HUHTAMÄKI OYJ HALF-YEARLY REPORT 23.7.2020 AT 8:30
Huhtamäki Oyj's Half-yearly Report January 1-June 30, 2020: Good resilience in the face of the COVID-19 crisis
Q2 2020 in brief
- Net sales decreased 8% to EUR 797 million (EUR 867 million)
- Adjusted EBIT was EUR 70 million (EUR 78 million); reported EBIT was EUR 70 million (EUR 78 million)
- Adjusted EPS was EUR 0.44 (EUR 0.51); reported EPS was EUR 0.44 (EUR 0.51)
- Comparable net sales growth was -8% at Group level and -12% in emerging markets
- The impact of currency movements was EUR -8 million on the Group's net sales and EUR 0 million on EBIT
H1 2020 in brief
- Net sales decreased 2% to EUR 1,642 million (EUR 1,669 million)
- Adjusted EBIT was EUR 144 million (EUR 146 million); reported EBIT was EUR 153 million (EUR 145 million)
- Adjusted EPS was EUR 0.90 (EUR 0.95) reported EPS was EUR 0.97 (EUR 0.95)
- Comparable net sales growth was -3% at Group level and -8% in emerging markets
- The impact of currency movements was EUR 2 million on the Group's net sales and EUR 1 million on EBIT
- Huhtamaki announces its outlook for 2020 in which disturbance from the COVID-19 pandemic on Huhtamaki's operating environment is expected to continue
Key figures
| EUR million | Q2 2020 | Q2 2019 | Change | H1 2020 | H1 2019 | Change | |
| Net sales | 797.1 | 867.3 | -8% | 1,641.7 | 1,669.4 | -2% | |
| Comparable net sales growth | -8% | 6% | -3% | 5% | |||
| Adjusted EBITDA1 | 112.1 | 118.6 | -5% | 229.1 | 225.5 | 2% | |
| Margin1 | 14.1% | 13.7% | 14.0% | 13.5% | |||
| EBITDA | 113.0 | 118.1 | -4% | 243.1 | 224.9 | 8% | |
| Adjusted EBIT2 | 70.1 | 78.3 | -10% | 143.7 | 146.1 | -2% | |
| Margin2 | 8.8% | 9.0% | 8.8% | 8.8% | |||
| EBIT | 70.2 | 77.8 | -10% | 152.7 | 145.5 | 5% | |
| Adjusted EPS3 | 0.44 | 0.51 | -14% | 0.90 | 0.95 | -5% | |
| EPS, EUR | 0.44 | 0.51 | -14% | 0.97 | 0.95 | 2% | |
| Adjusted ROI2 | 11.6% | 11.5% | |||||
| Adjusted ROE3 | 14.2% | 14.8% | |||||
| ROI | 11.6% | 10.0% | |||||
| ROE | 14.3% | 12.6% | |||||
| Capital expenditure | 40.3 | 38.6 | 4% | 79.7 | 78.3 | 2% | |
| Free Cash Flow | 70.4 | 52.4 | 34% | 45.9 | 34.2 | 34% |
1 Excluding IAC of EUR 0.9 million in Q2 2020 (EUR -0.5 million) and EUR 14.0 million in H1 2020 (EUR -0.6 million).
2 Excluding IAC of EUR 0.1 million in Q2 2020 (EUR -0.5 million) and EUR 9.0 million in H1 2020 (EUR -0.6 million).
3 Excluding IAC of EUR 0.1 million in Q2 2020 (EUR -0.4 million) and EUR 7.0 million in H1 2020 (EUR -0.5 million).
Unless otherwise stated, all comparisons in this report are compared to the corresponding period in 2019. Figures of return on investment (ROI), return on equity (ROE) and return on net assets (RONA) as well as net debt to EBITDA presented in this report are calculated on a 12-month rolling basis.
The figures in the tables are exact figures and consequently the sum of individual figures may deviate from the sum presented. Key figures have been calculated using exact figures.
Charles Héaulmé, President and CEO
"The first half of 2020 has been marked by the COVID-19 outbreak. Throughout the crisis our primary focus has been to safeguard the health and safety of our employees and to maintain business continuity. We have taken necessary measures to carefully manage our financial situation, contain cost and prioritize investments, whilst planning ahead for a gradual recovery and a renewed growth trajectory.
