Huhtamäki Oyj’s Half-yearly Report January 1–June 30, 2023: Stable performance in a challenging market

HUHTAMÄKI OYJ HALF-YEARLY REPORT 20.7.2023 AT 8:30

Huhtamäki Oyj’s Half-yearly Report January 1–June 30, 2023: Stable performance in a challenging market

Q2 2023 in brief

• Net sales decreased 8% to EUR 1,052 million (EUR 1,147 million)
• Adjusted EBIT was EUR 93 million (EUR 103 million); reported EBIT was EUR 55 million (EUR 97 million)
• Adjusted EPS was EUR 0.55 (EUR 0.63); reported EPS was EUR 0.24 (EUR 0.58)
• Comparable net sales growth at Group level was -2% and -2% in emerging markets
• The impact of currency movements on the Group’s net sales was EUR -38 million and EUR -3 million on EBIT

H1 2023 in brief

• Net sales decreased 4% to EUR 2,099 million (EUR 2,197 million)
• Adjusted EBIT was EUR 185 million (EUR 200 million); reported EBIT was EUR 142 million (EUR 190 million)
• Adjusted EPS was EUR 1.06 (EUR 1.26); reported EPS was EUR 0.72 (EUR 1.21)
• Comparable net sales growth at Group level was 0% and -1% in emerging markets
• The impact of currency movements on the Group’s net sales was EUR -39 million and EUR -2 million on EBIT
• Capital expenditure was EUR 134 million (EUR 128 million)
• Free cash flow was EUR 71 million (EUR -66 million)

Key figures

Unless otherwise stated, all comparisons in this report are compared to the corresponding period in 2022. 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.

IAC includes, but is not limited to, material restructuring costs and acquisition related costs (gains and losses on business combinations, professional and legal fees, material purchase price accounting adjustments for inventory, material purchase price amortization of intangible assets and changes in contingent considerations) as well as material impairment losses and reversals, gains and losses relating to sale of intangible and tangible assets and fines and penalties imposed by authorities.

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

"The market environment remained muted in the second quarter of 2023, as Inflation affected consumption across categories and geographies. Destocking also continued to impact volumes during the second quarter, although at a lower level than during the first quarter.

Our financial performance in the second quarter was in line with the first quarter of 2023, however it was soft compared to last year. Market conditions remained challenging, resulting in lower sales volumes. Our comparable net sales decreased by 2% in the second quarter but remained stable during the first half of the year. Adjusted EBIT decreased by 10% in the second quarter and 8% during the first half of the year, mainly due to lower sales volumes and the divested operations in Russia. Free cash flow continued to improve, reaching EUR 28 million during the second quarter and EUR 71 million during the first half of the year, driven by reduced working capital.

During the second quarter, the North America segment delivered a strong adjusted EBIT. We also had solid performance by the Foodservice Europe-Asia-Oceania and Fiber Packaging segments. However, the Flexible Packaging segment continued to face decreased demand, particularly impacted by inflation.

We are taking decisive actions to improve the financial performance in the Flexible Packaging segment. These actions include optimizing our operating model, labor productivity and consolidating our manufacturing footprint. In June, we announced the intention to close the manufacturing site in Prague, Czech Republic. In India, we have also initiated the consolidation of our smaller manufacturing sites with our existing footprint. Across the Group, we have continued to actively address productivity, with a focus on machine utilization, material waste reduction and labor efficiency. Employee numbers are 1,700 lower than in the comparison period, driven by the Russian divestment and efficiency improvements to drive competitiveness.

At the same time, we continue to drive our 2030 strategy by investing in growth and innovation. In 2023, we are bringing new capacity to commercial production, including tableware in North America, fiber lids in Europe, egg packaging in North America and South Africa, and Nespresso home compostable coffee capsules produced in The Netherlands. We recently announced the expansion of our North America Foodservice capacity in Paris, Texas, to capture the growing demand for folding carton packaging. These projects illustrate our strategy to scale up our profitable core business and innovate for sustainable packaging solutions.”

Financial review Q2 2023 

Net sales by business segment

Comparable net sales growth by business segment

The Group’s net sales decreased 8% to EUR 1,052 million (EUR 1,147 million) during the quarter and comparable net sales growth was -2%. Overall, demand continued to be muted by the impact of inflation. Net sales were weighed on by a decrease in sales volumes and changes in currencies, whereas pricing had a positive impact. The divestment of the operations in Russia had a negative impact. Comparable sales growth in emerging markets was -2%. Foreign currency translation impact on the Group’s net sales was EUR -38 million (EUR 68 million) compared to 2022 exchange rates.

Adjusted EBIT by business segment

Adjusted EBIT margin by business segment

The Group’s adjusted EBIT decreased to EUR 93 million (EUR 103 million) and reported EBIT was EUR 55 million (EUR 97 million) in the quarter. Adjusted EBIT decreased mainly due to lower sales volumes and the divestment of operations in Russia. The Group’s adjusted EBIT margin decreased and was 8.8% (9.0%). Foreign currency translation impact on the Group’s earnings was EUR -3 million (EUR 6 million).

Adjusted EBIT excludes EUR -38.0 million (EUR -6.2 million) of items affecting comparability (IAC). The main change in IACs relate to the planned closure of the Flexible Packaging production facility in Prague, Czech Republic.

