Huhtamäki Oyj’s Interim Report January 1–September 30, 2019: Strong net sales growth continued and profitability improved

HUHTAMÄKI OYJ INTERIM REPORT 23.10.2019 AT 8:30
Huhtamäki Oyj’s Interim Report January 1–September 30, 2019: Strong net sales growth continued and profitability improvedQ3 2019 in briefNet sales increased 10 percent to EUR 855 million (EUR 780 million)Adjusted EBIT was EUR 72 million (EUR 57 million); reported EBIT was EUR 68 million (EUR 57 million)Adjusted EPS was EUR 0.45 (EUR 0.38); reported EPS was EUR 0.41 (EUR 0.38)Comparable net sales growth was 7 percent at Group level and 8 percent in emerging marketsCurrency movements had a positive impact of EUR 24 million on the Group’s net sales and EUR 2 million on EBITQ1-Q3 2019 in briefNet sales increased 10 percent to EUR 2,524 million (EUR 2,291 million)Adjusted EBIT was EUR 218 million (EUR 189 million); reported EBIT was EUR 213 million (EUR 198 million)Adjusted EPS was EUR 1.40 (EUR 1.24); reported EPS was EUR 1.36 (EUR 1.32)Comparable net sales growth was 6 percent at Group level and 7 percent in emerging marketsCurrency movements had a positive impact of EUR 68 million on the Group’s net sales and EUR 6 million on EBITKey figures¹Excluding IAC of EUR -4.6 million in Q3 2019 (EUR -0.1 million), EUR -5.2 million in Q1-Q3 2019 (EUR 11.5 million) and EUR ‑8.4 million in FY 2018.
²Excluding IAC of EUR -4.6 million in Q3 2019 (EUR -0.1 million), EUR -5.2 million in Q1-Q3 2019 (EUR 9.4 million) and EUR ‑25.5 million in FY 2018.
³Excluding IAC of EUR -3.6 million in Q3 2019 (EUR -0.0 million), EUR -4.1 million in Q1-Q3 2019 (EUR 7.6 million) and EUR ‑20.6 million in FY 2018.
⁴ROI and ROE for Q1-Q3 2018 have not been restated for IFRS 16 impact.Unless otherwise stated, all comparisons in this report are compared to the corresponding period in 2018. 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.IFRS 16 Leases standard has been adopted as of January 1, 2019 using full retrospective transition method. The financial information for 2018 has been restated except for key figures ROI, ROE, RONA and net debt to EBITDA for periods Q1 2018, Q2 2018 and Q3 2018. For more information see the notes.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:
“Our growth continued to be strong in the third quarter of 2019. Net sales increased 10 percent to EUR 855 million with the comparable net sales growth at 7 percent. In the emerging markets our growth continued strong at 8 percent. We had some tailwinds from currencies during the quarter as the translation impact on net sales was 3 percent.During the quarter, we continued to improve our profitability. Our adjusted EBIT increased 26 percent to EUR 72 million, and the corresponding margin improved to 8.5 percent. Adjusted EBIT increased significantly in the North America segment and strongly in the Flexible Packaging and Foodservice Europe-Asia-Oceania segments. Overall, the improvement in profitability is a result of the actions we took in late 2018 to improve pricing and efficiency.We continue to develop and deploy our portfolio of sustainable packaging. Fresh, the fiber-based ready meal tray, has been well received. The pilots that have taken place in Waitrose stores in the UK have showed that there is a strong customer and consumer interest for Fresh and the product performs well through the supply chain. Huhtamaki’s first industrial-scale Fresh manufacturing line will start operations during the fourth quarter of 2019, in Lurgan, Northern Ireland. Our two other recent new launches, the Huhtamaki blueloop concept for recyclable flexible packaging and our paper straws, also progressed well during the quarter.At the end of the quarter we announced two acquisitions that support our growth in the developing markets. One of the flexible packaging manufacturers is located in South Africa and the other in India. Following the acquisitions, we expand our flexible packaging manufacturing footprint into South Africa and are able to speed up our growth in India by improving our capability to serve the customers in the southern parts of the country.”Financial review Q3 2019The Group’s net sales growth was strong during the quarter, especially in the North America segment. Comparable net sales growth was strong at 7 percent, supported by all segments. Growth in emerging markets was 8 percent. The Group’s net sales increased 10 percent to EUR 855 million (EUR 780 million). Foreign currency translation impact on the Group’s net sales was EUR 24 million (EUR -9 million) compared to 2018 exchange rates. The majority of the positive impact came from the US Dollar.Net sales by business segmentComparable net sales growth by business segmentThe Group’s adjusted EBIT improved significantly, and profitability was at a good level. Earnings growth was driven by operational improvement in all businesses. Earnings improved significantly in the North America segment as a result of the pricing actions taken in the second half of 2018, higher sales volumes, a moderation in distribution costs and good operational efficiency. Earnings improved significantly in the Flexible Packaging segment, driven by an improvement in the emerging markets. The Group’s adjusted EBIT was EUR 72 million (EUR 57 million) and reported EBIT EUR 68 million (EUR 57 million). Foreign currency translation impact on the Group’s earnings was EUR 2 million (EUR 0 million).Adjusted EBIT by business segment¹Excluding IAC of EUR -0.1 million in Q3 2019 (no IAC in Q3 2018)
²Excluding IAC of EUR -3.0 million in Q3 2019 (no IAC in Q3 2018)
³Excluding IAC of EUR -0.1 million in Q3 2019 (EUR 0.0 million)
