Huhtamäki Oyj's Interim Report January 1 - June 30, 2015: Profitability improvement continued
HUHTAMÄKI OYJ INTERIM REPORT 24.7.2015 AT 8:30
Huhtamäki Oyj's Interim Report January 1 - June 30, 2015: Profitability improvement continued
Q2 2015 in brief
- Net sales were EUR 714 million (EUR 579 million)
- EBIT excluding non-recurring items (NRI) was EUR 70 million (EUR 51 million)
- EPS excluding NRI was EUR 0.52 (EUR 0.34)
- Comparable net sales growth was 1% in total and 5% in emerging markets
- Currency movements had a positive impact of EUR 67 million on the Group's net sales, and EUR 6 million on EBIT
- The European Commission imposed a fine of EUR 15.6 million on Huhtamaki based on infringements of EU's competition regulation in 2002-2006. Huhtamaki has examined the Commission's decision and has decided to launch an appeal.
H1 2015 in brief
- Net sales were EUR 1,344 million (EUR 1,093 million)
- EBIT excluding NRI was EUR 119 million (EUR 89 million)
- EPS excluding NRI was EUR 0.85 (EUR 0.59)
- Comparable net sales growth was 3% in total and 5% in emerging markets
- Currency movements had a positive impact of EUR 120 million on the Group's net sales, and EUR 10 million on EBIT
- Acquisition of Positive Packaging, a flexible packaging company operating in India, United Arab Emirates and Africa, was closed at the end of January and the business was consolidated into the Flexible Packaging business segment as of February 1, 2015
Key figures
| EUR million | Q2 2015 | Q2 2014 | Change | H1 2015 | H1 2014 | Change | FY 2014 | ||||||||||||
| Net sales | 713.6 | 578.9 | 23% | 1,343.7 | 1,092.5 | 23% | 2,235.7 | ||||||||||||
| EBITDA* | 96.2 | 71.5 | 35% | 171.0 | 130.2 | 31% | 259.0 | ||||||||||||
| EBITDA margin* | 13.5% | 12.4% | 12.7% | 11.9% | 11.6% | ||||||||||||||
| EBIT* | 69.7 | 51.0 | 37% | 119.4 | 89.4 | 34% | 174.9 | ||||||||||||
| EBIT margin* | 9.8% | 8.8% | 8.9% | 8.2% | 7.8% | ||||||||||||||
| EPS*, EUR | 0.52 | 0.34 | 53% | 0.85 | 0.59 | 44% | 1.24 | ||||||||||||
| ROI** | 13.4% | 12.3% | 12.6% | ||||||||||||||||
| ROE** | 17.5% | 16.6% | 16.1% | ||||||||||||||||
| Capital expenditure | 36.9 | 23.6 | 56% | 61.6 | 45.6 | 35% | 127.0 | ||||||||||||
| Free cash flow | 30.4 | 7.1 | 328% | 11.0 | -4.2 | 362% | 64.6 | ||||||||||||
| Including discontinued operations | |||||||||||||||||||
| EPS**, EUR | 0.52 | 0.37 | 41% | 0.85 | 0.64 | 33% | 1.28 | ||||||||||||
| EPS, reported, EUR | 0.32 | 0.37 | -14% | 0.61 | 0.64 | -5% | 1.33 | ||||||||||||
* Excluding NRI of EUR -18.5 million in Q2 2015 and EUR -22.6 million in H1 2015.
** Excluding NRI of EUR -19.8 million in Q2 2015, EUR -23.9 million in H1 2015 and EUR 5.1 million in FY 2014.
Unless otherwise stated, all figures presented in this report, including corresponding periods in 2014, cover continuing operations only. Continuing operations include the Foodservice Europe-Asia-Oceania, North America, Flexible Packaging and Molded Fiber business segments. Discontinued operations for 2014 and 2015 include the Films business segment, which was sold at the end of December 2014. Unless otherwise stated, all comparisons in this report are compared to the corresponding period in 2014. ROI, ROE and RONA figures presented in this report are calculated on a 12-month rolling basis.
Jukka Moisio, CEO:
"We remain satisfied with the continued strong profitability improvement as we recorded the highest ever second quarter results. The profitability improvement was strongly driven by the North America segment that executed planned actions to bring its operating profitability to a more normalized level. Also the Flexible Packaging segment achieved a solid profitability improvement helped by the Positive Packaging business that performed according to our expectations in the second quarter. We are five months into the acquisition and will continue to execute our business plan to achieve the targeted synergies.
