Huhtamaki Oyj · OMXHEX:HUH1V
Huhtamaki Oyj — FY2018 Earnings Presentation
61 slides from Huhtamaki Oyj's earnings presentation, February 2019
Slide 1: Results 2018
Results 2018 CEO Jukka Moisio CFO Thomas Geust
Slide 2: Strong organic growth boosted further with acquisitions
Strong organic growth boosted further with acquisitions Net sales growth split in Q4 18 -3 – 6% comparable growth with 813 significant growth in North 27 America and Foodservice E-A-O – 5% in emerging markets 44 – 4% from acquisitions – Currency impact decreased to 745 MEUR -3 (MEUR -35) M€ Q4 17 Or
Slide 3: Long-term ambition of 5+% comparable growth achieved
Long-term ambition of 5+% comparable growth achieved Net sales growth split in FY 18 76 -120 – 5% comparable growth with 159 3,104 solid contribution from all 2,989 segments – 7% in emerging markets; growth strongest in Eastern Europe, Africa, Middle East and India – 3% from acquisitions – Currency
Slide 4: Comparable growth
Comparable growth Q4 18 Q3 18 Q2 18 Q1 18 2017 2018 Long-term ambitions Foodservice E-A-O 3% 5% 5% 5% 4% 4% 5-7% North America 11% 2% 2% 5% 2% 5% 2-5% Flexible Packaging 4% 6% 11% 6% 4% 7% 6-8% Fiber Packaging 5% 4% 3% 5% 5% 4% 5-7% Group 6% 4% 6% 5% 3% 5% 5+% – Growth in North America boosted by st
Slide 5: Strong net sales growth and high cost environment continued
Strong net sales growth and high cost environment continued MEUR Q4 18 Q4 17 Change FY 2018 FY 2017 Change Q4 Highlights Net sales 812.8 745.4 9% 3,103.6 2,988.7 4% – 9% reported net sales growth Adjusted EBITDA1 95.2 95.3 -0% 373.6 389.7 -4% – Absolute EBITDA at 2017 level Margin1 11.7% 12.8% 12.0%
Slide 6: Business segment review
siness segment review Huhtamaki
Slide 7: Foodservice Europe-Asia-Oceania: Significant growth from acquisitions
Foodservice Europe-Asia-Oceania: Significant growth from acquisitions 2017 Net sales MEUR 808 EBIT margin1 8.7% 2018 MEUR 882 8.6% 8 – Strong topline growth 6 – Contribution from acquisitions MEUR 24 – Continued good development of core 4 paperboard items & Global key accounts – Quarterly margin bur
Slide 8: European Commission SUP Directive – status update
European Commission SUP Directive – status update – During Q4/18 the SUP Directive progressed within the EU with no significant changes made – The SUP Directive is expected to enter into force at EU-level mid-2019 – Member States to transpose it into national law by mid-2021 – The Directive is appli
Slide 9: North America: Strong comparable growth boosted by season
North America: Strong comparable growth boosted by season 2017 Net sales MEUR 1,000 2018 MEUR 1,003 EBIT margin1 10.4% 7.2% 12 – Strong season and favorable timing of call-offs 10 drove topline development; good growth across all 8 product lines 6 4 – Underlying operational performance better than 2
Slide 10: Flexible Packaging: Trending positively
Flexible Packaging: Trending positively 2017 Net sales MEUR 913 2018 MEUR 952 EBIT margin1 7.6% 7.1% 12 – Good growth across markets, except in Europe 10 8 where growth was impacted by a national 6 support strike in Germany 4 2 – Underlying profitability improved 0 – Price/mix actions in India start
Slide 11: Fiber Packaging: Profitability back on track
Fiber Packaging: Profitability back on track 2017 Net sales MEUR 285 2018 MEUR 283 EBIT margin1 9.9% 10.9% 10 – Solid net sales growth led by Australia and 8 Africa 6 – Significant profitability improvement 4 supported by moderate raw material prices 2 and tight cost control 72 72 69 72 70 71 69 73
Slide 12: Financial review
Financial review Huhtamaki
Slide 13: Cost improvement actions began to have an impact during Q4
