News

Huhtamäki Oyj's Interim Report January 1 - March 31, 2018: Solid comparable growth, negative currency impact

HUHTAMÄKI OYJ INTERIM REPORT 25.4.2018 at 8:00

Huhtamäki Oyj's Interim Report January 1 - March 31, 2018: Solid comparable growth, negative currency impact

Q1 2018 in brief

  • Net sales were EUR 725 million (EUR 739 million)
  • EBIT was EUR 60 million (EUR 63 million)
  • EPS was EUR 0.40 (EUR 0.43)
  • Comparable net sales growth was 5% in total and 8% in emerging markets
  • Currency movements had a negative impact of EUR 59 million on the Group's net sales and EUR 4 million on EBIT

Key figures

EUR million Q1 2018 Q1 2017 Change FY 2017
Net sales 725.2 739.4 -2% 2,988.7
EBITDA 90.1 94.0 -4% 389.71
  Margin 12.4% 12.7%   13.0%1
EBIT 60.0 62.8 -4% 267.71
  Margin 8.3% 8.5%   9.0%1
EPS, EUR 0.40 0.43 -7% 1.902
ROI 13.3%1 14.6%   13.6%1
ROE 16.7%2 17.4%   17.0%2
Capital expenditure 33.3 47.0 -29% 214.8
Free cash flow -18.0 -8.8 -105% 55.5

1 FY 2017 excluding IAC of EUR -3.4 million. Reported EBITDA for FY 2017 EUR 386.3 million and EBIT EUR 264.3 million.
2 FY 2017 excluding IAC of EUR -4.8 million. Reported EPS for FY 2017 EUR 1.86.

Unless otherwise stated, all comparisons in this report are compared to the corresponding period in 2017. Figures of return on investment (ROI), return on equity (ROE) and return on net assets (RONA) presented in this report are calculated on a 12-month rolling basis.

All figures in the tables have been rounded to the nearest whole number and consequently the sum of individual figures may deviate from the sum presented. Key figures have been calculated using exact figures.

Jukka Moisio, CEO:

"We achieved a solid 5% comparable net sales growth in the first quarter. In emerging markets our comparable net sales grew by 8% with Eastern Europe and India growing strongest. The North America segment started to benefit from the Goodyear plant start-up and reported 5% comparable growth while other segments continued with good momentum that was already visible in 2017. Currency headwinds were strong and they had a significant negative impact on reported net sales. The main impact came from the weakening of the U.S. dollar versus euro, but all key currencies weakened versus euro.

In constant currencies our profitability was slightly ahead of previous year while reported EBIT declined. The Foodservice Europe-Asia-Oceania segment reported an improved EBIT and Fiber Packaging also progressed well. The North America segment reported weaker profitability due to currency conversion, higher distribution costs, and start-up of the Goodyear facility. The Flexible Packaging segment reported slightly weaker profitability due to tight pricing and competitive situation in Europe, while in India sales and profitability developed well.

During the quarter we were ramping up the new capacity of the Goodyear plant in North America. The project is progressing according to our plan and has met the first quarter technical and operational targets. Later in the year we will commission new lines and machines that have been part of our capital expenditure in 2017 and in the early part of 2018. The additional capacity allows us to capture further growth opportunities.

During the quarter we announced an acquisition of a labeling company Ajanta Packaging in India to expand our product offer and improve our competitive position in this key market for us. We also established a joint venture with Smith Anderson Group to manufacture and sell foodservice paper bags in Eastern Europe, strengthening our position as a one-stop-shop to foodservice customers.

Our high season is starting and we are confident about the growth momentum in our business."

Financial review Q1 2018

The Group's comparable net sales growth was 5% with all segments making good progress. Comparable growth in emerging markets was 8%. In absolute terms growth was strongest in Eastern Europe, India, and Middle East and Africa. The Group's reported net sales declined and were EUR 725 million (EUR 739 million). Foreign currency translation impact on the Group's net sales was EUR -59 million (EUR 20 million) compared to 2017 exchange rates. The majority of the negative currency impact came from the weakening of the U.S. dollar versus euro, however, all key currencies weakened against euro contributing to the negative translation impact.

