May, 23, 2017
Net sales grew and earnings improved - the year started well
We have engaged actively with investors during the 3 weeks since the publication of our Q1 17 Interim report. Interest in our long-term strategy and industry trends as well as in our quarterly performance has been high. The most discussed topics related to the first quarter include raw material prices, margin management, and demand development in India.
Prices of plastic resins increased sharply throughout the first quarter. Plastic is the main raw material for flexible packaging, which typically replaces more rigid packaging types, such as metal cans, glass jars or rigid plastic containers. About half of the net sales of our Flexible Packaging segment is with the large global clients. Agreements with them typically include a pass-through clause, which means that the selling price is adjusted to reflect changes in raw material prices. In average, it takes about one to two quarters before the adjustment becomes effective.
In India, our Q1 17 net sales were negatively affected by the demonetization action the government took late last year. The lack of bank notes in daily use had a negative impact on consumer demand, and subsequently the demand for flexible packaging especially in January and February. However, demand started to normalize in March as the newly launched notes penetrated the market. The Indian situation was also a clear reason for the Group's comparable growth being 3% (and 2% in emerging markets). In the long-term we continue to aim for a comparable growth of 5+%.
On May 16 Huhtamaki had the honor to ring the market closing bell at Nasdaq Market Site in New York. You'll find a video and pictures of the event here: business.nasdaq.com. Our U.S. disposable tableware brand, Chinet®, was also well presented at the event. I'll discuss our U.S. business more closely in the next IR Blog, to be published in June.
P.S. Have you already read the interesting stories on responsible business at Huhtamaki, or familiarized yourself with our corporate responsibility performance in 2016? You'll find our GRI Performance Review 2016 and CR Insights 2016 here: http://www.huhtamaki.com/investors/reports-and-presentations/reports/2017