"Our reported third quarter net sales grew 7% including a minor currency headwind impact of -1%. Comparable growth for the Group was 4% and in emerging markets 5%. Acquisitions added EUR 30 million to reported net sales accounting for 4% growth. During the quarter a number of important emerging market currencies devalued significantly.
Our profitability weakened because price and mix improvement actions were not enough to offset the increase in input costs. We will continue the price and mix improvement actions. In addition, we announced in early October plans to close down non-competitive production lines and invest further in automation to improve our productivity and efficiency. Executing the plan would generate an item affecting comparability (IAC) of EUR -30 million, to be recognized in Q4, and it is expected to improve our profitability by EUR 15-18 million annually, with full impact in 2020.
Net sales with global key accounts developed well and we made good progress on many innovation projects. I am pleased to see the project Fresh progressing to a second, larger consumer test phase in the UK. This compostable ready meal tray is made from renewable fibers and it can replace black plastic trays. Fresh is a good example of the work we do in developing solutions to pack and serve food safely and conveniently with less negative impact on the environment.
The ramp-up of our new facility in Arizona, the U.S., is on track supporting the sales growth of paperboard-based products. The building of the new flexible packaging manufacturing unit in Egypt is also progressing as planned and we expect to start early trials towards the end of 2018 and commercial deliveries in early 2019. Both units will help us address the growth opportunities we continue to see in food and drink packaging."
The Group`s comparable net sales growth was 4% during the quarter, with all segments contributing. Growth was strongest in the Flexible Packaging and Foodservice Europe-Asia-Oceania business segments. Comparable growth in emerging markets was 5%. The Group`s net sales grew to EUR 780 million (EUR 732 million). Foreign currency translation impact on the Group`s net sales was EUR -9 million (EUR -21 million) compared to 2017 exchange rates. The majority of the negative impact came from the Indian rupee and Russian ruble, while the impact of the US dollar turned positive during the quarter.
| EUR million | Q3 2018 | Q3 2017 | Change | Of Group in
Q3 2018 |
| Foodservice Europe-Asia-Oceania | 229.9 | 202.6 | 14% | 29% |
| North America | 242.3 | 235.3 | 3% | 31% |
| Flexible Packaging | 242.4 | 229.7 | 6% | 31% |
| Fiber Packaging | 69.1 | 68.6 | 1% | 9% |
| Elimination of internal sales | -4.0 | -4.2 | | |
| Group | 779.8 | 732.0 | 7% | |
| | Q3 2018 | Q2 2018 | Q1 2018 | Q4 2017 |
| Foodservice Europe-Asia-Oceania | 5% | 5% | 5% | 6% |
| North America | 2% | 2% | 5% | 2% |
| Flexible Packaging | 6% | 11% | 6% | 9% |
| Fiber Packaging | 4% | 3% | 5% | 4% |
| Group | 4% | 6% | 5% | 5% |
The Group`s earnings declined. Earnings continued to develop favorably in the Foodservice Europe-Asia-Oceania business segment while earnings declined in other business segments. The earnings decline in the North America segment was due to higher distribution costs and costs related to the start-up of the Goodyear plant. The Group`s Adjusted earnings before interests and taxes (EBIT) were EUR 56.5 million (EUR 64.3 million) and reported EBIT EUR 56.4 million (EUR 64.3 million). There was no significant foreign currency translation impact on the Group`s profitability (EUR -2 million).
| EUR million | Q3 2018 | Q3 2017 | Change | Of Group in
Q3 2018 |
| Foodservice Europe-Asia-Oceania | 18.7 | 18.4 | 2% | 34% |
| North America | 14.6 | 20.2 | -28% | 26% |
| Flexible Packaging1 | 15.0 | 17.7 | -15% | 27% |
| Fiber Packaging | 7.0 | 7.3 | -4% | 13% |
| Other activities2 | 1.2 | 0.7 | | |
| Group | 56.5 | 64.3 | -12% | |
1 Excluding IAC of EUR 0.0 million in Q3 2018 (no IAC in Q3 2017).
2 Excluding IAC of EUR -0.1 million in Q3 2018 (no IAC in Q3 2017).
| EUR million | Q3 2018 | Q3 2017 |
| Adjusted EBIT | 56.5 | 64.3 |
| Restructuring costs including write-downs of related assets | 0.3 | - |
| Acquisition related costs | -0.4 | - |
| EBIT | 56.4 | 64.3 |
Net financial expenses increased to EUR 7 million (EUR 5 million). Tax expense was EUR 10 million (EUR 13 million).