Restrictions and lockdowns related to the pandemic negatively impacted the demand for food on-the-go products but conversely boosted consumption of food on-the-shelf products. Towards the end of the second quarter the demand for food on-the-go products improved as countries were easing restrictions. Demand however remained lower than 2019. As a result, for the first half of the year, we were able to deliver a solid performance in the face of the COVID-19 crisis.
The negative impact of COVID-19 is visible in our foodservice sales globally. In North America, where the lockdown period was shorter, sales of foodservice products decreased less and were partly compensated by growing food delivery and drive-thru channels. Increase in home consumption also supported retail tableware and consumer goods sales. In the Fiber Packaging segment comparable net sales growth was strong driven by high demand for eggs and continued plastic substitution. In Flexible Packaging, despite the strong demand for pre-packed food and hygiene products, growth was held back by supply chain disruptions in India and the United Arab Emirates. At Group level, after a first quarter of solid growth, net sales declined by 8% during the second quarter and overall, by 2% for the first half of the year. This is a solid performance reflecting the resilience of our diversified portfolio.
With on-going improvements and further measures implemented, we have delivered solid profitability. The adjusted EBIT margin reached 8.8% in the quarter and the first half of 2020. We also delivered a strong cash flow, ending the quarter with a stronger balance sheet, reflected in a net debt to adjusted EBITDA ratio of 2.0.
During the crisis, we leveraged our core capabilities to make a difference where it matters most. We used idle manufacturing capacity because of the COVID-19 crisis, to produce protective face shields for health care workers and launched a range of high-quality affordable and reusable consumer face masks for everyday use. 2020 also marks our 100-year anniversary and we have built a EUR 3 million donation plan giving back towards the future of life. We have responded to the immediate COVID-19 crisis needs with a donation to the International Red Cross and have launched three projects in partnership with several nonprofit organizations to have an impact on the circular economy at different levels: acting today, educating for tomorrow, innovating for the future. Whilst we are continuing to focus on our sustainability ambition and scaling up our capabilities, we have demonstrated through these unprecedented times our commitment to protecting people, food and the planet, offering well-being, convenience and a responsible lifestyle to billions of people everywhere."
Financial review Q2 2020
Net sales by business segment
| EUR million | Q2 2020 | Q2 2019 | Change | |
| Foodservice Europe-Asia-Oceania | 167.2 | 241.0 | -31% | |
| North America | 296.1 | 306.4 | -3% | |
| Flexible Packaging | 263.1 | 248.7 | 6% | |
| Fiber Packaging | 75.7 | 77.5 | -2% | |
| Elimination of internal sales | -5.1 | -6.4 | ||
| Group | 797.1 | 867.3 | -8% |
Comparable net sales growth by business segment
| Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | Q2 2019 | ||
| Foodservice Europe-Asia-Oceania | -28% | -4% | 4% | 4% | 3% | |
| North America | -5% | 9% | 6% | 14% | 13% | |
| Flexible Packaging | 2% | 2% | 3% | 4% | 1% | |
| Fiber Packaging | 10% | 9% | 8% | 7% | 7% | |
| Group | -8% | 3% | 5% | 7% | 6% |
The Group's net sales decreased significantly during the quarter. Net sales decreased strongly in the North America segment and significantly in the Foodservice Europe-Asia-Oceania segment following the impact of COVID-19. Comparable net sales growth was significant in the Fiber Packaging segment and moderate in the Flexible Packaging segment. The Group's comparable net sales growth was -8% and growth in emerging markets was -12%. The Group's net sales decreased 8% to EUR 797 million (EUR 867 million). Foreign currency translation impact on the Group's net sales was EUR -8 million (EUR 25 million) compared to 2019 exchange rates.
