The Group’s consolidated earnings in the first half of the year were affected mainly by the rising costs (some affecting the entire market and others more direct and extraordinary) suffered by the North American rice business and the major investments in the Group’s expansion plan.
In this context, Ebro chalked up a net profit of €76.3 million in the first six months of 2018, 17.1% down on the first half of 2017. Net turnover rose by 2.3% to €1,277.3 million despite the adverse effect of the drop in the dollar exchange rate, from 1.08 to 1.21. The EBITDA, or gross operating profit, stood at €151.4 million, down 16.6% year on year.
Net debt grew by €215 million year on year to €732.2 million in the wake of the acquisition of the fresh pasta manufacturer Bertagni for €145 million, the investment of €14 million in the new headquarters of Panzani in France, the considerable increase in working capital made in both divisions to source raw material in the face of possible adverse situations, and the heavy investment in organic growth.
Following a period of unprecedented results with a 13% growth in EBITDA, a number of extraordinary factors temporarily dented the earnings of this Division, such as:
1. The hike in raw material prices, especially jazmine rice from Thailand, which particularly hit Riviana and, to a smaller extent, our business in Europe.
2. The high industrial costs deriving from the start-up of new microwave lines in the USA and Spain.
3. The coming on stream of the enlargement in Bangkok, which has hampered normal sourcing.
4. The situation of full employment in the USA, leading to a shortage of personnel for our Freeport plant (Texas).
5. The extraordinary rise in logistics costs in the USA owing to the shortage of hauliers and rising fuel prices.
On the upside, the volume of sales was not affected by the above-mentioned incidents and have continued to grow, especially our American brands on an otherwise rather flat market.
The division posted a turnover of €688.3 million and an EBITDA of €85.6 million.
As far as raw materials are concerned, the Division has hedged its sourcing in both the USA and Europe for the rest of the year.
In France, the Panzani business performed well, increasing its market share in all the segments in which it operates, although the mix is slightly less favourable as sales have also risen among our least profitable clients.
Garofalo continues to make major efforts to position the brand in France, Spain and the USA. It has managed to consolidate its position in the fiercely competitive Italian market and, together with Bertagni, it has begun to launch its first fresh pasta listings.
In the USA, the measures implemented in Riviana to boost the value attributes of its brands are beginning to bear fruit and it is improving its market share, especially in the core pastas.
The division posted a turnover of €617 million and an EBITDA of €70.5 million.
Enhanced full-year prospects
As seen above, the Group was faced with some complex circumstances during the period, especially in the North American rice business. We trust that the effects will be mitigated over the year, since they are all due to a temporary increase in costs. Riviana is in a very strong position to address these factors, with strong brands and a positive goodwill, as confirmed by the excellent evolution of its sales volumes and values over the six-month period.
We have also made some very positive achievements during the first six months of the year, including the total incorporation of the fresh pasta company Bertagni, making the Group the second fresh pasta manufacturer in the world and generating major synergies with our other fresh pasta businesses; the healthy growth of our North American pasta business, which, after some complicated years, has now returned to the path of growth; and the outstanding performance of our main brands, which maintain their leadership and are increasing their market shares, proving consumers’ appreciation of our products.