Huhtamaki Oyj · OMXHEX:HUH1V
Huhtamaki Oyj — Q3 2018 Earnings Presentation
61 slides from Huhtamaki Oyj's earnings presentation, 2018
Slide 1: Interim Report Q3 2018
Interim Report Q3 2018 CEO Jukka Moisio CFO Thomas Geust
Slide 2: 7% net sales growth in Q3 – both organic and acquisitive growth contributed
7% net sales growth in Q3 – both organic and acquisitive growth contributed Net sales growth split in Q3 18 – 4% comparable growth with all business segments contributing – 5% in emerging markets -9 27 – 4% from acquisitions 780 – Currency impact decreased to MEUR -9 (app. -1%) 30 M€ 732 Q3 17 Organ
Slide 3: Currency translation impacting good year-to-date growth
Currency translation impacting good year-to-date growth Net sales growth split in 49 Q1-Q3 18 -117 – 5% comparable growth 116 – 8% in emerging markets; 2,291 growth strongest in Africa, 2,243 Russia, Brazil and India – 2% from acquisitions – Negative currency translation impact of M€ 117 (app. 5%) M
Slide 4: Comparable growth
Comparable growth Q3 18 Q2 18 Q1 18 Q4 17 Q3 17 YTD 18 YTD 17 FY 2017 Long-term ambitions Foodservice E-A-O 5% 5% 5% 6% 4% 5% 3% 4% 5-7% North America 2% 2% 5% 2% 2% 3% 1% 2% 2-5% Flexible Packaging 6% 11% 6% 9% 7% 8% 3% 4% 6-8% Fiber Packaging 4% 3% 5% 4% 5% 4% 5% 5% 5-7% Group 4% 6% 5% 5% 4% 5% 3%
Slide 5: Strong net sales growth, high cost environment
Strong net sales growth, high cost environment MEUR Q3 18 Q3 17 Change Q1-Q3 18 Q1-Q3 17 Change Q3 18 Highlights Net sales 779.8 732.0 7% 2,290.9 2,243.3 2% – Earnings improvement in Adjusted EBITDA1 87.6 94.0 -7% 278.4 294.4 -5% Foodservice E-A-O Margin1 11.2% 12.8% 12.2% 13.1% – High costs and unf
Slide 6: Profit below long-term ambitions – actions ongoing
Profit below long-term ambitions – actions ongoing 1. Pricing Restore gross margin, currently impacted by cost increases (ongoing) 2. Cost-out and efficiency improvements Cost-out activities including: – Write-off of non-competitive lines; India, North America (Q4 2018) – Focused restructuring plans
Slide 7: Business segment review
siness segment review Huhtamaki
Slide 8: Foodservice Europe-Asia-Oceania: Solid performance
Foodservice Europe-Asia-Oceania: Solid performance 2017 Net sales MEUR 808 YTD 2018 MEUR 650 EBIT margin1 8.7% 9.0% 8 – Good net sales development 6 – Core paperboard items – Global key accounts 4 – Earnings improvement supported by 2 – Positive net sales development, good cost 193 205 203 207 199 2
Slide 9: New print with a QR code makes cup recycling easier in the UK
New print with a QR code makes cup recycling easier in the UK – Cup design includes a QR code taking to a web page with details of recycling sites and schemes across the UK – All cups manufactured by Huhtamaki in the UK are made of PEFC certified board and either recyclable or compostable 9 Interim
Slide 10: European Commission SUP directive – status update
European Commission SUP directive – status update – The next step in the legislative process are trilogies between the EU Commission, Parliament and Member States, where the proposal is negotiated further – Items proposed to be banned (straws, cutlery, plates) represent only a small part of Foodserv
Slide 11: North America: Paperboard progressed well
North America: Paperboard progressed well 2017 Net sales MEUR 1,000 YTD 2018 MEUR 726 EBIT margin 10.4% 7.4% 6 – Strong paperboard sales driven by foodservice, ice cream, and private label tableware 4 – Branded tableware sales declined due to lower 2 promotional activity 247 274 235 244 227 257 242
Slide 12: Flexible Packaging: Strong volume growth
Flexible Packaging: Strong volume growth 2017 Net sales MEUR 913 YTD 2018 MEUR 717 EBIT margin 7.6% 7.0% 12 – Good volume growth across markets, 10 8 exports to Africa subdued 6 4 – Segment profitability suffered from 2 emerging market currencies, especially the 0 -2 232 224 230 227 234 240 242 deva
Slide 13: Fiber Packaging: Product business developed well
Fiber Packaging: Product business developed well 2017 Net sales MEUR 285 YTD 2018 MEUR 210 EBIT margin 9.9% 10.6% 10 – Strong growth in the UK, Russia, Brazil and 8 Africa 6 – Good earnings development of product 4 business 2 – Especially strong outside Europe 72 72 69 72 70 71 69 0 – Raw materials
Slide 14: Financial review
Financial review Huhtamaki
Slide 15: Q3 reported net sales reflect underlying growth – currency translation moderate
Q3 reported net sales reflect underlying growth – currency translation moderate Q1-Q3 Q1-Q3 Q3 18 Q3 17 Change 2018 2017 Change MEUR Q3 Highlights Net sales 779.8 732.0 7% 2,290.9 2,243.3 2% – Good growth, high costs Adjusted EBITDA1 87.6 94.0 -7% 278.4 294.4 -5% – High depreciation burdens EBIT Mar
