Swiss Cheesemaker Emmi Feels Brexit Pain As Weak Pound Hurts
Swiss cheesemaker Emmi became the latest victim of Brexit, lowering its sales forecast as the pound’s weakness makes European-produced goods less competitive in the UK.
The drop in sterling is cutting into revenue of the Onken yogurts that Emmi produces in Germany and A-27 desserts it makes in Italy, the company said Wednesday, adding that demand in Spain, Italy and France is also weak. The stock plunged as much as 12%.
“The issue is the UK market, where it has raised prices to offset currency weakness but local players haven’t needed to do so,” wrote Jon Cox, an analyst at Kepler Cheuvreux.
Sterling’s weakness is a problem for European food producers, causing them to either charge British customers more or take a hit to revenue and profitability. The increased cost of imports pushed UK food price inflation to a three-year high in July.
Emmi shares fell as much as 88.50 francs to 638.50 francs in Zurich. The warning has brought the stock down to earth because it ends the dairy company’s streak of earnings beating analysts’ estimates since 2015, according to Patrik Schwendimann, an analyst at Zuercher Kantonalbank, who downgraded the stock to underperform.
Group revenue in 2017 will drop as much as 1% versus a previous forecast of 1% to 2% growth, the company said. Within that, European sales will decline 1% to 3%, below a prior prediction for growth of as much as 2%.