HUHTAMÄKI OYJ - Stock exchange release
HUHTAMÄKI OYJ INTERIM REPORT 22.10.2020 AT 8:30
Huhtamäki Oyj's Interim Report January 1-September 30, 2020: Strong profitability improvement
Q3 2020 in brief
- Net sales decreased 1% to EUR 847 million (EUR 855 million)
- Adjusted EBIT was EUR 86 million (EUR 72 million); reported EBIT was EUR 65 million (EUR 68 million)
- Adjusted EPS was EUR 0.56 (EUR 0.45); reported EPS was EUR 0.43 (EUR 0.41)
- Comparable net sales growth was 2% at Group level and -2% in emerging markets
- The impact of currency movements was EUR -38 million on the Group's net sales and EUR -4 million on EBIT
Q1-Q3 2020 in brief
- Net sales decreased 1% to EUR 2,489 million (EUR 2,524 million)
- Adjusted EBIT was EUR 229 million (EUR 218 million); reported EBIT was EUR 217 million (EUR 213 million)
- Adjusted EPS was EUR 1.46 (EUR 1.40) reported EPS was EUR 1.40 (EUR 1.36)
- Comparable net sales growth was -1% at Group level and -6% in emerging markets
- The impact of currency movements was EUR -37 million on the Group's net sales and EUR -3 million on EBIT
Key figures
| EUR million | Q3 2020 | Q3 2019 | Change | Q1-Q3 2020 | Q1-Q3 2019 | Change | |
| Net sales | 847.3 | 854.9 | -1% | 2,489.0 | 2,524.3 | -1% | |
| Comparable net sales growth | 2% | 7% | -1% | 6% | |||
| Adjusted EBITDA1 | 127.2 | 113.5 | 12% | 356.3 | 339.0 | 5% | |
| Margin1 | 15.0% | 13.3% | 14.3% | 13.4% | |||
| EBITDA | 120.1 | 108.8 | 10% | 363.2 | 333.8 | 9% | |
| Adjusted EBIT2 | 85.5 | 72.3 | 18% | 229.2 | 218.4 | 5% | |
| Margin2 | 10.1% | 8.5% | 9.2% | 8.7% | |||
| EBIT | 64.7 | 67.7 | -4% | 217.4 | 213.2 | 2% | |
| Adjusted EPS3 | 0.56 | 0.45 | 25% | 1.46 | 1.40 | 5% | |
| EPS, EUR | 0.43 | 0.41 | 4% | 1.40 | 1.36 | 3% | |
| Adjusted ROI2 | 11.9% | 12.0% | |||||
| Adjusted ROE3 | 14.9% | 15.2% | |||||
| ROI | 11.3% | 10.3% | |||||
| ROE | 14.3% | 12.8% | |||||
| Capital expenditure | 40.6 | 54.6 | -26% | 120.3 | 132.9 | -10% | |
| Free Cash Flow | 103.7 | 82.9 | 25% | 149.6 | 117.1 | 28% | |
| 1Excluding IAC of | -7.1 | -4.6 | 6.8 | -5.2 | |||
| 2Excluding IAC of | -20.9 | -4.6 | -11.8 | -5.2 | |||
| 3Excluding IAC of | -13.8 | -3.6 | -6.8 | -4.1 |
Unless otherwise stated, all comparisons in this report are compared to the corresponding period in 2019. Figures of return on investment (ROI), return on equity (ROE) and return on net assets (RONA) as well as net debt to EBITDA presented in this report are calculated on a 12‑month rolling basis.
The figures in the tables are exact figures and consequently the sum of individual figures may deviate from the sum presented. Key figures have been calculated using exact figures.
Charles Héaulmé, President and CEO
'The COVID-19 pandemic continued to dominate the news flow and everyday life in the third quarter of 2020. We remained focused on safeguarding the health and safety of our employees and business continuity throughout the organization. Whilst parts of our business, particularly foodservice, were still substantially impacted, we have seen a limited recovery during the third quarter. Demand for food on-the-go products has gradually improved, but it is still lower than in 2019. The significant gap in consumption in restaurant services is partly compensated by the fast-increasing trend in food delivery. On the other hand, demand for food on-the-shelf products has remained strong throughout the crisis. In North America, the increased in-home consumption continued to support retail tableware and consumer goods sales. Growth in the Fiber Packaging segment continued to be driven by high demand for eggs and continued substitution of plastics. In the Flexible Packaging segment, the supply chain disruptions suffered in India and UAE during the second quarter eased during the third quarter, although we did not see fully the recovery to a normal level of logistics and consumption.