Slide 16: Less negative impact from currency translation in Q3 2018
Less negative impact from currency translation in Q3 2018 Closing rates Average rate Q1-Q3 2017 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Average rate Q1-Q3 2018 – Foreign currency impact USD 1.11 1.18 1.19 1.24 1.16 1.17 1.20 compared to 2017 rates INR 72.56 77.11 76.47 80.80 79.68 84.98 80.19 – Q3 2018 Net Sa
Slide 17: Up-trending cost environment in raw materials
Up-trending cost environment in raw materials 140 – Overall cost inflation – Sharp increase in plastic 120 resins in emerging markets – e.g. PET films up 25% in India during Q3 100 – Prices of fiber varied – OCC and post-consumer fiber low; post-industrial fiber 80 higher – Paperboard high, followin
Slide 18: Debt position includes Q2 acquisitions
Debt position includes Q2 acquisitions Covenant level 3.5 – Net debt/EBITDA at 2.2 AMBITION 2-3 – At the end of Q3 18 – Cash and cash equivalents MEUR 79 – Unused committed credit 1.7 1.9 1.9 1.8 1.8 2.2 2.2 facilities available MEUR 306 – Funds available for acquisitions approx. MEUR 400-500 0.56 0
Slide 19: Loan maturities extended in 2017
Loan maturities extended in 2017 Debt maturity structure September 30, 2018 600 – Average maturity 3.9 years at 500 the end of Q3 2018 400 (4.8 at the end of Q3 2017) 300 200 100 MEUR0 2018 2019 2020 2021 2022 Later Finance lease liabilities Commercial paper program Uncommitted loans from financial
Slide 20: Free cash flow
Free cash flow 290 294 – Working capital reflects onboarding new business MEUR 24 and higher raw material 5 2 2 2 costs -4 – Lower capex -8 -17 -24 -38 -94 -105 -127 -144 Reported Change in Net financial Taxes Capital Proceeds Other Free cash EBITDA working items expenditure from selling flow capita
Slide 21: Progress towards long-term ambitions
Progress towards long-term ambitions Long-term FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 YTD Q3 2018 ambition Organic growth 3% 6% 4% 4% 3% 5% 5+% – Group growth is EBITDA margin 11.2% 11.6% 12.5% 13.3% 13.0% 12.2% 14+% on track EBIT margin 7.4% 7.8% 8.7% 9.4% 9.0% 8.2% 10+% – Profitability improvemen
Slide 22: Looking forward
Looking forward Huhtamaki
Slide 23: Outlook 2018
Outlook 2018 The Group’s trading conditions are expected to remain relatively stable during 2018. 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
Slide 24: Short-term risks and uncertainties
Short-term risks and uncertainties Volatile raw material and energy prices as well as movements in currency rates are considered to be relevant short-term business risks and uncertainties in the Group's operations. General political, economic and financial market conditions can also have an adverse
Slide 25: Financial calendar 2019
Financial calendar 2019 February 14 Week 8 Results 2018 Annual Accounts 2018 & Directors’ Report April 25 July 19 October 23 Q1 19 Interim Report Half-yearly Report Q3 19 Interim Report AGM 2019 25 Interim report Q3 2018
Slide 26: Helping great products reach more people, more easily
Helping great products reach more people, more easily
Slide 27: Our business segments
Our business segments Huhtamaki
Slide 28: Our three business areas are organized into four reporting segments
Our three business areas are organized into four reporting segments Foodservice Flexible Fiber Share of net sales packaging packaging packaging per segment in 2017 9% 27% 31% 33% Foodservice Europe-Asia- Flexible Packaging Fiber Packagingj Oceania and North America kdfgjkl dhgdfhg – 40 plants on – 2
Slide 29: Foodservice E-A-O: Geared for profitable growth
Foodservice E-A-O: Geared for profitable growth Foodservice paper and plastic disposable tableware, such as cups and lids, is supplied to foodservice operators, fast food restaurants and coffee shops. The segment has production in Europe, South Africa, Middle East, Asia and Oceania. Our products Our
Slide 30: North America: Continue on the growth path
North America: Continue on the growth path The North America segment serves local markets with foodservice packaging, Chinet® disposable tableware as well as ice-cream containers and other consumer goods packaging products. The segment has production in the United States and Mexico. Our products Our
Slide 31: Flexible Packaging: Strengthening our position
Flexible Packaging: Strengthening our position Flexible packaging is used for a wide range of consumer products including food, pet food, hygiene and health care products. The segment serves global markets from production units in Europe, Middle East, Asia and South America. Our products Our competi
