Huhtamäki Oyj's Interim Report January 1 - June 30, 2014: Net sales and EBIT growth continued
HUHTAMÄKI OYJ INTERIM REPORT 18.7.2014 AT 08:30
Huhtamäki Oyj's Interim Report January 1 - June 30, 2014: Net sales and EBIT growth continued
Q2 2014 in brief
- Net sales were EUR 628 million (EUR 619 million)
- EBIT was EUR 54 million (EUR 49 million, excluding NRI of EUR -7 million)
- EPS was EUR 0.37 (EUR 0.34, excluding NRI)
- Comparable net sales growth was 7% in total and 12% in the emerging markets
- Currency movements had a significant negative impact of EUR 28 million on the Group's net sales
- Acquisition of Positive Packaging, a flexible packaging company operating in India, United Arab Emirates and Africa, was announced after the end of the quarter
H1 2014 in brief
- Net sales were EUR 1,192 million (EUR 1,187 million)
- EBIT was EUR 96 million (EUR 86 million, excluding NRI of EUR -7 million)
- EPS was EUR 0.64 (EUR 0.58, excluding NRI)
- Comparable net sales growth was 6% in total and 12% in the emerging markets
- Currency movements had a significant negative impact of EUR 58 million on the Group's net sales
| EUR million | Q2 2014 | Q2 2013 | Change | H1 2014 | H1 2013 | Change | FY 2013 |
| Net sales | 628.2 | 618.9 | 2% | 1,191.9 | 1,187.3 | 0% | 2,342.2 |
| EBITDA* | 76.7 | 71.9 | 7% | 140.3 | 131.6 | 7% | 256.4 |
| EBITDA margin* | 12.2% | 11.6% | 11.8% | 11.1% | 10.9% | ||
| EBIT* | 54.3 | 49.2 | 10% | 95.7 | 86.4 | 11% | 166.7 |
| EBIT margin* | 8.6% | 7.9% | 8.0% | 7.3% | 7.1% | ||
| EPS*, EUR | 0.37 | 0.34 | 9% | 0.64 | 0.58 | 10% | 1.21 |
| ROI* | 12.3% | 12.3% | 12.1% | ||||
| ROE* | 16.6% | 15.0% | 15.8% | ||||
| Capital expenditure | 23.6 | 29.1 | -19% | 45.6 | 55.9 | -18% | 121.0 |
| Free cash flow | 7.1 | 27.2 | -74% | -4.2 | 5.8 | -172% | 56.0 |
* Excluding non-recurring items (NRI) of EUR -7.3 million in Q2 2013 and H1 2013 and EUR -30.6 million in FY 2013.
CEO Jukka Moisio:
"Our organic growth this quarter was 7% against our target of 5%. Our good pace in the emerging markets continued and we achieved 12% organic growth. Given the continued economic uncertainty in many markets, I am particularly pleased that we have stayed well on our course.
Our pipeline of ideas and projects continues to be good in terms of new product development, bringing them to market as well as new businesses. The hard work of our acquisition team was rewarded as we were able to announce the acquisition of Positive Packaging early July. Positive Packaging is a good fit to our strategy of quality growth and emerging market positions. With Positive we are able to improve our position in India, we gain a good foothold in the Middle East and a significant improvement in Africa.
The acquisition of Positive Packaging also supports our growing focus on consumer food packaging. Due to this reason we have decided to evaluate options regarding our Films business. While the business is growing well and improving its profitability, it serves different end users than the other Huhtamaki businesses.
Huhtamaki's financial performance during the second quarter continued good. Our EBIT growth exceeds the net sales growth and improved RONA in most of the segments shows that our asset utilization is on a good level. We are making good progress towards achieving our medium term ambitions."
Financial review Q2 2014
The Group's comparable net sales growth was 7% during the quarter with all business segments reporting organic growth. Comparable growth in the emerging markets was 12%, led by Eastern Europe and South America. The Group's reported net sales were EUR 628 million (EUR 619 million). The negative foreign currency translation impact on Group's net sales continued and was EUR 28 million compared to the 2013 exchange rates. The largest negative impact on the Group's net sales came from the fluctuations of US dollar, Indian rupee and Russian ruble.
NET SALES BY BUSINESS SEGMENT
| EUR million | Q2 2014 | Q2 2013 | Change | Of Group in Q2 2014 |
| Foodservice Europe-Asia-Oceania | 162.7 | 167.4 | -2.8% | 25% |
| North America | 208.3 | 197.0 | 5.7% | 33% |
| Flexible Packaging | 152.1 | 152.9 | -0.5% | 24% |
| Molded Fiber | 61.8 | 59.0 | 4.7% | 10% |
| Films | 50.4 | 47.1 | 7.0% | 8% |
Excluding internal sales eliminations of EUR -7.1 million in Q2 2014 and EUR -4.5 million in Q2 2013.
COMPARABLE GROWTH BY BUSINESS SEGMENT
| Q2 2014 | Q1 2014 | Q4 2013 | Q3 2013 | |
| Foodservice Europe-Asia-Oceania | 5% | 3% | 3% | 3% |
| North America | 10% | 3% | 6% | 7% |
| Flexible Packaging | 4% | 7% | 9% | 6% |
| Molded Fiber | 10% | 10% | 10% | 6% |
| Films | 10% | 9% | 2% | 3% |
| Group | 7% | 5% | 6% | 5% |
The Group's earnings development in constant currencies continued strong, with all business segments except North America contributing to the positive development. Main reason for the positive development was good volume growth and continued focus on operational efficiencies. In constant currencies the earnings before interest and taxes (EBIT) grew by 14%. The Group's EBIT were EUR 54 million (EUR 49 million, excluding NRI of EUR -7 million). Negative foreign currency translation impact on Group's EBIT was EUR 2 million.