Adjusted EBIT and IAC

Net financial expenses were EUR 15 million (EUR 12 million) in the quarter. The increase was due to higher interest rates. Tax expense was EUR 13 million (EUR 22 million), due to lower profit before taxes. Profit for the quarter was EUR 27 million (EUR 63 million). Adjusted earnings per share (EPS) was EUR 0.55 (EUR 0.63) and reported EPS EUR 0.24 (EUR 0.58). Adjusted EPS is calculated based on adjusted profit for the period, which excludes EUR -32.3 million (EUR -4.5 million) of IAC.

Adjusted profit and IAC

Financial review H1 2023

Net sales by business segment

Comparable net sales growth by business segment

The Group’s net sales decreased 4% to EUR 2,099 million (EUR 2,197 million) during the reporting period, and comparable net sales growth was 0%. Overall, demand continued to be muted by the impact of inflation. Net sales were weighed on by a decrease in sales volumes and changes in currencies, whereas pricing had a positive impact. The divestment of the operations in Russia had a negative impact. Comparable sales growth in emerging markets was -1%. Foreign currency translation impact on the Group’s net sales was EUR -39 million (EUR 103 million) compared to 2022 exchange rates.

Adjusted EBIT by business segment

Adjusted EBIT margin by business segment

The Group’s adjusted EBIT decreased to EUR 185 million (EUR 200 million) and reported EBIT was EUR 142 million (EUR 190 million). Adjusted EBIT decreased mainly due to lower sales volumes and the divestment of operations in Russia. The Group’s adjusted EBIT margin decreased and was 8.8% (9.1%). Foreign currency translation impact on the Group’s earnings was EUR -2 million (EUR 9 million).

Adjusted EBIT excludes EUR -42.7 million (EUR -10.2 million) of items affecting comparability (IAC). The main change in IACs relate to the planned closure of the Flexible Packaging production facility in Prague, Czech Republic.

Adjusted EBIT and IAC

Net financial expenses were EUR 34 million (EUR 15 million). The increase was due to higher interest rates and other financing costs. Tax expense was EUR 29 million (EUR 44 million). The effective tax rate was 26% (25%) and the increase was due to a non-deductible goodwill impairment related to the planned closure of the Flexible Packaging site in Prague. Profit for the period was EUR 79 million (EUR 131 million). Adjusted earnings per share (EPS) were EUR 1.06 (EUR 1.26) and reported EPS EUR 0.72 (EUR 1.21). Adjusted EPS is calculated based on adjusted profit for the period, which excludes EUR -36.2 million (EUR -4.2 million) of IAC.

Adjusted profit and IAC

Outlook for 2023 (unchanged)

The Group’s trading conditions are expected to remain relatively stable, despite the continued volatility in the operating environment. Huhtamaki's diversified product portfolio provides resilience and the Group’s good financial position enables addressing profitable long-term growth opportunities.

Teleconference

Huhtamaki will arrange a combined audiocast and teleconference on July 20, 2023, at 9:30 EEST. Huhtamaki’s President & CEO Charles Héaulmé and CFO Thomas Geust will present the results. The event will be followed by a question and answer session. The event will be held in English and it can be followed in real-time.

A link to the audiocast is available at: https://huhtamaki.videosync.fi/2023-q2.

A link to the teleconference is available at: https://palvelu.flik.fi/teleconference/?id=10010471. Registration is required for the teleconference. After the registration you will be provided with phone numbers and a conference ID to access the conference.

An on-demand replay of the audiocast will be available shortly after the end of the call at www.huhtamaki.com/investors.

Financial reporting in 2023

In 2023, Huhtamaki will publish financial information as follows:

Interim Report, January 1 - September 30, 2023        October 20

This is a summary of Huhtamäki Oyj's Half-yearly Report January 1-June 30, 2023. The complete report is attached to this release and is also available at the company website at: www.huhtamaki.fi

For further information, please contact:

Kristian Tammela, VP, Investor Relations, tel. +358 10 686 7058

HUHTAMÄKI OYJ

Global Communications

About Huhtamaki

Huhtamaki is a leading global provider of sustainable packaging solutions for consumers around the world. Our innovative products protect on-the-go and on-the-shelf food and beverages, and personal care products, ensuring hygiene and safety, driving accessibility and affordability, and helping prevent food waste. We embed sustainability in everything we do. We are committed to achieving carbon neutral production and designing all our products to be recyclable, compostable or reusable by 2030. Our blueloopTM sustainable packaging solutions are world-leading and designed for circularity.

We are a participant in the UN Global Compact, Huhtamaki is rated ‘A’ on the MSCI ESG Ratings assessment and EcoVadis has awarded Huhtamaki with the Gold medal for performance in sustainability. To play our part in managing climate change, we have set science-based targets that have been approved and validated by the Science-Based Targets initiative.

With 100 years of history and a strong Nordic heritage we operate in 37 countries and 116 operating locations around the world. Our values Care Dare Deliver guide our decisions and help our team of around 18 000 employees make a difference where it matters. Our 2022 net sales totalled EUR 4.5 billion. Huhtamaki Group is headquartered in Espoo, Finland and our parent company, Huhtamäki Oyj, is listed on Nasdaq Helsinki Ltd. Find out more about how we are protecting food, people and the planet at www.huhtamaki.com.

Attachment

• Half-yearly report 2023