Our resilient and diversified portfolio continued delivering solid performance in the third quarter, with a comparable net sales growth of 2%. On Group level, comparable net sales from the beginning of the year declined -1% compared to 2019. The adjusted EBIT margin in the third quarter increased to 10.1%, improving 1.6 percentage-points compared to the same period last year. Year to date it increased from 8.7% in 2019 to 9.2%. The improvement in profitability reflects favorable mix impact and our continued focus on costs and efficiency.
During the quarter, the Board of Directors decided to pay a dividend of EUR 0.89 per share for the fiscal year 2019. The dividend has increased every year since 2009, in line with Huhtamaki's growth trajectory.
In March, we had introduced our 2030 strategy and laid out high ambitions for this decade. We are focused on delivering growth, improving competitiveness, developing talent, and embedding sustainability in everything we do. I am pleased to see that our work towards these ambitions is proceeding positively, albeit with some challenges and potential delays related to the current crisis. Our determination to strengthen and embed sustainability across products and operations has already yielded results. This is also visible in our stakeholders' evaluation of Huhtamaki as a company with a strong commitment to sustainability.'
Financial review Q3 2020
Net sales by business segment
| EUR million | Q3 2020 | Q3 2019 | Change | |
| Foodservice Europe-Asia-Oceania | 230.8 | 242.4 | -5% | |
| North America | 282.6 | 287.0 | -2% | |
| Flexible Packaging | 266.0 | 260.7 | 2% | |
| Fiber Packaging | 72.2 | 68.2 | 6% | |
| Elimination of internal sales | -4.3 | -3.4 | ||
| Group | 847.3 | 854.9 | -1% |
Comparable net sales growth by business segment
| Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | ||
| Foodservice Europe-Asia-Oceania | -1% | -28% | -4% | 4% | 4% | |
| North America | 4% | -5% | 9% | 6% | 14% | |
| Flexible Packaging | 1% | 2% | 2% | 3% | 4% | |
| Fiber Packaging | 7% | 10% | 9% | 8% | 7% | |
| Group | 2% | -8% | 3% | 5% | 7% |
The Group's net sales decreased 1% to EUR 847 million (EUR 855 million) during the quarter. Comparable net sales growth was 2%. Growth was especially strong in the Fiber Packaging segment, following mainly the strong demand of egg packaging. The Group's growth in emerging markets was -2%. Foreign currency translation impact on the Group's net sales was EUR -38 million (EUR 24 million) compared to 2019 exchange rates.
Adjusted EBIT by business segment
| Items affecting comparability | |||||||
| EUR million | Q3 2020 | Q3 2019 | Change | Q3 2020 | Q3 2019 | ||
| Foodservice Europe-Asia-Oceania | 21.7 | 22.7 | -4% | -17.3 | -0.1 | ||
| North America | 36.0 | 25.3 | 42% | -3.2 | -3.0 | ||
| Flexible Packaging | 22.7 | 20.6 | 10% | -0.7 | -0.1 | ||
| Fiber Packaging | 8.0 | 7.1 | 13% | -0.2 | -1.0 | ||
| Other activities | -2.9 | -3.4 | 0.6 | -0.4 | |||
| Group | 85.5 | 72.3 | 18% | -20.9 | -4.6 |
Adjusted EBIT margin by business segment
| Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | ||
| Foodservice Europe-Asia-Oceania | 9.4% | 3.7% | 8.0% | 8.5% | 9.4% | |
| North America | 12.7% | 12.8% | 10.6% | 10.9% | 8.8% | |
| Flexible Packaging | 8.5% | 7.3% | 7.7% | 7.4% | 7.9% | |
| Fiber Packaging | 11.1% | 11.2% | 11.0% | 9.8% | 10.4% | |
| Group | 10.1% | 8.8% | 8.7% | 8.5% | 8.5% |
The Group's adjusted EBIT increased to EUR 86 million (EUR 72 million) and reported EBIT was EUR 65 million (EUR 68 million). The increase in earnings was supported by the Fiber Packaging and Flexible Packaging segments and especially by the North America segment. The Group's adjusted EBIT margin improved and was 10.1% (8.5%). Foreign currency translation impact on the Group's earnings was EUR -4 million (EUR 2 million).