The comparable net sales growth was more subdued in this quarter. As part of the profit normalization actions, the North America segment discontinued low profitability products, bringing its comparable net sales development temporarily to negative territory. Prices for plastic resins reached their low point during the first quarter and due to lag effect in net selling prices, the lower raw material prices of the first quarter resulted in lower selling prices and reduced comparable growth in the second quarter. This concerns especially the Flexible Packaging segment, which is the primary user of plastic raw materials in the Group. The resin prices have increased significantly in the second quarter and we expect the topline impact to even out during coming quarters.
Our key markets of Southeast Asia, North America, and Europe are expected to offer good growth opportunities going forward. Main softness in emerging markets is in China and although the growth has slowed down in Eastern Europe it still remains at a good level. In summary, we are reasonably optimistic about net sales development during the second half of 2015 and we should see good contributions both from organic growth actions as well as our recent acquisitions.
At the end of June, the European Commission gave its decision on the cartel case related to our former rigid plastic consumer goods business in Europe, and imposed a EUR 16 million fine on Huhtamaki. After having studied the Commission's decision we've decided to launch an appeal. We do not tolerate unethical behavior and continue to do our utmost to prevent it from happening."
Financial review Q2 2015
The Group's comparable net sales growth was 1% during the quarter. Stable growth in Molded Fiber, Flexible Packaging and Foodservice Europe-Asia-Oceania business segments continued. The North America business segment's reported net sales grew, whereas in constant currencies net sales development was negatively affected by the segment's successful focus on actions to normalize its margins. Comparable growth in emerging markets was 5%. Good net sales growth in South America, Russia and Southeast Asia continued. Net sales grew also in India, but declined in China. The Group's net sales grew to EUR 714 million (EUR 579 million). There was a significant positive impact on net sales from the Positive Packaging acquisition as well as foreign currency translation, which was EUR 67 million compared to the 2014 exchange rates. Majority of the currency impact came from the strengthening of the US dollar versus euro.
Net sales by business segment
| EUR million | Q2 2015 | Q2 2014 | Change | Of Group in Q2 2015 |
| Foodservice Europe-Asia-Oceania | 175.4 | 162.7 | 8% | 24% |
| North America | 252.5 | 208.3 | 21% | 35% |
| Flexible Packaging | 224.8 | 152.1 | 48% | 32% |
| Molded Fiber | 66.2 | 61.8 | 7% | 9% |
| Elimination of internal sales | -5.3 | -6.0 | ||
| Group | 713.6 | 578.9 | 23% |
Comparable growth by business segment
| Q2 2015 | Q1 2015 | Q4 2014 | Q3 2014 | |
| Foodservice Europe-Asia-Oceania | 2% | 3% | 2% | 4% |
| North America | -2% | 7% | 5% | 4% |
| Flexible Packaging | 4% | 5% | 12% | 6% |
| Molded Fiber | 5% | 5% | 7% | 9% |
| Group | 1% | 5% | 6% | 5% |
The Group's earnings development was solid. Strong earnings growth in the North America business segment continued. In addition, earnings growth was good in the Flexible Packaging business segment with a significant positive contribution from Positive Packaging. The Group's earnings before interest and taxes (EBIT) were EUR 70 million, excluding NRI of EUR -19 million (EUR 51 million). Positive foreign currency translation impact on Group's EBIT was EUR 6 million.
EBIT by business segment
| EUR million | Q2 2015 | Q2 2014 | Change | Of Group in Q2 2015 |
| Foodservice Europe-Asia-Oceania | 16.4 | 17.4 | -6% | 23% |
| North America | 26.2 | 13.2 | 98% | 38% |
| Flexible Packaging | 17.8 | 11.3 | 58% | 26% |
| Molded Fiber | 9.0 | 10.0 | -10% | 13% |
| Other activities | 0.3 | -0.9 | ||
| Group | 69.7 | 51.0 | 37% |
Other activities EBIT excluding NRI of EUR -18.5 million in Q2 2015.
Net financial expenses increased to EUR 9 million (EUR 7 million). Tax expense was EUR 7 million (EUR 8 million).
Profit for the period was EUR 36 million, including NRI of EUR -19 million (EUR 37 million). The NRI is related to the fine of EUR 16 million imposed on Huhtamaki by the European Commission based on infringements of EU's competition regulation in 2002-2006 as well as legal costs of EUR 3 million related to the investigation and the appeal process.
Earnings per share (EPS) excluding NRI were EUR 0.52 (EUR 0.34). Reported EPS were EUR 0.33 (EUR 0.34) and EUR 0.32 (EUR 0.37) including discontinued operations.