Adjusted EBIT by business segment
| Items affecting comparability | |||||||
| EUR million | Q2 2020 | Q2 2019 | Change | Q2 2020 | Q2 2019 | ||
| Foodservice Europe-Asia-Oceania | 6.2 | 22.0 | -72% | -0.5 | -0.2 | ||
| North America | 37.9 | 32.4 | 17% | -0.0 | - | ||
| Flexible Packaging | 19.1 | 20.1 | -5% | -0.3 | - | ||
| Fiber Packaging | 8.5 | 7.6 | 12% | -0.8 | - | ||
| Other activities | -1.6 | -3.9 | 1.7 | -0.3 | |||
| Group | 70.1 | 78.3 | -10% | 0.1 | -0.5 | ||
Adjusted EBIT margin by business segment
| Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | Q2 2019 | ||
| Foodservice Europe-Asia-Oceania | 3.7% | 8.0% | 8.5% | 9.4% | 9.1% | |
| North America | 12.8% | 10.6% | 10.9% | 8.8% | 10.6% | |
| Flexible Packaging | 7.3% | 7.7% | 7.4% | 7.9% | 8.1% | |
| Fiber Packaging | 11.2% | 11.0% | 9.8% | 10.4% | 9.8% | |
| Group | 8.8% | 8.7% | 8.5% | 8.5% | 9.0% |
The Group's adjusted EBIT decreased but the corresponding margin was solid. Earnings decreased mainly due to lower sales of foodservice products following the impact from COVID-19. Earnings were supported by price management in 2019, lower raw material prices and a favorable sales mix in the North America segment. The Group's adjusted EBIT was EUR 70 million (EUR 78 million) and reported EBIT EUR 70 million (EUR 78 million). Foreign currency translation impact on the Group's earnings was EUR 0 million (EUR 2 million).
Adjusted EBIT excludes EUR 0.1 million (EUR -0.5 million) of items affecting comparability (IAC).
Adjusted EBIT and IAC
| EUR million | Q2 2020 | Q2 2019 | |
| Adjusted EBIT | 70.1 | 78.3 | |
| Acquisitions | -0.3 | -0.5 | |
| Restructuring costs including write-downs of related assets | -1.3 | - | |
| One-time gain from acquisition of Laminor | 1.7 | - | |
| EBIT | 70.2 | 77.8 |
Net financial expenses were EUR 8 million (EUR 8 million). Tax expense was EUR 14 million (EUR 15 million). Profit for the quarter was EUR 48 million (EUR 55 million). Adjusted earnings per share (EPS) were EUR 0.44 (EUR 0.51) and reported EPS EUR 0.44 (EUR 0.51). Adjusted EPS is calculated based on adjusted profit for the period, which excludes EUR 0.1 million (EUR -0.4 million) of IAC.
Adjusted EPS and IAC
| EUR million | Q2 2020 | Q2 2019 | |
| Adjusted profit for the period attributable to equity holders of the parent company | 46.0 | 53.7 | |
| IAC | 0.1 | -0.5 | |
| Taxes relating to IAC | -0.0 | 0.1 | |
| Profit for the period attributable to equity holders of the parent company | 46.1 | 53.3 |
Financial review H1 2020
Net sales by business segment
| EUR million | H1 2020 | H1 2019 | Change | |
| Foodservice Europe-Asia-Oceania | 384.8 | 469.0 | -18% | |
| North America | 582.3 | 562.1 | 4% | |
| Flexible Packaging | 534.0 | 500.5 | 7% | |
| Fiber Packaging | 150.2 | 149.1 | 1% | |
| Elimination of internal sales | -9.7 | -11.3 | ||
| Group | 1,641.7 | 1,669.4 | -2% |
Comparable net sales growth by business segment
| H1 2020 | 2019 | H1 2019 | ||
| Foodservice Europe-Asia-Oceania | -17% | 4% | 4% | |
| North America | 1% | 9% | 9% | |
| Flexible Packaging | 2% | 3% | 3% | |
| Fiber Packaging | 10% | 6% | 5% | |
| Group | -3% | 6% | 5% |
The decrease in the Group's comparable net sales was notable during the reporting period. Net sales decreased significantly in the Foodservice Europe-Asia-Oceania segment following the impact of COVID-19. Comparable net sales growth was significant in the Fiber Packaging segment and moderate in the Flexible Packaging and North America segments. The Group's comparable net sales growth was -3% and growth in emerging markets was -8%. The Group's net sales decreased 2% to EUR 1,642 million (EUR 1,669 million). Foreign currency translation impact on the Group's net sales was EUR 2 million (EUR 44 million) compared to 2019 exchange rates.