Adjusted EBIT excludes EUR -20.9 million (EUR -4.6 million) of items affecting comparability (IAC).
Adjusted EBIT and IAC
| EUR million | Q3 2020 | Q3 2019 | |
| Adjusted EBIT | 85.5 | 72.3 | |
| Acquisitions | -0.2 | -0.6 | |
| Restructuring costs including write-downs of related assets | -21.2 | - | |
| One-time gain from acquisition of Laminor | 0.5 | - | |
| Losses from property damage incidents | - | -4.0 | |
| EBIT | 64.7 | 67.7 |
Net financial expenses were EUR 4 million (EUR 7 million). Tax expense was EUR 14 million (EUR 15 million). Profit for the quarter was EUR 47 million (EUR 46 million). Adjusted earnings per share (EPS) were EUR 0.56 (EUR 0.45) and reported EPS EUR 0.43 (EUR 0.41). Adjusted EPS is calculated based on adjusted profit for the period, which excludes EUR -13.8 million (EUR -3.6 million) of IAC.
Adjusted EPS and IAC
| EUR million | Q3 2020 | Q3 2019 | |
| Adjusted profit for the period attributable to equity holders of the parent company | 58.7 | 46.9 | |
| IAC in EBIT | -20.9 | -4.6 | |
| IAC in Financial items (related to reversal of contingent consideration related to acquisition) | 3.0 | - | |
| Taxes relating to IAC | 4.0 | 1.1 | |
| Profit for the period attributable to equity holders of the parent company | 44.9 | 43.3 |
Financial review Q1-Q3 2020
Net sales by business segment
| EUR million | Q1-Q3 2020 | Q1-Q3 2019 | Change | |
| Foodservice Europe-Asia-Oceania | 615.6 | 711.4 | -13% | |
| North America | 864.9 | 849.0 | 2% | |
| Flexible Packaging | 800.0 | 761.3 | 5% | |
| Fiber Packaging | 222.5 | 217.3 | 2% | |
| Elimination of internal sales | -14.0 | -14.7 | ||
| Group | 2,489.0 | 2,524.3 | -1% |
Comparable net sales growth by business segment
| Q1-Q3 2020 | Q1-Q3 2019 | 2019 | ||
| Foodservice Europe-Asia-Oceania | -11% | 4% | 4% | |
| North America | 2% | 11% | 9% | |
| Flexible Packaging | 2% | 3% | 3% | |
| Fiber Packaging | 9% | 6% | 6% | |
| Group | -1% | 6% | 6% |
The Group's net sales decreased 1% to EUR 2,489 million (EUR 2,524 million) during the reporting period. Comparable net sales growth was -1%. Net sales decreased in the Foodservice Europe-Asia-Oceania segment, following the impact of COVID-19, and increased in the other segments. The Group's growth in emerging markets was -6%. Foreign currency translation impact on the Group's net sales was EUR -37 million (EUR 68 million) compared to 2019 exchange rates.
Adjusted EBIT by business segment
| Items affecting comparability | |||||||
| EUR million | Q1-Q3 2020 | Q1-Q3 2019 | Change | Q1-Q3 2020 | Q1-Q3 2019 | ||
| Foodservice Europe-Asia-Oceania | 45.3 | 64.7 | -30% | -19.4 | -0.3 | ||
| North America | 104.4 | 78.3 | 33% | -6.6 | -3.0 | ||
| Flexible Packaging | 62.7 | 63.8 | -2% | -5.7 | -0.1 | ||
| Fiber Packaging | 24.8 | 21.6 | 15% | -1.7 | -1.0 | ||
| Other activities | -7.9 | -10.0 | 21.5 | -0.8 | |||
| Group | 229.2 | 218.4 | 5% | -11.8 | -5.2 |
Adjusted EBIT margin by business segment
| Q1-Q3 2020 | Q1-Q3 2019 | Q1-Q3 2018 | ||
| Foodservice Europe-Asia-Oceania | 7.4% | 9.1% | 9.1% | |
| North America | 12.1% | 9.2% | 7.4% | |
| Flexible Packaging | 7.8% | 8.4% | 7.1% | |
| Fiber Packaging | 11.1% | 9.9% | 10.7% | |
| Group Total | 9.2% | 8.7% | 8.2% |
The Group's adjusted EBIT increased to EUR 229 million (EUR 218 million) and reported EBIT was EUR 217 million (EUR 213 million). The increase in earnings was supported by the North America and Fiber Packaging segments. The Group's adjusted EBIT margin improved and was 9.2% (8.7%). Foreign currency translation impact on the Group's earnings was EUR -3 million (EUR 6 million).