Profit for the quarter was EUR 39 million (EUR 46 million). Earnings per share (EPS) were EUR 0.38 (EUR 0.44).
| EUR million | Q3 2018 | Q3 2017 |
| Adjusted profit for the quarter | 39.4 | 46.2 |
| Restructuring costs including write-downs of related assets | -0.1 | - |
| Taxes relating to IAC items | 0.1 | - |
| Profit for the quarter | 39.4 | 46.2 |
The Group`s comparable net sales growth was 5% with a positive contribution from all business segments. Comparable growth in emerging markets was 8%. Growth was strongest in Africa, Russia, Brazil and India. The Group`s net sales grew to EUR 2,291 million (EUR 2,243 million). Foreign currency translation impact on the Group`s net sales was EUR 117 million (EUR 16 million). The majority of the negative impact came from the US dollar, Indian rupee and Russian ruble.
| EUR million | Q1-Q3 2018 | Q1-Q3 2017 | Change | Of Group in
Q1-Q3 2018 |
| Foodservice Europe-Asia-Oceania | 650.2 | 600.5 | 8% | 28% |
| North America | 726.1 | 756.9 | -4% | 32% |
| Flexible Packaging | 716.8 | 686.0 | 4% | 31% |
| Fiber Packaging | 210.2 | 212.7 | -1% | 9% |
| Elimination of internal sales | -12.3 | -12.8 | | |
| Group | 2,290.9 | 2,243.3 | 2% | |
The Group`s earnings declined due to weak profitability in the North America business segment. The Foodservice Europe-Asia-Oceania segment`s earnings improved significantly as a result of volume growth and favorable product mix development. In constant currencies earnings grew moderately in the Flexible Packaging segment and were at previous year`s level in the Fiber Packaging segment. The Group`s Adjusted EBIT were EUR 186.7 million (EUR 202.7 million) and reported EBIT EUR 196.1 million (EUR 202.7 million). Foreign currency translation impacted the Group`s profitability by EUR 9 million (EUR 2 million).
| EUR million | Q1-Q3 2018 | Q1-Q3 2017 | Change | Of Group in
Q1-Q3 2018 |
| Foodservice Europe-Asia-Oceania1 | 58.2 | 52.2 | 12% | 32% |
| North America | 53.4 | 75.3 | -29% | 29% |
| Flexible Packaging2 | 50.4 | 50.6 | -0% | 27% |
| Fiber Packaging3 | 22.2 | 22.7 | -2% | 12% |
| Other activities4 | 2.5 | 1.9 | | |
| Group | 186.7 | 202.7 | -8% | |
1 Excluding IAC of EUR -1.3 million in Q1-Q3 2018 (no IAC in Q1-Q3 2017).
2 Excluding IAC of EUR -1.5 million in Q1-Q3 2018 (no IAC in Q1-Q3 2017).
3 Excluding IAC of EUR -0.6 million in Q1-Q3 2018 (no IAC in Q1-Q3 2017).
4 Excluding IAC of EUR 12.8 million in Q1-Q3 2018 (no IAC in Q1-Q3 2017).
Adjusted EBIT excludes EUR 9.4 million of IAC, which consist of EUR 3.2 million restructuring costs including write-downs of related assets, EUR 1.6 million acquisition related costs and a gain of EUR 14.2 million. The restructuring costs are related to improvement actions in Foodservice Europe-Asia-Oceania, Flexible Packaging and Fiber Packaging segments, as well as in Other activities. The gain is related to the sale of the Group`s confectionery trademark portfolio, as announced on April 30, 2018. Huhtamaki`s confectionery business was divested in 1996.
| EUR million | Q1-Q3 2018 | Q1-Q3 2017 |
| Adjusted EBIT | 186.7 | 202.7 |
| Restructuring costs including write-downs of related assets | -3.2 | - |
| Acquisition related costs | -1.6 | - |
| Gains relating to sale of trademark portfolio | 14.2 | - |
| EBIT | 196.1 | 202.7 |
Net financial expenses increased to EUR 20 million (EUR 16 million). Tax expense was EUR 37 million (EUR 41 million). The corresponding tax rate was 21% (22%).
