In Switzerland the year under review was marked by the currency effect resulting from the removal of the minimum exchange rate of the Swiss franc against the euro and the very difficult situation on the milk market in Germany. This meant that the HOCHDORF Group was not able to meet its ex­pected figures with regard to turnover due to quantity and currency effects. Fortunately, however, the Group even outperformed its more important operational targets.

Baby Care made a substantial contribution towards the good results. A high of utilisation of capacities and a good product mix led to pleasing revenue figures. The situation is more difficult and more competitive in the business area Dairy Ingredients, and much effort is needed in order to maintain quantities and margins. Despite the very difficult situation as regards the «Schoggi Law» there was no need for write-downs or additional expenditure. In Cereals & Ingredients we continued to clear out the product range and the portfolio. So after several years of losses, the Swiss business made a pleasingly positive contribution in 2015. Unfortunately, Cereals & Ingredients posted a loss in its German business, but this is entirely due to the failure to achieve quantity and turnover targets.

Due to the weaker margins achieved in the business in Germany, the Group's gross profit, in terms of percentages, was down to 23.9% (PY: 24.7%). Of greater significance, however, is the nominal increase in gross profit to CHF 130.1 m (PY: CHF 105.2 m). Gross turnover rose to CHF 551.2 m (PY: CHF 428.7 m). This was mainly driven by the new acquisitions in Germany. In the year under review we achieved an EBITDA of CHF 30.5 m (PY: 27.2 m), setting a new record. The EBIT result was CHF 20.1 m (PY: 20.0 m) with much higher amortisations of CHF 10.3 m in 2015 (PY: CHF 7.2 m).

In the year under review, the main plants once again ran at close to full capacity. In 2016 volumes are to be raised again with the help of additional measures. With regard to operating expenses, the inclusion of the German plants meant that the figures for both personnel expenses and other operating expenses were higher than for the previous year. Personnel expenses were higher, largely due to the higher staffing levels required. On the other hand, operating expenses have come in below internal targets. The main reason for this lay in the much lower energy prices for gas and electricity.

In the year under review, the outstanding convertible bond with a nominal value of CHF 50 m was prematurely called on 28 December 2015. With the exception of CHF 280,000, which was paid back in full on 28 December 2015, the bond was converted in full. Ordinary investments were financed from the current cash flow. The main items in terms of interest expenses were costs for the syndicated loan and the convertible bond.

The strong Swiss franc also affected the business of the HOCHDORF Group. The removal of the minimum exchange rate of the Swiss franc against the euro by the Swiss National Bank led to an appreciable loss in the financial result. The immediate measures taken by the Group meant that the losses remained manageable and the operating result even rose slightly. However, our competitiveness remains diminished at this exchange rate level.

Tax costs on the operating result were in line with expectations. In the year under review, deferred taxes on newly incurred tax losses in the German companies were capitalised. At HOCHDORF Deutschland GmbH the capitalised taxes were written off as the company is in liquidation and the losses can no longer be offset.

Cash flow from operating activities was down year-on-year from CHF 20.5 m to CHF 19.0 m. Earned capital also fell from CHF 25.3 m to CHF 24.9 m, the main reason being the exchange rate losses suffered due to the appreciation of the Swiss franc. Despite the expansion of business activities, receivables and inventories remained within a reasonable range.

In the area of investments, more than CHF 22.2 m was spent on plant/buildings/software. Further substantial investments in capacities are planned for 2016.

As expected, free cash flow was negative in 2015. For 2016 and 2017 we are also forecasting negative free cash flows as urgent investments have to be made in increasing capacities.

At 31 December 2015 net borrowing stood at the low figure of CHF 21.3 m (PY: CHF 46.8 m). The reduction is due to the conversion of the convertible bond. The long-term, expensive borrowings of the German companies have been refinanced via the Group, which has significantly reduced the interest burden in general. The HOCHDORF Group's financing therefore forms a solid basis for the company's continued growth.

Marcel Gavillet
CFO