 6 million, or 9%. This was partly due to the growth of the number of employees (the payroll rose from 1,523 in 2013 to 1,559 last year) as well as a wage increase of about 3%. In addition, performance-related remuneration increased significantly.
Other operating expenses increased by EUR 8 million. The cost of television advertising in Germany and abroad increased to EUR 4 million. As a result of the high vegetable harvest yields, the cost of hiring external coldstores rose by EUR 1.5 million.
Investments of EUR 16 million in 2014, a figure double the previous year’s EUR 8 million total, were fully financed from cash flow. Main investments were the construction of a new fish production unit in Bydgoszcz (northern Poland) and the modernization of the fish sticks line in Bremerhaven. In addition, a separate combined heat and power (CHP) co-generation unit was built in Bremerhaven to further reduce the corporate carbon footprint of FRoSTA.
Depreciation remained constant, while finance costs compared to 2013 decreased by EUR 1 million.
Total assets amounted to EUR 237 million, which was significantly higher than the previous year’s EUR 222 million. Stocks increased by 15% over 2013 due to the robust vegetable crop. Borrowing decreased by almost 15%, from EUR 40 million in 2013 to EUR 30 million in 2014. Thus, the equity ratio rose to 53.5%. Due to the good financial structure of the company, the executive board approved a dividend of EUR 1.36 per share (+36%).
Outlook is Unclear
Since October of 2014 the US dollar has gained more than 20% against the euro. This led to an increase in the price of all commodities that are traded in greenbacks, which equates to about 60% of the raw materials purchased by the company. Because of the volatility in exchange rates, no profit forecast for 2015 can be made at this time.