Profit for the period was EUR 139 million (EUR 146 million). Adjusted EPS were EUR 1.25 (EUR 1.39) and reported EPS EUR 1.33 (EUR 1.39). Adjusted EPS is calculated based on Adjusted profit for the period, which excludes EUR 9.4 million of IAC and EUR -1.8 million of taxes relating to IAC items.
| EUR million | Q1-Q3 2018 | Q1-Q3 2017 |
| Adjusted profit for the period | 131.5 | 145.7 |
| IAC items included in adjusted EBIT | 9.4 | - |
| Taxes relating to IAC items | -1.8 | - |
| Profit for the period | 139.1 | 145.7 |
On March 23, 2018 Huhtamaki announced that it has entered into an agreement to acquire the Indian business and related assets of Ajanta Packaging, a privately-owned manufacturer of pressure sensitive labels. With the acquisition Huhtamaki strengthened its labeling business in India by adding new printing technologies into its offering as well as improving its innovation capability. The acquisition is complementary to Huhtamaki`s existing labeling product portfolio. The annual net sales of the acquired business are approximately EUR 10 million. It employs altogether 170 people and has two state-of-the-art manufacturing facilities. The debt free purchase price was approximately EUR 13 million. The transaction was closed at the end of May 2018. The business has been reported as part of the Flexible Packaging business segment as of June 1, 2018.
On April 30, 2018 Huhtamaki announced the majority acquisition of Tailored Packaging, an Australian foodservice packaging distribution and wholesale group. With the acquisition Huhtamaki gained access to a national network of distribution centers across Australia, allowing it to serve its customers even better and with more agility. Tailored Packaging is one of the largest importers and distributors of foodservice packaging in Australia with annualized net sales of approximately EUR 85 million and approximately 130 employees. The debt free purchase price for 65% ownership of the joint venture was approximately EUR 35 million. As the majority shareholder Huhtamaki consolidates the joint venture company as a subsidiary in the Group`s financial reporting. The business has been reported as part of the Foodservice Europe-Asia-Oceania business segment as of May 1, 2018.
On April 30, 2018 Huhtamaki announced the sale of its confectionery trademark portfolio to Highlander Partners, a US based investment firm. Related to the sale, an after taxes gain of approximately USD 16 million was booked as an item affecting comparability during the second quarter of 2018. The sold trademark portfolio was related to Huhtamaki`s confectionery business divested in 1996.
On May 31, 2018 Huhtamaki announced the majority acquisition of Cup Print Unlimited Company, a privately-owned paper cup manufacturer based in the Republic of Ireland. With the acquisition Huhtamaki improved its access to the growing market of short run custom-printed cups and boosted its on-line commercial activity. The short run capability allows Huhtamaki to even better support its current customers` promotional activities. CupPrint`s annual net sales are approximately EUR 14 million and it employs altogether approximately 110 people. The debt free purchase price for 70% ownership of CupPrint was approximately EUR 22 million. The business has been reported as part of the Foodservice Europe-Asia-Oceania business segment as of June 1, 2018.
On May 28, 2018 the European Commission published a proposal for a Directive of the European Parliament and of the Council on the reduction of the impact of certain plastic products on the environment (the Single Use Plastics proposal) targeting items that have been identified as contributing to marine pollution. The proposal is applicable to a part of Huhtamaki`s product range and contains a number of different measures ranging from banning certain plastic products within the EU to introducing labelling requirements in order to reduce marine pollution. Adoption of the proposal will follow the EU`s Ordinary Legislative Procedure and will be the subject of negotiations between the Council of Ministers, the European Parliament and the European Commission (the Trialogue). Once adopted by the EU, Member States will have two years to transpose the final Directive before it becomes law. Currently the majority of Huhtamaki`s products are fiber-based.
On October 2, 2018 Huhtamaki announced that it is considering to close and write-off non-competitive production lines, and planning to speed-up actions to improve productivity by investing further in automation. The total effect of write-offs and other actions is estimated to amount to EUR -30 million, which would be reported as items affecting comparability (IAC) in the fourth quarter 2018. The planned actions are estimated to result in annual profit improvement of approximately EUR 15-18 million with full impact in 2020.
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 level as in 2017 with the majority of the investments directed to business expansion.
In 2019, Huhtamaki will publish financial information as follows:
Results 2018 February 14
Interim Report, January 1-March 31, 2019 April 25
Half-yearly Report, January 1-June 30, 2019 July 19
Interim Report, January 1-September 30, 2019 October 23
Annual Accounts 2018 will be published on week 8.
Huhtamäki Oyj`s Annual General Meeting is planned to be held on Thursday, April 25, 2019.
This is a summary of Huhtamäki Oyj`s Interim Report January 1-September 30, 2018. 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 10 686 7880 HUHTAMÄKI OYJ Global Communications
Huhtamaki is a global specialist in packaging for food and drink. With our network of 78 manufacturing units and additional 24 sales only offices in altogether 34 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 2017 our net sales totaled EUR 3.0 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. Huhtamaki Interim Report Q3 2018
This announcement is distributed by West Corporation on behalf of West Corporation clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Huhtamäki Oyj via GlobeNewswire
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