Slide 32: Fiber Packaging: Focus on profitable growth to enhance our positions
Fiber Packaging: Focus on profitable growth to enhance our positions Recycled and other natural fibers are used to make fresh product packaging, such as egg, fruit, food and drink packaging. The segment has production in Europe, Oceania, Africa and South America. Our products Our competitive MEUR Lo
Slide 33: Becoming the first choice in food packaging – next steps
Becoming the first choice in food packaging – next steps
Slide 34: Our business is consumer food and drink packaging
Our business is consumer food and drink packaging Food-on-the-go Pre-packed food Convenience Short shelf life Food Safety Long shelf life Waste prevention Our packaging protects food and drink products, delivering them to consumers safely and in good condition, helping to reduce food waste. 34 Inter
Slide 35: Megatrends support food packaging growth
Megatrends support food packaging growth… Food packaging offers stable Innovations create more growth opportunities Food contact sustainable and easy-to-use over the cycle requirements create packaging a higher entry barrier Megatrends create opportunities for us More people Growing middle class Mor
Slide 36: … and our positions offer good opportunities
… and our positions offer good opportunities Focus on consumer Major brand food and drink owners with high growth packaging ambitions as customers Product portfolio Geographic and innovations expansion Our growth opportunities Mature markets Developing markets approx. GDP growth + 2% even GDP growth
Slide 37: World changes create opportunities
World changes create opportunities Global challenges: – Marine plastics – Waste handling and processing – Food safety Changing consumer habits: – Lifestyle & convenience – Home delivery
Slide 38: We target long-term growth both organically and via acquisitions
We target long-term growth both organically and via acquisitions 3-5 year growth ambition 5+% + 5+% 10+% € 5+bn p.a. if major Comparable Acquisitive acquisition growth growth ambition ambition € 4+bn with capex and add-on acquisitions Net sales Comparable growth 2010 2011 2012 2013 2014 2015 2016* 2
Slide 39: Growth and operational efficiency drive profitability improvement
Growth and operational efficiency drive profitability improvement – Summary of our long-term ambitions Comparable growth 5+% 10+% 15+% 40-50% EBIT ROI DPS margin 5+% Balancing both EBIT margin and asset velocity → To deliver steadily improving returns Acquisitive growth → To ensure cash for growth i
Slide 40: How we support our customers’ growth
How we support our customers’ growth We invest to expand We’re a safe pair of We offer a wide We take innovation our network and to hands throughout product range to into next level improve our our network make our customers’ loremipsum capabilities loremipsum lives easier loremipsum - Follow global
Slide 41: Achieve our vision: The first choice in food packaging
Achieve our vision: The first choice in food packaging Grow AMBITION Build more Sustainability 10+% - Organic and - Continue organic - Ensure food safety innovative growth 5+% investments - Reduce food waste - Acquisitive growth 5+% - Continue disciplined - Fit-for-purpose material acquisitions choi
Slide 42: On sustainability of food packaging
On sustainability of food packaging
Slide 43: Our business is consumer food and drink packaging
Our business is consumer food and drink packaging Food-on-the-go Pre-packed food Convenience Short shelf life Food Safety Long shelf life Waste prevention Our packaging protects food and drink products, delivering them to consumers safely and in good condition, helping to reduce food waste. 43 Inter
Slide 44: Food waste and loss is a global challenge
Food waste and loss is a global challenge – Using appropriate packaging can help reduce food waste at almost every stage of the food chain* 44 Interim report Q3 2018 *Appropriate food packaging solutions for developing countries, FAO 2014
Slide 45: Packaging accounts for app. 5% of food’s CO2 footprint
Packaging accounts for app. 5% of food’s CO2 footprint – Proper packaging results in less greenhouse gas emissions – In many applications more packaging leads to lower overall carbon footprint due to reduced food waste 45 Interim report Q3 2018
Slide 46: 52% of global consumer packaging is made of plastics – of which 14% get recycled
52% of global consumer packaging is made of plastics – of which 14% get recycled today Glass Landfilled Metal Foil Plastics 52% Recycled or Leakage incinerated Paper Other 46 Interim report Q3 2018
