Huhtamäki Oyj's Interim Report January 1 - September 30, 2014: Solid net sales growth
HUHTAMÄKI OYJ INTERIM REPORT 23.10.2014 AT 08:30
Huhtamäki Oyj's Interim Report January 1 - September 30, 2014: Solid net sales growth
Q3 2014 in brief
- Net sales were EUR 613 million (EUR 587 million)
- EBIT was EUR 45 million (EUR 42 million, excluding NRI of EUR -5 million)
- EPS was EUR 0.29 (EUR 0.31, excluding NRI)
- Comparable net sales growth was 6% in total and 9% in emerging markets
- Significant profitability improvement in the Foodservice Europe-Asia-Oceania, Molded Fiber and Films business segments
- While net sales growth was satisfactory, the North America business segment did not deliver profitability according to expectations
- Currency movements had no impact on the Group's net sales
- Acquisition of Positive Packaging, a flexible packaging company operating in India, United Arab Emirates and Africa, was announced in the beginning of the quarter
Q1-Q3 2014 in brief
- Net sales were EUR 1,805 million (EUR 1,774 million)
- EBIT was EUR 141 million (EUR 129 million, excluding NRI of EUR -13 million)
- EPS was EUR 0.93 (EUR 0.89, excluding NRI)
- Comparable net sales growth was 6% in total and 11% in emerging markets
- Currency movements had a significant negative impact of EUR 58 million on the Group's net sales
Key figures
| EUR million | Q3 2014 | Q3 2013 | Change | Q1-Q3 2014 | Q1-Q3 2013 | Change | FY 2013 |
| Net sales | 613.2 | 586.5 | 5% | 1,805.1 | 1,773.8 | 2% | 2,342.2 |
| EBITDA* | 67.8 | 64.2 | 6% | 208.1 | 195.8 | 6% | 256.4 |
| EBITDA margin* | 11.1% | 10.9% | 11.5% | 11.0% | 10.9% | ||
| EBIT** | 44.9 | 42.3 | 6% | 140.6 | 128.7 | 9% | 166.7 |
| EBIT margin** | 7.3% | 7.2% | 7.8% | 7.3% | 7.1% | ||
| EPS**, EUR | 0.29 | 0.31 | -6% | 0.93 | 0.89 | 4% | 1.21 |
| ROI** | 12.3% | 12.1% | 12.1% | ||||
| ROE** | 16.0% | 15.0% | 15.8% | ||||
| Capital expenditure | 31.6 | 26.1 | 21% | 77.2 | 82.0 | -6% | 121.0 |
| Free cash flow | 14.7 | 31.9 | -54% | 10.5 | 37.7 | -72% | 56.0 |
* Excluding non-recurring items (NRI) of EUR -3.5 million in Q3 2013, EUR -6.7 million in Q1-Q3 2013 and EUR -23.8 million in FY 2013.
** Excluding NRI of EUR -5.2 million in Q3 2013, EUR -12.5 million in Q1-Q3 2013 and EUR -30.6 million in FY 2013.
CEO Jukka Moisio:
"The 6% comparable net sales growth that was achieved is a satisfactory result in the current economic climate and shows that we are making steady progress towards our growth targets. General economic uncertainty is reflected particularly in the emerging markets with the pace of growth slowing down to 9% (12% in the previous quarter), but there is a big variation from country to country.
Our profitability for the quarter, however, did not meet our expectations and particularly the performance in the North America segment should have been better. The growth pace of the segment is good, but we need to work to get the profitability back on track. We are taking action to improve these results. At the same time, distribution costs and raw material prices are putting pressure on the segment's margins.
The results of the restructuring actions taken in the Foodservice Europe-Asia-Oceania segment during 2013 are visible in the segment's profitability. Strong performance continued also in the Molded Fiber segment, while the profitability of the Flexible Packaging segment was negatively impacted by increased raw material costs and continued strong competition in emerging markets.
It is pleasing to see the strong net sales growth and profitability improvement in the Films segment, even though the segment's future as part of Huhtamaki is being evaluated as a result of our growing focus on consumer food packaging.
Our financial position remains solid. While we invest heavily to support our customers' growth in emerging markets, we also continue to focus on working capital management in order to optimize our cash flows. This combined with the actions we are taking to improve the performance of our North America segment, allows us to progress well towards our strategic targets and mid-term financial ambitions."
Financial review Q3 2014
The Group's comparable net sales growth was 6% during the quarter. The growth was strongest in Molded Fiber, Films and Flexible Packaging business segments. Comparable growth in the emerging markets was 9%. The growth in emerging markets was driven by good volume development especially in Eastern Europe and South Asia, whereas net sales development in China turned negative. The Group's reported net sales were EUR 613 million (EUR 587 million). There was no impact on the Group's net sales from foreign currency translations compared to the 2013 exchange rates.
NET SALES BY BUSINESS SEGMENT
| EUR million | Q3 2014 | Q3 2013 | Change | Of Group in Q3 2014 |
| Foodservice Europe-Asia-Oceania | 160.1 | 160.0 | 0.1% | 26% |
| North America | 191.2 | 182.7 | 4.7% | 31% |
| Flexible Packaging | 155.3 | 145.2 | 7.0% | 25% |
| Molded Fiber | 60.5 | 56.4 | 7.3% | 10% |
| Films | 52.3 | 47.9 | 9.2% | 8% |
Excluding internal sales eliminations of EUR -6.2 million in Q3 2014 and EUR -5.7 million in Q3 2013.