Cost improvement actions began to have an impact during Q4 Q4 18 Q4 17 Change FY 2018 FY 2017 Change MEUR Q4 Highlights Net sales 812.8 745.4 9% 3,103.6 2,988.7 4% – Change of trend visible in EBITDA Adjusted EBITDA1 95.2 95.3 -0% 373.6 389.7 -4% – MEUR -35 of IAC Margin1 11.7% 12.8% 12.0% 13.0% – R
Slide 14: Currency impact moderating in Q4 2018
Currency impact moderating in Q4 2018 Closing rates Average rate 2017 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Average rate 2018 – Foreign currency impact USD 1.13 1.19 1.24 1.16 1.17 1.15 1.18 compared to 2017 rates INR 73.48 76.47 80.80 79.68 84.98 80.23 80.72 – Q4 2018 Net Sales MEUR -3 and EBIT MEUR -1 GBP
Slide 15: Raw material costs beginning to moderate
Raw material costs beginning to moderate 140 – Resin prices declined – Paperboard and post- 120 industrial fiber prices remained on a high level 100 – OCC and post-consumer fiber increased slightly 80 60 Q1/11 Q1/12 Q1/13 Q1/14 Q1/15 Q1/16 Q1/17 Q1/18 PS PP PE -7% -2% -11% (end of Q4 18 vs. end of Q
Slide 16: Debt position reflects acquisitions completed in Q2
Debt position reflects acquisitions completed in Q2 Covenant level 3.5 – Net debt/EBITDA at 2.2 AMBITION 2-3 – At the end of Q4 18 – Cash and cash equivalents MEUR 95 – Unused committed credit 1.9 1.9 1.8 1.7 1.8 2.2 2.2 2.2 facilities available MEUR 304 – Funds available for acquisitions approx. ME
Slide 17: Free cash flow
Free cash flow 386 365 – Lower EBITDA compensated by lower CAPEX 59 56 MEUR 3 14 8 2 – Strong deliveries in Q4; inventories improved but -13 -21 -69 -66 -38 -44 receivables higher -197 -215 Reported Change in Net financial Taxes Capital Proceeds Other Free cash EBITDA working items expenditure from
Slide 18: Stable financial position
Stable financial position MEUR Dec 2018 Dec 2017 Total assets 3,128 2,931 – Higher assets reflect investments and Operating working capital 598 512 acquisitions Net debt 808 698 Equity & non-controlling interest 1,274 1,208 – Delivery of investments not yet fully Gearing 0.63 0.58 visible in topline
Slide 19: The Board of Directors aims at predictable and growing dividends
The Board of Directors aims at predictable and growing dividends Dividend payout ratio 40-50% – The Board proposes a €0.84 dividend per share 53% 48% – Adjusted EPS €1.70 47% 47% 47% 40% 40% 42% 49% – Based on Board proposal, 5% increase in dividend → Payout ratio 49% → Dividend yield2 3.1% – Divide
Slide 20: Progress towards long-term ambitions
Progress towards long-term ambitions Long-term FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 ambition Organic growth 6% 4% 4% 3% 5+% 5+% – Long-term ambition of EBITDA margin 11.6% 12.5% 13.3% 13.0% 12.0% 14+% 5+% comparable growth EBIT margin 7.8% 8.7% 9.4% 9.0% 8.0% 10+% achieved – In addition 3% acquir
Slide 21: Looking forward
Looking forward Huhtamaki
Slide 22: Outlook 2019
Outlook 2019 The 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
Slide 23: Financial calendar 2019
Financial calendar 2019 Week 8 April 25 Annual Accounts 2018 Q1 19 Interim Report & Directors’ Report AGM July 19 October 23 Half-yearly Report Q3 19 Interim Report 2019 23 Results 2018
Slide 24: Helping great products reach more people, more easily
Helping great products reach more people, more easily
Slide 25: 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 26: Our business segments
Our business segments Huhtamaki
Slide 27: 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 2018 9% 28% 31% 32% Foodservice Europe-Asia- Flexible Packaging Fiber Packagingj Oceania and North America kdfgjkl dhgdfhg – 39 plants on – 2
Slide 28: 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 29: 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 29 Results
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 pre-packed consumer products including food, beverages, pet food, hygiene and health care products. The segment serves global markets from production units in Europe, Middle East, Asia and South America. Ou
