December 19, 2016

In CMD mood

We have met a vast number of investors during the quarter, firstly at our Capital Markets Day in Espoo and CMD Briefing in London, and secondly in regular one-on-one meetings and calls. Huhtamaki Capital Markets Day 2016 took place at our HQ in Espoo, Finland on November 22, followed by a briefing in London the next day. We’re very pleased with the interest both CMD events raised among investors. Questions during the days addressed e.g. underlying growth, future growth investments and their leverage, measures for margin improvement and risks related to acquisitions and greenfields in emerging markets.

We launched new long-term financial ambitions

We introduced new long-term ambitions for the Group and the business segments at the CMD. In 3-5 years’ time, we aim for 5+% organic growth complemented with 5+% growth from acquisitions (annual averages, growth from acquisitions in particular not expected to be linear between years). Our aim is to continue to grow profitably, and we raised our EBIT margin ambition to 10+%. The comprehensive set of our new long-term ambitions is available on our website.

Growth is the key in our agenda

The underlying growth picture of food packaging has remained relatively stable. Food packaging demand is supported by major megatrends, which create an average growth opportunity of 2%-points above GDP growth in developed markets and even 2 times GDP growth in emerging markets.

Our aim is to invest about 40% of EBITDA. Majority of the annual capital expenditure is allocated in growth and is expected to generate a capital velocity of 2+. In addition, we currently have about M€ 400-500 to spend in acquisitions. During the past years, 1 euro spent in acquisitions has generated an average of 80 cents of new net sales. When entering new markets – be it via an acquisition or a greenfield – thorough due diligence and risk assessment are the key for long-term success. Our strategy is to follow our key customers; as they already operate locally in the country in question they’re an important information source to us when we assess risks and opportunities of our growth initiatives.

How to achieve the higher margin target?

Our tools for margin improvement are pretty much unchanged, with some new twist added by stronger collaboration across our business segments. First of all, our focus on food packaging allows growth, and the limited scope also enhances leverage we can get out of it. Secondly, we continue our focused approach in raw material sourcing, cost containment and operational efficiency in all operations, supported by additional restructuring actions when needed. Finally, we will increase collaboration and sharing of best practices across segments, especially in the areas of sourcing, operations, innovations, commercialization, people and corporate responsibility, and expect this to bring good things either in the form of value-in or cost-out, depending on the area in focus.

Useful links to recap the CMD materials in more detail

Presentations

Videos (CEO & CFO)

Twitter summary (in Finnish)

Updated analyst consensus

Huhtamaki awarded by analysts

Huhtamaki was rewarded 3rd and our CEO Jukka Moisio 1st in the Finnish large cap category of the annual IR Nordic Markets survey conducted among analysts by research company Regi. We thank our analysts for the confidence in our IR work, but in particular for the great development ideas we received. After all, Huhtamaki is a continuously developing company, and the same applies to our IR!

I wish everyone Happy Holidays and health and success for 2017!

Kaisa Uurasmaa
Huhtamaki IR