COMPARABLE GROWTH BY BUSINESS SEGMENT
| Q3 2014 | Q2 2014 | Q1 2014 | Q4 2013 | |
| Foodservice Europe-Asia-Oceania | 4% | 5% | 3% | 3% |
| North America | 4% | 10% | 3% | 6% |
| Flexible Packaging | 6% | 4% | 7% | 9% |
| Molded Fiber | 9% | 10% | 10% | 10% |
| Films | 9% | 10% | 9% | 2% |
| Group | 6% | 7% | 5% | 6% |
The Group's earnings development in constant currencies continued strong, with particularly strong performance by the Foodservice Europe-Asia-Oceania and Films business segments. In the North America business segment earnings developed negatively. In constant currencies the earnings before interest and taxes (EBIT) grew by 7%. The Group's EBIT was EUR 45 million (EUR 42 million, excluding NRI of EUR -5 million).
EBIT BY BUSINESS SEGMENT
| EUR million | Q3 2014 | Q3 2013 | Change | Of Group in Q3 2014 |
| Foodservice Europe-Asia-Oceania | 16.0 | 11.5 | 39.1% | 34% |
| North America | 7.8 | 10.6 | -26.4% | 17% |
| Flexible Packaging | 10.8 | 10.7 | 0.9% | 23% |
| Molded Fiber | 7.4 | 6.3 | 17.5% | 16% |
| Films | 4.7 | 2.6 | 80.8% | 10% |
Excluding Other activities EBIT EUR -1.8 million in Q3 2014 and EUR 0.6 million in Q3 2013. Foodservice Europe-Asia-Oceania EBIT excluding NRI of EUR -5.2 million in Q3 2013.
Net financial expenses were EUR 8 million (EUR 7 million). Tax expense was EUR 6 million (EUR 3 million).
Profit for the period was EUR 31 million (EUR 27 million). There were no NRI reported during the quarter, whereas profit for the third quarter of 2013 includes NRI of EUR -5 million. Earnings per share (EPS) were EUR 0.29 (EUR 0.31 excluding NRI or EUR 0.26 reported).
Financial review Q1-Q3 2014
The Group's comparable net sales growth was 6% during the period. In the emerging markets comparable growth was 11%, with Eastern European markets continuing to show fastest growth. The Group's reported net sales were EUR 1,805 million (EUR 1,774 million). The negative foreign currency translation impact on Group's net sales, related to currency movements during the first half of the year, was EUR 58 million compared to the 2013 exchange rates. The largest negative impact came from the US dollar, Russian ruble and Indian rupee.
NET SALES BY BUSINESS SEGMENT
| EUR million | Q1-Q3 2014 | Q1-Q3 2013 | Change | Of Group in Q1-Q3 2014 |
| Foodservice Europe-Asia-Oceania | 464.8 | 477.0 | -2.6% | 26% |
| North America | 563.7 | 544.3 | 3.6% | 31% |
| Flexible Packaging | 458.2 | 447.2 | 2.5% | 25% |
| Molded Fiber | 183.8 | 176.0 | 4.4% | 10% |
| Films | 154.4 | 143.6 | 7.5% | 8% |
Excluding internal sales eliminations of EUR -19.8 million in Q1-Q3 2014 and EUR -14.3 million in Q1-Q3 2013.
The Group's earnings development in constant currencies was strong, with all business segments except North America contributing to the earnings growth. Earnings growth was strongest in the Foodservice Europe-Asia-Oceania, Films and Molded Fiber business segments. Main reasons for the positive development were volume growth, disciplined cost containment and the positive effect of successful restructuring activities taken during 2013. EBIT in constant currencies grew by 10%. The Group's EBIT was EUR 141 million (EUR 129 million, excluding NRI of EUR -13 million). Negative foreign currency translation impact on Group's EBIT, resulting from currency movements during the first half of the year, was EUR 4 million.
EBIT BY BUSINESS SEGMENT
| EUR million | Q1-Q3 2014 | Q1-Q3 2013 | Change | Of Group in Q1-Q3 2014 |
| Foodservice Europe-Asia-Oceania | 44.4 | 34.7 | 28.0% | 31% |
| North America | 29.8 | 33.4 | -10.8% | 21% |
| Flexible Packaging | 33.1 | 33.9 | -2.4% | 23% |
| Molded Fiber | 25.0 | 20.7 | 20.8% | 17% |
| Films | 11.0 | 6.2 | 77.4% | 8% |
Excluding Other activities EBIT EUR -2.7 million in Q1-Q3 2014 and EUR -0.2 million in Q1-Q3 2013. Foodservice Europe-Asia-Oceania EBIT excluding NRI of EUR -12.5 million in Q1-Q3 2013.
Net financial expenses increased and were EUR 23 million (EUR 21 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 19 million (EUR 13 million). The corresponding tax rate was 16% (14%).
Profit for the period was EUR 99 million (EUR 82 million). There were no NRI reported during the period, whereas the profit for the corresponding period in 2013 includes NRI of EUR -13 million. EPS was EUR 0.93 (EUR 0.89 excluding NRI or EUR 0.77 reported).
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 2015
Results 2014 will be published on February 12, 2015.
Additionally, Huhtamaki will publish the following interim reports during the course of the year:
Interim Report January 1 - March 31, 2015 April 21, 2015
Interim Report January 1 - June 30, 2015 July 24, 2015
Interim Report January 1 - September 30, 2015 October 22, 2015
Huhtamäki Oyj's Annual General Meeting is planned to be held on April 21, 2015.
This is a summary of Huhtamäki Oyj's Interim Report January 1 - September 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 14,700 people in 62 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.