SIG is driving growth by working in partnership with customers to bring food products to consumers around the world in a safe, sustainable and affordable way.
Chairman & CEO's letter
2019 was SIG’s first full year as a publicly listed company since returning to SIX Swiss Exchange in 2018. The listing has naturally brought greater awareness of our Company both in our home country Switzerland and abroad. During the year we have engaged with a broad base of investors internationally and have had many discussions with representatives of the media and other external stakeholders. This has given us the opportunity to explain the unique technology behind our solution business, consisting of filling lines, carton packs, closures and services. We have also been able to demonstrate the strong sustainability credentials which are intrinsic to our business.
As a listed company we continue to pursue our expansion goals supported by the investments made in recent years. Our dream of seeing “Every consumer in the world with a SIG pack in their hand, and a smile on their face, every single day” may sound ambitious but it reflects the growing demand for packaged food globally. In fact, this dream is firmly grounded in the reality of providing safe, sustainable and affordable packaging solutions for essential food products to our customers around the world.
"SIG’s focus on sustainability dates back many years and it is an integral part of our corporate compass and group strategy."
Consuming safely and on the go
We help the food and beverage companies who are our customers to meet the differing needs of consumers globally. In many emerging markets where there is no fully reliable cold chain, food preservation is a top priority. Our cartons enable beverages and liquid food to maintain their taste, appearance and nutritional qualities for up to 12 months without the need for refrigeration or preservatives. This minimises waste and avoids the CO2 emissions generated by a cold chain. Cartons are also highly attractive in countries where e-commerce is expanding, as they facilitate safe and cost-effective transportation.
"Our dream is firmly grounded in the reality of providing safe, sustainable and affordable packaging solutions to our customers around the world."
Our flexibility in terms of packaging size and format means that emerging market consumers can have access to nutritional products at an affordable price. Milk is a primary source of protein for young and old alike and consumption continues to rise in many countries. In some more developed markets, producers including smaller start-up brands are diversifying into areas such as plant-based dairy alternatives, protein drinks and nutritional supplements. Consumers’ changing lifestyles favour on-the-go consumption and the difference between food and drink is blurring. These all represent new opportunities for us which can be maximised through our unique filling capabilities and our innovative formats and designs.
Public concern over sustainability issues has intensified over the last 12 months and the need for sustainable packaging is now top of mind with all our customers, as well as with many consumers. However, SIG’s focus on sustainability dates back many years and it is an integral part of our corporate compass and group strategy. Our cartons have one of the lowest carbon footprints, being made largely out of renewable materials and fully recyclable, and we have pioneered structures that further enhance their environmental profile. More broadly, we focus on driving carbon footprints down and on changing the narrative from carbon neutral to net positive. In 2019, we became one of the first companies in our industry to set a climate target approved by the Science-Based Targets Initiative (SBTi) as being in line with the goal of limiting global warming to 1.5°C above pre-industrial levels.
Governance and shareholders
The Company held its first Annual General Meeting since the recent listing on 11 April 2019 in Schaffhausen. The meeting was well attended with 81.8% of the share capital represented. All the proposals of the Board of Directors were passed by a large majority.
The Board of Directors combines the knowledge and experience of the previous Advisory Board with the addition of new members who have a background in publicly listed companies both in Switzerland and abroad. Onex now has a single Board seat as David Mansell did not stand for re-election at the Annual General Meeting. In the course of 2019, in line with common post-IPO practice, Onex reduced its holding from 51% to 32% of the share capital.
2019 financial performance
2019 was another year of strong sales growth and cash generation. Core revenue increased by 5.2% at constant exchange rates, comfortably within our target range of 4 to 6%. Growth was driven in particular by markets outside Europe, demonstrating the success of our expansion initiatives. The adjusted EBITDA margin for the Group at 27.2% was also within the target range for 2019. We continued to invest in innovation and introduced multiple new products in the course of the year. Recent major launches such as combismile continued to ramp up and our most advanced sustainable solutions, including SIGNATURE PACK and EcoPlus, gained traction as customers sought to address growing consumer concerns over the environment. Adjusted net income reached EUR 217 million, above the 2018 pro forma level. Free cash flow was also ahead of 2018 at EUR 267 million and we are proposing a dividend of CHF 0.38 per share, compared with CHF 0.35 per share in 2018.
Increasing share of wallet and winning new customers
Our business model is based on supplying our customers with an integrated system serviced by our engineers in the field worldwide. New customers are often attracted to the SIG offering by the flexibility of our system and our ability to fill a wide array of products, ranging from plain white milk to soups and sauces containing pieces or chunks. Our ambition is to deliver unrivalled operating efficiency, service and innovation to not only maintain but also grow our share of wallet. Our success is evidenced by long-lasting customer relationships and a net promoter score that is regularly best-in-class. The loyalty of our customers is something we prize very highly – it is never taken for granted and we strive continuously to ensure that it is merited.
Growing the business globally while deepening our local presence
We have a well established global filler base that forms the bedrock of our future growth. Over the last 10 years, aided by strong cash flows out of Europe, we have significantly built up our business in the Americas and Asia Pacific. These regions have increased in importance in recent years and are expected to have the highest growth rates going forward. We have focused on establishing a local manufacturing presence in order to be close to our customers and to benefit from cost and sourcing efficiencies. With the rapid growth in our Asia Pacific business, we announced in July that we have decided to expand our production network in the region with the construction of a second plant in China. This follows on from our recently opened regional Tech Centre in China and will enable us to continue to meet demand across Oceania and Asia, where millions of people are only now starting to consume packaged food and beverages. SIG’s growth objectives are founded on organic growth and acquisition opportunities in our industry have historically been few. However, in 2019 we were able to acquire Visy Cartons in Australia, establishing a presence in a market where SIG has until now had no direct presence. We intend to expand the Visy business in New Zealand as well as Australia and to fully take advantage of the wave of investment by dairy companies targeting exports of premium milk to the Chinese market. The acquisition of Visy will further leverage our expanding Asia Pacific footprint and will enable us to expand the reach of SIG’s latest technologies and solutions.
"We have a well established global filler base which forms the bedrock of our future growth."
The capabilities and know-how of our employees are key to our success
Our business demands a diversity of talents spanning different areas including engineering, food science, marketing and product development. We aim to make SIG the best place in our industry to work and to offer exciting development opportunities globally and across disciplines. We would like to thank all our employees for the excellent contributions they made in 2019, going the extra mile to serve our customers, to further grow our business while maintaining a high level of profitability and return on capital, and to go way beyond good on our journey to become net positive.
- Andreas Umbach Chairman
- Rolf Stangl Chief Executive Officer