Slide 47: We use different materials for different purposes, aiming for optimal packaging
We use different materials for different purposes, aiming for optimal packaging 2/3 of raw material we use is renewable ‒ Virgin fiber is used due to food Recycled fibers are derived contact regulation from either post-consumer ‒ 97% of virgin fiber used is certified or post-industrial recycled mate
Slide 48: Recycling rates vary – upside potential to utilize valuable materials remain
Recycling rates vary – upside potential to utilize valuable materials remain Plastic packaging Steel Paper ~14% ~70-90% ~50-60% recycled* recycled* recycled* 48 Interim report Q3 2018 *Source: Ellen MacArthur foundation: The New Plastics Economy, Rethinking the future of plastics, 2016
Slide 49: Paper cup recycling
Paper cup recycling The fibre in our recyclable cup can be used Up to seven times and then composted or used to generate electricity Recyclable paper cup = — Good for the environment. Good for the economy. Good for people
Slide 50: Appendices
Appendices
Slide 51: We’re the global specialist in packaging for food and drink
We’re the global specialist in packaging for food and drink Net sales EBIT margin Our vision €3.0bn 9.0% The first choice in food Comparable growth ROI packaging 3% 13.6% Employees Manufacturing sites Our purpose 18,100 78 Helping great products Operations in reach more people, 34 countries more eas
Slide 52: We’re well positioned to deliver on our ambitions
We’re well positioned to deliver on our ambitions Who we are: Who we serve: What we offer: Main materials we use: FOODSERVICE #1 packaging company Paperboard operating globally FIBER PACKAGING #1 company globally Recycled fibers FLEXIBLE PACKAGING Plastic & other #1 company in emerging markets mater
Slide 53: Group financials 2009-2017
Group financials 2009-2017 LTM Q3 18 2017 2016 2015 2014 (1 2013 (1 2012 (2 2011 2010 2009 Net sales MEUR 3,036 2,989 2,865 2,726 2,236 2,161 2,321 2,043 1,952 1,832 Comparable growth (3 % 5(5 3 4 4 6 3 3 5 3 -5 Adjusted EBITDA (4 MEUR 374 390 382 342 259 242 254 208 214 193 Margin (4 % 12.3 13.0 13
Slide 54: Stable financial position
Stable financial position MEUR Sep 2018 Dec 2017 Sep 2017 Total assets 3,082 2,931 2,912 – Higher assets reflect investments Operating working capital 612 512 534 and acquisitions Net debt 839 698 741 Equity & non-controlling interest 1,243 1,208 1,158 – Major investments in ramp-up Gearing 0.67 0.5
Slide 55: Quarterly comparable growth by business segment since 2016
Quarterly comparable growth by business segment since 2016 Long- term Q3 18 Q2 18 Q1 18 Q4 17 Q3 17 Q2 17 Q1 17 Q4 16 Q3 16 Q2 16 Q1 16 FY 17 FY 16 FY 15 ambition Foodservice E-A-O 5% 5% 5% 6% 4% 2% 3% 3% 5% 7% 7% 4% 5% 4% 5-7% North America 2% 2% 5% 2% 2% 1% 2% 5% 2% 8% 10% 2% 6% 4% 2-5% Flexible P
Slide 56: Solid track record of growth investments
Solid track record of growth investments Short-run flexible Ireland Paper and plastic packaging, disposable packaging, Eastern Europe China & HK Distribution, 2013-2018 Australia Folding carton, Capex M€ 936 Pressed UAE, Bags & Europe USA, Egypt M&A spend plates, US Malaysia wraps, USA, Egypt, M€ 54
Slide 57: 17 acquisitions completed since 2011
17 acquisitions completed since 2011 – Paris Packaging, Inc., US, September 2011 (North America) – Ample Industries, Inc., US, November 2011 (North America) – Josco (Holdings) Limited, China, April 2012 (Foodservice E-A-O) – Winterfield, LLC, US, August 2012 (North America) – Webtech Labels Private
Slide 58: Ownership
Ownership Shareholder distribution by sector September 30, 2018 – 31,630 registered shareholders at the end of September 2018 6% – 54% of shares in domestic ownership 6% – 16% of shares controlled by non-profit 10% 46% organizations – Finnish Cultural Foundation a 15% major owner since 1943, current
Slide 59: Definitions for performance measures
Definitions for performance measures Performance measures according to IFRS Earnings per share (EPS) attributable to equity holders of the parent company = Profit for the period – non-controlling interest Average number of shares outstanding Diluted earnings per share (diluted EPS) attributable to e
Slide 60: Disclaimer
Disclaimer Information presented herein contains, or may be deemed to contain, forward-looking statements. These statements relate to future events or Huhtamäki Oyj’s or its affiliates’ (“Huhtamaki”) future financial performance, including, but not limited to, strategic plans, potential growth, expe
Slide 61: For further information, please contact us:
For further information, please contact us: www.huhtamaki.com » Investors ir@huhtamaki.com