Financial review H1 2015
The Group's comparable net sales growth was 3% during the period. All business segments contributed to the net sales growth. Comparable growth in emerging markets was 5%. The growth in emerging markets was driven by continued good development in Russia, Southeast Asia and South America, whereas negative net sales development in China continued. The Group's net sales grew to EUR 1,344 million (EUR 1,093 million). In addition to organic growth, there was a significant positive impact on net sales from the Positive Packaging acquisition as well as the foreign currency translation, which was EUR 120 million compared to the 2014 exchange rates. The majority of the currency impact came from the strengthening of the US dollar versus euro.
Net sales by business segment
| EUR million | H1 2015 | H1 2014 | Change | Of Group in H1 2015 |
| Foodservice Europe-Asia-Oceania | 329.3 | 304.7 | 8% | 24% |
| North America | 463.2 | 372.5 | 24% | 34% |
| Flexible Packaging | 430.8 | 302.9 | 42% | 32% |
| Molded Fiber | 131.4 | 123.3 | 7% | 10% |
| Elimination of internal sales | -11.0 | -10.9 | ||
| Group | 1,343.7 | 1,092.5 | 23% |
The Group's earnings development was good. Earnings improvement was strongest in the North America business segment. The Group's EBIT were EUR 119 million, excluding NRI of EUR -23 million (EUR 89 million). Positive Packaging also contributed positively to earnings. Positive foreign currency translation impact on Group's EBIT was EUR 10 million.
EBIT by business segment
| EUR million | H1 2015 | H1 2014 | Change | Of Group in H1 2015 |
| Foodservice Europe-Asia-Oceania | 28.3 | 28.4 | 0% | 23% |
| North America | 40.0 | 22.0 | 82% | 33% |
| Flexible Packaging | 34.8 | 22.3 | 56% | 29% |
| Molded Fiber | 17.6 | 17.6 | 0% | 15% |
| Other activities | -1.3 | -0.9 | ||
| Group | 119.4 | 89.4 | 34% |
Other activities EBIT excluding NRI of EUR -22.6 million in H1 2015.
Net financial expenses increased to EUR 18 million (EUR 14 million). The payment of purchase price for Positive Packaging led to a higher amount of net debt and thus higher financial expenses. Tax expense was EUR 13 million (EUR 13 million). The corresponding tax rate was 16% (16%).
Profit for the period was EUR 67 million, including NRI of EUR -23 million (EUR 63 million). EPS excluding NRI were EUR 0.85 (EUR 0.59). Reported EPS were EUR 0.62 (EUR 0.59) and EUR 0.61 (EUR 0.64) including discontinued operations.
Significant events during the reporting period
On June 24, 2015 the European Commission announced the outcome of its investigations on anticompetitive behavior in the markets of plastic trays used for retail packaging. Huhtamäki Oyj had received in September 2012 the European Commission's statement of objections concerning alleged anticompetitive behavior in the markets of plastic trays used for retail packaging of fresh food during years 2000-2008. The European Commission found certain of Huhtamaki's former operations to have been involved in anticompetitive practices. The concerned operations are no longer part of Huhtamaki as they were part of the Group's rigid consumer goods business in Europe that was closed down or divested in years 2006 and 2010. Based on infringements in North-West Europe and France during years 2002-2006 the European Commission imposed a EUR 16 million fine on Huhtamaki. The fine and legal costs of EUR 3 million related to the investigation and the appeal process are recognized as a non-recurring expense in the Group's Q2 2015 result. Huhtamaki has examined the European Commission's decision and has decided to launch an appeal against the decision before the General Court of the European Union.
Outlook for 2015
The Group's trading conditions are expected to remain relatively stable during 2015. 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 2014. Majority of the investments are expected to be directed to enhance growth in the emerging markets.
Financial reporting in 2015
Huhtamaki will publish the following interim report during the course of the year:
Interim Report January 1 - September 30, 2015 October 22, 2015
This is a summary of Huhtamäki Oyj's Interim Report January 1 - June 30, 2015. 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 is a global specialist in packaging for food and drink. With our network of 69 manufacturing units and 23 sales offices in 34 countries, we're well placed to support our customers' growth wherever they operate. Mastering three distinctive packaging technologies, approximately 16,500 employees develop and make packaging that helps great products reach more people, more easily. In 2014 our net sales totaled EUR 2.2 billion. The Group has its head office in Espoo, Finland and the parent company Huhtamäki Oyj is listed on NASDAQ OMX Helsinki Ltd. Additional information is available at www.huhtamaki.com.
get_app Huhtamäki Oyj Interim Report January 1- June 30, 2015