Adjusted EBIT excludes EUR -11.8 million (EUR -5.2 million) of items affecting comparability (IAC).
Adjusted EBIT and IAC
| EUR million | Q1-Q3 2020 | Q1-Q3 2019 | |
| Adjusted EBIT | 229.2 | 218.4 | |
| Acquisitions | -0.7 | -1.2 | |
| Restructuring costs including write-downs of related assets | -33.6 | - | |
| One-time gain from acquisition of Laminor | 22.4 | - | |
| Losses from property damage incidents | - | -4.0 | |
| EBIT | 217.4 | 213.2 |
Net financial expenses were EUR 22 million (EUR 23 million). Tax expense was EUR 44 million (EUR 43 million). The corresponding tax rate was 23% (23%). Profit for the period was EUR 152 million (EUR 148 million). Adjusted earnings per share (EPS) were EUR 1.46 (EUR 1.40) and reported EPS EUR 1.40 (EUR 1.36). Adjusted EPS is calculated based on adjusted profit for the period, which excludes EUR -6.8 million (EUR -4.1 million) of IAC.
Adjusted EPS and IAC
| EUR million | Q1-Q3 2020 | Q1-Q3 2019 | |
| Adjusted profit for the period attributable to equity holders of the parent company | 152.6 | 146.0 | |
| IAC in EBIT | -11.8 | -5.2 | |
| IAC in Financial items (related to reversal of contingent consideration related to acquisition) | 3.0 | - | |
| Taxes relating to IAC | 2.0 | 1.2 | |
| Profit for the period attributable to equity holders of the parent company | 145.8 | 141.9 |
Acquisitions and divestments
On September 30, 2019, Huhtamaki announced its agreement to acquire the assets and operations of Mohan Mutha Polytech Private Limited (MMPPL), a privately-owned flexible packaging manufacturer located in Sri City, Andhra Pradesh, India. The acquisition allows Huhtamaki to speed up its growth in India by improving its capability to serve the customers in South India. MMPPL has approximately 160 employees and its net sales in 2018 were approximately EUR 9 million. The debt-free purchase price was approximately EUR 10 million. The acquisition was completed on January 10, 2020 and since then the business has reported as part of the Flexible Packaging business segment.
On December 23, 2019, Huhtamaki announced its agreement to acquire full ownership of its joint venture company Laminor S.A. in Brazil. Laminor is specialized in high-quality tube laminates, particularly for oral care applications, and was set up in 2002 as a 50/50 joint venture together with Bemis Company, which is now part of Amcor. The acquisition enables Huhtamaki to expand its tube laminate business, an important part of the Group's flexible packaging offering. Laminor has approximately 130 employees and its net sales in 2018 were approximately EUR 25 million. The additional shares were acquired at a price of approximately EUR 28 million and the acquisition was completed on March 31, 2020. The business has been consolidated as a subsidiary in the Group's financial reporting and it has been reported as part of the Flexible Packaging business segment as of April 1, 2020. As a result of the transaction, a gain from the difference between remeasured interest according to the purchase price and previously held equity interest of approximately EUR 22 million has been recognized in the income statement as item affecting comparability in Q1-Q3 2020 financial results.