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 Resul
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: 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 39: 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’ capabilities loremipsum lives easier - Game-changing - Follow global - Glo
Slide 40: 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 41: On sustainability of food packaging
On sustainability of food packaging
Slide 42: 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. 42 Resul
Slide 43: 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* 43 Results 2018 *Appropriate food packaging solutions for developing countries, FAO 2014
Slide 44: 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 44 Results 2018
Slide 45: 52% of global consumer packaging is made of plastics
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 45 Results 2018
Slide 46: We use different materials for different purposes
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 47: Recycling rates vary – upside potential remains
Recycling rates vary – upside potential to utilize valuable materials remain Plastic packaging Steel Paper ~14% ~70-90% ~50-60% recycled* recycled* recycled* 47 Results 2018 *Source: Ellen MacArthur foundation: The New Plastics Economy, Rethinking the future of plastics, 2016
Slide 48: 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 48 Results 2018
Slide 49: Appendices
Appendices
Slide 50: 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 €3.1bn 8.0% The first choice in food Comparable growth ROI packaging 5% 11.9% Employees Manufacturing sites Our purpose 17,700 77 Helping great products Operations in reach more people, 34 countries more eas
Slide 51: 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 52: Group financials 2009-2018
Group financials 2009-2018 2018 2017 2016 2015 2014 (1 2013 (1 2012 (2 2011 2010 2009 Net sales MEUR 3,104 2,989 2,865 2,726 2,236 2,161 2,321 2,043 1,952 1,832 Comparable growth (3 % 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 % 12.0 13.0 13.3 12.5
Slide 53: Quarterly comparable growth by business segment since 2016
Quarterly comparable growth by business segment since 2016 Long- term Q4 18 Q3 18 Q2 18 Q1 18 Q4 17 Q3 17 Q2 17 Q1 17 Q4 16 Q3 16 Q2 16 Q1 16 FY 18 FY 17 FY 16 ambition Foodservice E-A-O 3% 5% 5% 5% 6% 4% 2% 3% 3% 5% 7% 7% 4% 4% 5% 5-7% North America 11% 2% 2% 5% 2% 2% 1% 2% 5% 2% 8% 10% 5% 2% 6% 2-
Slide 54: 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€ 1,006 Pressed Bags & UAE, Malaysia Europe USA, Egypt M&A spend plates, US wraps, USA, Egypt, M€
Slide 55: Loan maturities
Loan maturities Debt maturity structure December 31, 2018 600 – Average maturity 3.7 years at 500 the end of Q4 2018 400 (4.6 at the end of Q4 2017) 300 200 100 MEUR0 2019 2020 2021 2022 2023 Later Finance lease liabilities Commercial paper program Uncommitted loans from financial institutions Bonds
Slide 56: 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 57: Ownership
Ownership Shareholder distribution by sector December 31, 2018 – 31,755 registered shareholders at the end of December 2018 6% – 57% of shares in domestic ownership 8% – 17% of shares controlled by non-profit 43% 10% organizations – Finnish Cultural Foundation a 15% major owner since 1943, current o
Slide 58: Ownership distribution over time
Ownership distribution over time 52% 44% 43% 17% 15% 15% 14% 11% 12% 10% 7% 5.9 5.0 7.6 6.0 5.5 6.1 5.4 5.5 4.8 5.3 5.2 6.0 5.5 7.2 4.7 5.0 6.5 6.4 6.4 5.9 6.4 7.3 4.8 5.9 5.0 7.6 7.9 5.0 5.4 5.5 6.5 7.6 4.6 6.1 7.7 6.1 5.2 5.9 4.3 4.0 4.4 3.6 3.9 4.5 3.2 3.7 4.0 3.5 3.7 Jan Mar May Jul Sep Nov Jan
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 [email protected]