Adjusted EBIT by business segment
| Items affecting comparability | |||||||
| EUR million | H1 2020 | H1 2019 | Change | H1 2020 | H1 2019 | ||
| Foodservice Europe-Asia-Oceania | 23.6 | 42.1 | -44% | -2.1 | -0.2 | ||
| North America | 68.4 | 53.0 | 29% | -3.4 | - | ||
| Flexible Packaging | 40.1 | 43.2 | -7% | -4.9 | - | ||
| Fiber Packaging | 16.7 | 14.4 | 16% | -1.5 | - | ||
| Other activities | -5.1 | -6.6 | 21.0 | -0.4 | |||
| Group | 143.7 | 146.1 | -2% | 9.0 | -0.6 | ||
Adjusted EBIT margin by business segment
| H1 2020 | H1 2019 | H1 2018 | ||
| Foodservice Europe-Asia-Oceania | 6.1% | 9.0% | 9.5% | |
| North America | 11.7% | 9.4% | 8.0% | |
| Flexible Packaging | 7.5% | 8.6% | 7.5% | |
| Fiber Packaging | 11.1% | 9.7% | 10.9% | |
| Group Total | 8.8% | 8.8% | 8.7% |
The Group's adjusted EBIT decreased but the corresponding margin was solid. Earnings decreased mainly due to lower sales in foodservice products following the impact from COVID-19. Earnings were supported by price management in 2019, lower raw material prices and a favorable sales mix in the North America segment. The Group's adjusted EBIT was EUR 144 million (EUR 146 million) and reported EBIT EUR 153 million (EUR 145 million). Foreign currency translation impact on the Group's earnings was EUR 1 million (EUR 4 million).
Adjusted EBIT excludes EUR 9.0 million (EUR -0.6 million) of items affecting comparability (IAC).
Adjusted EBIT and IAC
| EUR million | H1 2020 | H1 2019 | |
| Adjusted EBIT | 143.7 | 146.1 | |
| Acquisitions | -0.4 | -0.6 | |
| Restructuring costs including write-downs of related assets | -12.4 | - | |
| One-time gain from acquisition of Laminor | 21.9 | - | |
| EBIT | 152.7 | 145.5 |
Net financial expenses were EUR 18 million (EUR 16 million). Tax expense was EUR 30 million (EUR 28 million). The corresponding tax rate was 23% (22%). Profit for the period was EUR 105 million (EUR 102 million). Adjusted earnings per share (EPS) were EUR 0.90 (EUR 0.95) and reported EPS EUR 0.97 (EUR 0.95). Adjusted EPS is calculated based on adjusted profit for the period, which excludes EUR 7.0 million (EUR -0.5 million) of IAC.
Adjusted EPS and IAC
| EUR million | H1 2020 | H1 2019 | |
| Adjusted profit for the period attributable to equity holders of the parent company | 93.9 | 99.1 | |
| IAC | 9.0 | -0.6 | |
| Taxes relating to IAC | -2.0 | 0.1 | |
| Profit for the period attributable to equity holders of the parent company | 100.9 | 98.7 |
Acquisitions and divestments
On September 30, 2019, Huhtamaki announced its agreement to acquire the assets and operations of Mohan Mutha Polytech Private Limited (MMPPL), a privately-owned flexible packaging manufacturer located in Sri City, Andhra Pradesh, India. The acquisition allows Huhtamaki to speed up its growth in India by improving its capability to serve the customers in South India. MMPPL has approximately 160 employees and its net sales in 2018 were approximately EUR 9 million. The debt-free purchase price was approximately EUR 10 million. The acquisition was completed on January 10, 2020 and since then the business has reported as part of the Flexible Packaging business segment.