Significant events during the reporting period
On March 23, 2020, Huhtamaki announced its long-term 2030 strategy in order to maintain its growth trajectory and meet future transformative trends. Going forward, Huhtamaki will focus on growth, competitiveness, talent and sustainability. The company's ambition is to become the first choice in sustainable food packaging. Huhtamaki also outlined its long-term financial ambitions and introduced its new 2030 sustainability ambitions. The strategy emphasizes strong core values: Care, Dare, Deliver. In line with its renewed strategy, the company decided to integrate its Foodservice Europe-Asia-Oceania and Fiber Packaging business segments. The segments will continue to be reported separately, at least for the remainder of the financial year 2020. Eric Le Lay will continue as President for the combined Fiber and Foodservice EAO (Europe-Asia-Oceania) segment. This change became effective as of June 1, 2020.
On March 26, 2020, Huhtamaki announced that it has decided to withdraw its outlook for 2020 (published on February 13, 2020) due to the unprecedented and accelerated situation caused by the COVID-19 and its impact on the Group's trading conditions. It was announced that the company will provide a new outlook when impacts of the changing business environment on its trading conditions in 2020 can be assessed in a reliable manner. Huhtamaki announced a new outlook for 2020 on July 23, 2020, in conjunction with its Half-yearly Report January 1-June 30, 2020.
On March 26, 2020, Huhtamaki announced that the Board of Directors changed its proposal for use of the profit shown on the balance sheet and proposed that no dividend payment would be decided by the Annual General Meeting. Instead, the Board of Directors proposed to the Annual General Meeting that the Annual General Meeting would authorize the Board of Directors to decide at a later stage and in its discretion on a dividend payment in one or several installments of a total maximum of EUR 0.89 per share. On September 17, 2020, Huhtamaki announced that the Board of Directors of Huhtamäki Oyj decided to pay out a dividend of EUR 0.89 per share from the distributable funds of the Company. The dividend was paid to a shareholder who on the dividend record date September 18, 2020 was registered as a shareholder in the Company's shareholders' register held by Euroclear Finland Ltd. The dividend was paid on September 25, 2020.
Outlook for 2020
Disturbance from the COVID-19 pandemic on Huhtamaki's operating environment is expected to continue. The demand especially for food on-the-go packaging may be significantly negatively impacted whilst demand for food on-the-shelf packaging and convenience tableware may be positively impacted. Huhtamaki's diversified product portfolio provides resilience to the effects of the pandemic.
Financial reporting in 2021
In 2021, Huhtamaki will publish financial information as follows:
Results 2020 February 11
Interim Report, January 1 - March 31, 2021 April 22
Half-yearly Report, January 1 - June 30, 2021 July 22
Interim Report, January 1 - September 30, 2021 October 21
Annual Accounts 2020 will be published on the week commencing March 1, 2021.
Huhtamäki Oyj's Annual General Meeting is planned to be held on April 22, 2021.
This is a summary of Huhtamäki Oyj's Interim Report January 1-September 30, 2020. The complete report is attached to this release and is also available at the company website at www.huhtamaki.com.
For further information, please contact:
Calle Loikkanen, Head of Investor Relations and Financial Communications, tel. +358 10 686 7125
HUHTAMÄKI OYJ
Global Communications
Huhtamaki is a key global provider of sustainable packaging solutions for consumers around the world, enabling wellbeing and convenience. Our innovative products protect on-the-go and on-the-shelf food and beverages, ensuring hygiene and safety, and help prevent food waste. We embed sustainability in everything we do. We are committed to achieving carbon neutral production and designing all our products to be recyclable, compostable or reusable by 2030.
We are a participant in the UN Global Compact and as of 2020, we received an MSCI ESG Rating of A, on a scale of AAA─CCC. To play our part in managing climate change, we have committed to set science-based targets through the Science Based Targets initiative. Huhtamaki has been awarded the Silver medal by EcoVadis for performance in sustainability.
With 100 years of history and a strong Nordic heritage we operate in 35 countries and 81 sites around the world. Our values Care Dare Deliver guide our decisions and help our team of 18,600 employees make a difference where it matters. Our 2019 net sales totaled EUR 3.4 billion. Huhtamaki Group is headquartered in Espoo, Finland and our parent company, Huhtamäki Oyj, is listed on Nasdaq Helsinki Ltd. Find out more about how we are protecting food, people and the planet on www.huhtamaki.com.
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Huhtamäki Oyj published this content on 22 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 November 2020 22:46:04 UTC