EBIT BY BUSINESS SEGMENT
| EUR million | Q2 2014 | Q2 2013 | Change | Of Group in Q2 2014 |
| Foodservice Europe-Asia-Oceania | 17.4 | 14.8 | 17.6% | 32% |
| North America | 13.2 | 15.0 | -12.0% | 24% |
| Flexible Packaging | 11.3 | 12.0 | -5.8% | 20% |
| Molded Fiber | 10.0 | 7.3 | 37.0% | 18% |
| Films | 3.3 | 1.8 | 83.3% | 6% |
Net financial expenses were EUR 8 million (EUR 7 million). Tax expense was EUR 8 million (EUR 6 million).
Profit for the period was EUR 39 million (EUR 29 million). There were no NRI reported during the quarter, whereas profit for the second quarter of 2013 includes NRI of EUR -7 million. Earnings per share (EPS) were EUR 0.37 (EUR 0.34 excluding NRI or EUR 0.27 reported).
Financial review H1 2014
The Group's comparable net sales growth was 6% during the period. In the emerging markets, comparable growth was 12%, with Eastern European markets showing fastest growth. The Group's reported net sales were EUR 1,192 million (EUR 1,187 million). The negative foreign currency translation impact on Group's net sales was EUR 58 million compared to the 2013 exchange rates. The largest negative impact on the Group's net sales came from the fluctuations of US dollar, Russian ruble and Indian rupee.
NET SALES BY BUSINESS SEGMENT
| EUR million | H1 2014 | H1 2013 | Change | Of Group in H1 2014 |
| Foodservice Europe-Asia-Oceania | 304.7 | 317.0 | -3.9% | 25% |
| North America | 372.5 | 361.6 | 3.0% | 32% |
| Flexible Packaging | 302.9 | 302.0 | 0.3% | 25% |
| Molded Fiber | 123.3 | 119.6 | 3.1% | 10% |
| Films | 102.1 | 95.7 | 6.7% | 8% |
Excluding internal sales eliminations of EUR -13.6 million in H1 2014 and EUR -8.6 million in H1 2013.
The Group's earnings development in constant currencies was strong, with all business segments contributing to the positive development. Main reasons for the positive development were volume growth and continued good cost containment. EBIT in constant currencies grew by 14%. The Group's EBIT were EUR 96 million (EUR 86 million, excluding NRI of EUR -7 million). Negative foreign currency translation impact on Group's EBIT was EUR 4 million.
EBIT BY BUSINESS SEGMENT
| EUR million | H1 2014 | H1 2013 | Change | Of Group in H1 2014 |
| Foodservice Europe-Asia-Oceania | 28.4 | 23.2 | 22.4% | 29% |
| North America | 22.0 | 22.8 | -3.5% | 23% |
| Flexible Packaging | 22.3 | 23.2 | -3.9% | 23% |
| Molded Fiber | 17.6 | 14.4 | 22.2% | 18% |
| Films | 6.3 | 3.6 | 75.0% | 7% |
Net financial expenses increased slightly and were EUR 15 million (EUR 14 million). The increase was due to a higher amount of external debt compared to the previous year as a result of the fixed rate unsecured bond issued in the second quarter of 2013. Tax expense was EUR 13 million (EUR 10 million). The corresponding tax rate was 16% (16%).
Profit for the period was EUR 68 million (EUR 55 million). There were no NRI reported during the period, whereas the profit for the corresponding period in 2013 includes NRI of EUR -7 million. EPS were EUR 0.64 (EUR 0.58 excluding NRI or EUR 0.51 reported).
Significant events after the reporting period
On July 8, 2014 Huhtamaki entered into an agreement to acquire Positive Packaging, a privately owned flexible packaging company with nine manufacturing facilities in India and the United Arab Emirates as well as significant business in Africa and other export markets. With the acquisition Huhtamaki continues to implement its strategy of quality growth and strengthens its position in the fast-growing emerging markets.
The annual net sales of the business to be acquired are approximately EUR 220 million and it employs approximately 2,500 people in India and UAE as well as in the sales offices in seven countries. Huhtamaki will acquire Positive Packaging for a debt free purchase price of EUR 247 million (USD 336 million). The business will become part of the Group's Flexible Packaging business segment. The transaction is subject to the approval of competition authorities and other regulators and it is expected to be finalized in the fall.
On July 18, 2014 it was announced that as a result of Huhtamaki's growing strategic focus on food packaging it has been decided to evaluate options regarding the Group's Films business. One possible outcome of this evaluation is the divestment of the Films business segment.
Outlook for 2014
The Group's trading conditions are expected to remain relatively stable during 2014. The good financial position and ability to generate a positive cash flow will enable the Group to continue to address profitable growth opportunities. Capital expenditure is expected to be at the same level as in 2013. A significant part of the investments are expected to be directed to enhance growth in the emerging markets.
Financial reporting in 2014
Huhtamaki will publish the following interim report during the course of the year:
Interim Report January 1 - September 30, 2014 October 23, 2014
This is a summary of Huhtamaki's Interim Report January 1 - June 30, 2014. 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. +358 686 7880
HUHTAMÄKI OYJ
Group Communications
Huhtamaki Group is a leading manufacturer of consumer and specialty packaging with 2013 net sales totaling EUR 2.3 billion. Foodservice and consumer goods markets are served by approximately 14,400 people in 61 manufacturing units and several sales offices in 30 countries. The parent company, Huhtamäki Oyj, has its head office in Espoo, Finland and its share is quoted on NASDAQ OMX Helsinki Ltd. Additional information is available at www.huhtamaki.com.