Net sales by business segment

EUR million Q1 2018 Q1 2017 Change Of Group in
Q1 2018
Foodservice Europe-Asia-Oceania 198.8 192.5 3% 27%
North America 226.8 247.3 -8% 31%
Flexible Packaging 234.0 232.3 1% 32%
Fiber Packaging 69.7 72.3 -4% 10%
Elimination of internal sales -4.1 -5.0    
Group 725.2 739.4 -2%  

Comparable growth by business segment

  Q1 2018 Q4 2017 Q3 2017 Q2 2017
Foodservice Europe-Asia-Oceania 5% 6% 4% 2%
North America 5% 2% 2% 1%
Flexible Packaging 6% 9% 7% -2%
Fiber Packaging 5% 4% 5% 8%
Group 5% 5% 4% 1%

The Group's reported earnings declined but in comparable currencies the Group's earnings improved slightly compared to the previous year. Foodservice Europe-Asia-Oceania segment's earnings increased significantly as a result of sales growth and operational efficiency. Fiber Packaging segment's earnings grew as well, while earnings in Flexible Packaging and North America segments declined. Earnings decline in the North America segment was due to negative currency impact, higher distribution costs and costs related to the start-up of the Goodyear plant. The Group's earnings before interest and taxes (EBIT) were EUR 60 million (EUR 63 million). Foreign currency translation impact on Group's EBIT was EUR -4 million (EUR 2 million positive).

EBIT by business segment

EUR million Q1 2018 Q1 2017 Change Of Group in
Q1 2018
Foodservice Europe-Asia-Oceania 19.2 15.4 25% 32%
North America 16.2 22.5 -28% 26%
Flexible Packaging 17.5 18.9 -7% 29%
Fiber Packaging 7.9 7.3 9% 13%
Other activities -0.9 -1.3    
Group 60.0 62.8 -4%  

Net financial expenses were EUR 7 million (EUR 5 million). Tax expense was EUR 11 million (EUR 13 million). The corresponding tax rate was 21% (22%).

Profit for the quarter was EUR 42 million (EUR 45 million). Earnings per share (EPS) were EUR 0.40 (EUR 0.43).

Acquisitions

On March 23, 2018 Huhtamaki announced that it has entered into an agreement to acquire the Indian business and related assets of Ajanta Packaging, a privately-owned manufacturer of pressure sensitive labels. With the acquisition Huhtamaki strengthens its labeling business in India by adding new printing technologies into its offering as well as improving its innovation capability. The acquisition is complementary to Huhtamaki's existing labeling product portfolio. The annual net sales of the business to be acquired are approximately EUR 10 million. It employs altogether 170 people and has two state-of-the-art manufacturing facilities. The debt free purchase price is approximately EUR 13 million. The transaction is expected to be closed at the end of April 2018. The business will become part of the Flexible Packaging business segment

Outlook for 2018

The Group's trading conditions are expected to remain relatively stable during 2018. The good financial position and ability to generate a positive cash flow will enable the Group to address profitable growth opportunities. Capital expenditure is expected to be approximately at the same level as in 2017 with the majority of the investments directed to business expansion.

Annual General Meeting 2018

The Annual General Meeting of Shareholders will be held on Wednesday, April 25, 2018 at 11.00 (EET) at Messukeskus Helsinki, Expo and Convention Centre, Messuaukio 1, 00520 Helsinki, Finland.

Financial reporting in 2018

In 2018, Huhtamaki will publish financial information as follows:

Half-yearly Report, January 1 - June 30, 2018                         July 20
Interim Report, January 1 - September 30, 2018                     October 25

This is a summary of Huhtamäki Oyj's Interim Report January 1 - March 31, 2018. 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:
Jukka Moisio, CEO, tel. +358 10 686 7801
Thomas Geust, CFO, tel. +358 10 686 7880

HUHTAMÄKI OYJ
Group Communications

Huhtamaki is a global specialist in packaging for food and drink. With our network of 76 manufacturing units and additional 24 sales only offices in altogether 34 countries, we're well placed to support our customers' growth wherever they operate. Mastering three distinctive packaging technologies, approximately 17,600 employees develop and make packaging that helps great products reach more people, more easily. In 2017 our net sales totaled EUR 3.0 billion. The Group has its head office in Espoo, Finland and the parent company Huhtamäki Oyj is listed on Nasdaq Helsinki Ltd. Additional information is available at www.huhtamaki.com.