On December 23, 2019, Huhtamaki announced its agreement to acquire full ownership of its joint venture company Laminor S.A. in Brazil. Laminor is specialized in high-quality tube laminates, particularly for oral care applications, and was set up in 2002 as a 50/50 joint venture together with Bemis Company, which is now part of Amcor. The acquisition enables Huhtamaki to expand its tube laminate business, an important part of the Group's flexible packaging offering. Laminor has approximately 130 employees and its net sales in 2018 were approximately EUR 25 million. The additional shares were acquired at a price of approximately EUR 28 million and the acquisition was completed on March 31, 2020. The business has been consolidated as a subsidiary in the Group's financial reporting and it has been reported as part of the Flexible Packaging business segment as of April 1, 2020. As a result of the transaction, a gain from the difference between remeasured interest according to the purchase price and previously held equity interest of approximately EUR 22 million has been recognized in the income statement as item affecting comparability in H1 2020 financial results.
Significant events during the reporting period
On March 23, 2020, Huhtamaki announced its long-term 2030 strategy in order to maintain its growth trajectory and meet future transformative trends. Going forward, Huhtamaki will focus on growth, competitiveness, talent and sustainability. The company's ambition is to become the first choice in sustainable food packaging. Huhtamaki also outlined its long-term financial ambitions and introduced its new 2030 sustainability ambitions. The strategy emphasizes strong core values: Care, Dare, Deliver. In line with its renewed strategy, the company decided to integrate its Foodservice Europe-Asia-Oceania and Fiber Packaging business segments. The segments will continue to be reported separately, at least for the remainder of the financial year 2020. Eric Le Lay will continue as President for the combined Fiber and Foodservice EAO (Europe-Asia-Oceania) segment. This change became effective as of June 1, 2020.
On March 26, 2020, Huhtamaki announced that it has decided to withdraw its outlook for 2020 (published on February 13, 2020) due to the unprecedented and accelerated situation caused by the COVID-19 and its impact on the Group's trading conditions. It was announced that the company will provide a new outlook when impacts of the changing business environment on its trading conditions in 2020 can be assessed in a reliable manner. On the same date Huhtamaki also announced that the Board of Directors changed its proposal for use of the profit shown on the balance sheet and proposed that no dividend payment would be decided by the Annual General Meeting. Instead, the Board of Directors proposed to the Annual General Meeting that the Annual General Meeting would authorize the Board of Directors to decide at a later stage and in its discretion on a dividend payment in one or several installments of a total maximum of EUR 0.89 per share. The authorization would be valid until the Annual General Meeting 2021, however, no longer than until June 30, 2021. The Company will publish the possible decisions on dividend payment separately, and simultaneously confirm the dividend record and payment dates.
Outlook for 2020
Disturbance from the COVID-19 pandemic on Huhtamaki's operating environment is expected to continue. The demand especially for food on-the-go packaging may be significantly negatively impacted whilst demand for food on-the-shelf packaging and convenience tableware may be positively impacted. Huhtamaki's diversified product portfolio provides resilience to the effects of the pandemic.
Financial reporting in 2020
In 2020, Huhtamaki will publish financial information as follows:
Interim Report, January 1-September 30, 2020 October 22
This is a summary of Huhtamäki Oyj's Half-yearly Report January 1-June 30, 2020.? 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:
Calle Loikkanen, Head of Investor Relations and Financial Communications, tel. +358 10 686 7125
HUHTAMÄKI OYJ
Global Communications
Huhtamaki is a key global player in sustainable food-on-the-go and food-on-the shelf packaging solutions. Our innovative products help billions of consumers around the world make responsible lifestyle choices every day. Today, packaging plays a significant role in food safety and convenience. We are committed to making packaging more circular and we embed sustainability in everything we do. We are focused on achieving carbon neutral production and having all our products designed to be recyclable, compostable or reusable by 2030.
With 100 years of history and a strong Nordic heritage we operate in 35 countries and 81 sites around the world. Our 18,800 employees are working to deliver smart next generation packaging. Our 2019 net sales totaled EUR 3.4 billion. Huhtamaki Group has its head office in Espoo, Finland and the parent company Huhtamäki Oyj is listed on Nasdaq Helsinki Ltd. Find out more about our Sustainability Action Plan and our ambition at www.huhtamaki.com.
Attachment
- Huhtamäki Oyj Half-yearly Report 2020 (https://ml-eu.globenewswire.com/Resource/Download/109895af-fb9e-4e6f-8f1a-bb734730cd8d)