⁴Excluding IAC of EUR -1.0 million in Q3 2019 (no IAC in Q3 2018)
⁵Excluding IAC of EUR -0.4 million in Q3 2019 (EUR -0.1 million)Adjusted EBIT excludes EUR -4.6 million (EUR -0.1 million) of items affecting comparability (IAC).Adjusted EBIT and IACNet financial expenses were EUR 7 million (EUR 8 million). Tax expense was EUR 15 million (EUR 10 million).Profit for the quarter was EUR 46 million (EUR 39 million). Adjusted earnings per share (EPS) were EUR 0.45 and reported EPS EUR 0.41 (adjusted and reported EPS EUR 0.38). Adjusted EPS is calculated based on adjusted profit for the period, which excludes EUR -3.6 million (EUR -0.0 million) of IAC.Adjusted EPS and IAC
Financial review Q1-Q3 2019The Group’s net sales growth was strong during the reporting period, with all business segments contributing. Growth was strongest in the North America segment. Comparable net sales growth was strong at 6 percent, led by the North America segment. Growth in emerging markets was 7 percent. The Group’s net sales increased 10 percent to EUR 2,524 million (EUR 2,291 million). Foreign currency translation impact on the Group’s net sales was EUR 68 million (EUR ‑117 million) compared to 2018 exchange rates. The majority of the positive impact came from the US Dollar.Net sales by business segmentThe Group’s adjusted EBIT improved significantly, and profitability was solid. Earnings improved significantly in the North America and Flexible Packaging segments. Earnings declined in the Fiber Packaging segment due to development and commercialization costs of the Fresh ready meal tray. The Group’s adjusted EBIT was EUR 218 million (EUR 189 million) and reported EBIT EUR 213 million (EUR 198 million). Foreign currency translation impact on the Group’s earnings was EUR 6 million (EUR -9 million).Adjusted EBIT by business segment¹Excluding IAC of EUR -0.3 million in Q1-Q3 2019 (EUR -1.3 million)
²Excluding IAC of EUR -3.0 million in Q1-Q3 2019 (no IAC in Q1-Q3 2018)
³Excluding IAC of EUR -0.1 million in Q1-Q3 2019 (EUR -1.5 million)
⁴Excluding IAC of EUR -1.0 million in Q1-Q3 2019 (EUR -0.6 million)
⁵Excluding IAC of EUR -0.8 million in Q1-Q3 2019 (EUR 12.8 million)Adjusted EBIT excludes EUR -5.2 million (EUR 9.4 million) of items affecting comparability (IAC).Adjusted EBIT and IACNet financial expenses were EUR 23 million (EUR 23 million). Tax expense was EUR 43 million (EUR 37 million). The corresponding tax rate was 23 percent (21 percent).Profit for the period was EUR 148 million (EUR 138 million). Adjusted earnings per share (EPS) were EUR 1.40 (EUR 1.24) and reported EPS EUR 1.36 (EUR 1.32). Adjusted EPS is calculated based on adjusted profit for the period, which excludes EUR -4.1 million (EUR 7.6 million) of IAC.Adjusted EPS and IAC
Significant events during the reporting periodOn March 7, 2019 the European Commission announced that it has opened an investigation into Luxembourg tax practices, in particular Huhtamaki tax rulings from the years 2009, 2012 and 2013. The investigation is not targeted at Huhtamaki and Huhtamaki has not been approached by the European Commission.On July 11, 2019 the General Court of the European Union announced that it has dismissed Huhtamaki’s appeal against the European Commission’s decision on anticompetitive behavior. In June 2015 the European Commission announced that it had found certain of Huhtamaki’s former operations to have been involved in anticompetitive practices during years 2000-2006 and imposed a EUR 15.6 million fine on Huhtamaki. The fine and legal costs of EUR 2.7 million were recognized as a non-recurring expense in the Group’s Q2 2015 result and the payment of fine was made during Q3 2015.Outlook for 2019The Group’s trading conditions are expected to remain relatively stable during 2019. The good financial position and ability to generate a positive cash flow will enable the Group to address profitable growth opportunities. Capital expenditure is expected to be approximately at the same level as in 2018 with the majority of the investments directed to business expansion.Financial reporting in 2020In 2020, Huhtamaki will publish financial information as follows:Results 2019                                                                     February 13
Interim Report, January 1–March 31, 2020                           April 29
Half-yearly Report, January 1–June 30, 2020                        July 23
Interim Report, January 1–September 30, 2020                    October 22Annual Accounts 2019 will be published on week 10.Huhtamäki Oyj’s Annual General Meeting is planned to be held on April 29, 2020.This is a summary of Huhtamäki Oyj’s Interim Report January 1-September 30, 2019. 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:Thomas Geust, CFO, tel. +358 10 686 7880
Calle Loikkanen, Head of Investor Relations and Financial Communications, tel. +358 10 686 7125HUHTAMÄKI OYJ
Global CommunicationsHuhtamaki is a global specialist in packaging for food and drink. With our network of 79 manufacturing units and additional 24 sales only offices in altogether 35 countries, we’re well placed to support our customers’ growth wherever they operate. Mastering three distinctive packaging technologies, approximately 18,100 employees develop and make packaging that helps great products reach more people, more easily. In 2018, our net sales totaled EUR 3.1 billion. The Group has its head office in Espoo, Finland and the parent company Huhtamäki Oyj is listed on Nasdaq Helsinki Ltd. Additional information is available at www.huhtamaki.com.
AttachmentHuhtamaki Interim Report Q3 2019