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Huhtamäki Oyj's Interim Report January 1 - March 31, 2014: Comparable net sales growth across the business segments

HUHTAMÄKI OYJ INTERIM REPORT 24.4.2014 AT 08:30

Huhtamäki Oyj's Interim Report January 1 - March 31, 2014: Comparable net sales growth across the business segments

Q1 2014 in brief

  • Net sales was EUR 564 million (EUR 568 million)
  • EBIT was EUR 41 million (EUR 37 million)
  • EPS was EUR 0.27 (EUR 0.24)
  • Comparable net sales growth was 5% in total and 13% in the emerging markets
  • Currency movements had a significant negative impact of EUR 30 million on the Group's net sales

Key figures

EUR million Q1 2014 Q1 2013 Change FY 2013
   
Net sales 563.7 568.4 -1% 2,342.2
EBITDA* 63.6 59.7 7% 256.4
EBITDA margin* 11.3% 10.5%   10.9%
EBIT* 41.4 37.2 11% 166.7
EBIT margin* 7.3% 6.5%   7.1%
EPS*, EUR 0.27 0.24 13% 1.21
ROI* 12.1%  12.9%   12.1%
ROE* 16.1%  15.4%   15.8%
Capital expenditure 22.0 26.8 -18% 121.0
Free cash flow -11.3 -21.4 47% 56.0

* Excluding EUR -30.6 million non-recurring items (NRI) in FY 2013.

CEO Jukka Moisio:
"Despite increasing political unrest in Eastern Europe and slow growth in Europe and in North America, the trading conditions for Huhtamaki were relatively stable and good during the first quarter of 2014. Demand for consumer packaging was good in Eastern European markets as well as in emerging markets. The Group's comparable growth was 5% mainly driven by positive volume development; emerging markets' comparable growth was 13%. Currency fluctuations had a significant negative impact on the Group's reported net sales, as almost all of the non-euro currencies of Huhtamaki's operating countries weakened against the euro.

The situation in Crimea has until now had very little if any impact on Huhtamaki's business. Our foodservice and molded fiber businesses in Russia serve primarily local customers with products manufactured locally, and unless things change dramatically we expect the growth in Russia to continue.

Despite general economic uncertainty the prices of Huhtamaki's main raw materials have been relatively stable during the first quarter of the year. Demand and supply for recycled fiber have been quite well balanced globally. The decision of major foodservice operator in the United States to discontinue foam cups and move to paperboard based cups in their operations is hiking up the price of cupstock as demand increases. Prices of plastic resins are increasing in Asia and in North America creating pressure on margins.

Huhtamaki's financial performance during the first quarter was good. Volume growth and good operational efficiency helped improve the Group's earnings. This is a good start for the year and we see no reason to change the 2014 outlook given in February."

Financial review Q1 2014

The Group's comparable net sales growth was 5% during the quarter with all business segments reporting organic growth. In the emerging markets, comparable growth was 13%, with Eastern European markets showing fastest growth. The Group's reported net sales were EUR 564 million (EUR 568 million). The negative foreign currency translation impact on Group's net sales was significant, being EUR 30 million compared to the 2013 exchange rates, as most currencies weakened towards euro. 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 Q1 2014 Q1 2013 Change Of Group in Q1 2014
       
Foodservice Europe-Asia-Oceania 142.0 149.6 -5.1% 25%
North America 164.2 164.6 -0.2% 29%
Flexible Packaging 150.8 149.1 1.1% 26%
Molded Fiber 61.5 60.6 1.5% 11%
Films 51.7 48.6 6.4%  9%

Excluding internal sales eliminations of EUR -6.5 million in Q1 2014 and EUR -4.1 million in Q1 2013.

COMPARABLE GROWTH BY BUSINESS SEGMENT

Q1 2014 Q4 2013 Q3 2013 Q2 2013
       
Foodservice Europe-Asia-Oceania 3% 3% 3% 1%
North America 3% 6% 7% 3%
Flexible Packaging 7% 9% 6% 3%
Molded Fiber 10% 10% 6% 5%
Films 9% 2% 3% -7%
Group 5% 6% 5% 2%

The Group's earnings development in constant currencies was strong, with all business segments contributing to the positive development. Main reason for the positive development was volume growth and continued good cost containment. In constant currencies the earnings before interest and taxes (EBIT) grew by 14%. The Group's reported EBIT were EUR 41 million (EUR 37 million). Negative foreign currency translation impact on Group's EBIT was EUR 2 million.

EBIT BY BUSINESS SEGMENT

EUR million Q1 2014 Q1 2013 Change Of Group in Q1 2014
       
Foodservice Europe-Asia-Oceania 11.0 8.4 31.0% 27%
North America 8.8 7.8 12.8% 21%
Flexible Packaging 11.0 11.2 -1.8% 27%
Molded Fiber 7.6 7.1 7.0% 18%
Films 3.0 1.8 66.7%  7%

Excluding Other activities EBIT EUR 0.0 million in Q1 2014 and EUR 0.9 million in Q1 2013.

Net financial expenses increased and were EUR 8 million (EUR 7 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 5 million (EUR 5 million). The corresponding tax rate was 16% (16%).

Reported profit for the period was EUR 28 million (EUR 26 million). Earnings per share (EPS) were EUR 0.27 (EUR 0.24).

Changes after the reporting period

Shashank Sinha was appointed Executive Vice President, Flexible Packaging and a member of the Group Executive Team as of April 14, 2014. Simultaneously Suresh Gupta stepped aside from the role of Executive Vice President and a member of the Group Executive Team and continues as a Senior Advisor for the Group reporting to CEO Jukka Moisio.

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
The following interim reports will be published during the year:
 
- Interim Report January 1 - June 30, 2014 July 18, 2014  
- Interim Report January 1 - September 30, 2014 October 23, 2014  
       

This is a summary of Huhtamaki's Interim Report January 1 - March 31, 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, Director, Finance, 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.