Dear Shareholders

In the first half of the year, the Baby Care Division achieved higher turnover despite the delayed brand registration in China and although the new spray tower system was still in its test phase. The Dairy Ingredients Division has been realigned and is expected to deliver a slightly positive earnings contribution as early as 2018. Due to the weak first half of the year in terms of earnings, the forecast for the current business year will be adjusted slightly.

In the first six months, the HOCHDORF Group processed 365.3 million kg of milk, whey, cream and buttermilk (liquid quantity) (PY: 377.6 million kg; –3.2%). The slight decline was mainly caused by the further reduced milk quantity in the Lithuanian plant and its sale as of the end of May 2018. Due to the streamlining of the product portfolio, the product quantity sold dropped –25.5% to 83,374 t (PY: 111,948 t). However, the net sales revenue only declined –6.9% to CHF 281.6 million (PY: CHF 302.4 million).

Higher expenses for investments in the future

Year on year, gross earnings went up slightly to CHF 82.0 million (PY: CHF 79.3 million). Due to the significantly higher operating expenses, EBITDA only amounted to CHF 13.1 million (PY: CHF 21.7 million). The higher depreciation of fixed assets (CHF 6.6 million; +18.2% higher than PY) and the impairment of shareholdings (CHF 2.8 million; PY: CHF 0) brought the EBIT to CHF 2.9 million (PY: CHF 15.8 million). The result was a loss attributable to shareholders of CHF −2.2 million.

The consolidated income statement was affected by the relatively high increase in operating expenses. The higher expenses need to be evaluated from different perspectives. On the one hand, we recorded actual cost increases, e.g. for maintenance as well as energy and disposal. On the other hand, there were higher expenses associated with the roll-out of our strategy. For example, we hired additional personnel for the commissioning of the new systems, incurred marketing expenses for the market launch of new products in the Dairy Ingredients Division and invested in potential market entries and in the acquisition of customers in the Baby Care and Cereals & Ingredients Divisions. The latter will provide a return in the medium to long term. Thus, part of the higher operating expenses represent investments in the future.

Continuation of successful strategy

In the first half of the year, HOCHDORF continued to pursue its strategy. In accordance with the strategy, Bimbosan AG was acquired. With its Swiss origin, long-standing positive market presence and focus on biological raw materials, the company suits the HOCHDORF Group very well and is extremely well-suited for international expansion. In line with the HOCHDORF strategy, we sold HOCHDORF Baltic Milk UAB, thereby greatly reducing the business risks in the Dairy Ingredients Division (see Notes to the half-year financial statements for details).

In accordance with our strategy, we streamlined the product portfolio in the Dairy Ingredients Division. At the same time, however, we developed and sold special milk powder for the first time. Moreover, we moved ahead with the integration of Zifru Trockenprodukte GmbH and developed new product and marketing concepts in the Kids Food and Health Food Divisions.

New production line in Sulgen

After some initial delays, the new production and packaging line in Sulgen began regular production in mid-August. The state-of-the-art, technologically complex system has met our expectations. We are especially pleased with the powder structure achieved with it. Now, the plant capacity must be duly utilised with suitable products.


Under consideration of the production and sales orders already received, we expect excellent results in the second half of the year. Nevertheless, we will not be able to fully make up for the lower-than-expected half-year result. We are therefore slightly lowering our forecast for the 2018 business year. We are now expecting net revenue of CHF 570 – 600 million and EBIT amounting to 5.8 – 6.5% of the production revenue. This adjustment is based on the lack of lucrative sales in China, delays in the new production and filling facilities, the weak half-year results of Pharmalys Laboratories SA and the impairment from the sale of the HOCHDORF Baltic Milk UAB shareholding.

On the operating side, we expect the Baby Care Division to slightly exceed the previous year's volumes thanks to the growth among existing customers. In the Dairy Ingredients Division, we are driving the business with premium chocolate manufacturers. Moreover, we will produce additional special milk powders. Various market and product launches have been scheduled in the Cereals & Ingredients Division. We will carefully analyse the said cost increases and take meaningful countermeasures.

Thank you for supporting the HOCHDORF strategy, whose roll-out will take a few more months.

Kind regards from your BEST PARTNER
HOCHDORF Holding Ltd.

Dr. Daniel Suter
Chairman of the Board of Directors

Dr. Thomas Eisenring

Dr.  Thomas Eisenring
Dr  Daniel Suter
Chairman of the Board of Directors