Huhtamäki Oyj’s Interim Report January 1 – March 31, 2018: Solid comparable growth, negative currency impact

Q1 2018 in brief
• Net sales were EUR 725 million (EUR 739 million)
• EBIT was EUR 60 million (EUR 63 million)
• EPS was EUR 0.40 (EUR 0.43)
• Comparable net sales growth was 5% in total and 8% in emerging markets
• Currency movements had a negative impact of EUR 59 million on the Group’s net sales and EUR 4 million on EBIT

Jukka Moisio, CEO: “We achieved a solid 5% comparable net sales growth in the first quarter. In emerging markets our comparable net sales grew by 8% with Eastern Europe and India growing strongest. The North America segment started to benefit from the Goodyear plant start-up and reported 5% comparable growth while other segments continued with good momentum that was already visible in 2017. Currency headwinds were strong and they had a significant negative impact on reported net sales. The main impact came from the weakening of the U.S. dollar versus euro, but all key currencies weakened versus euro.

In constant currencies our profitability was slightly ahead of previous year while reported EBIT declined. The Foodservice Europe-Asia-Oceania segment reported an improved EBIT and Fiber Packaging also progressed well. The North America segment reported weaker profitability due to currency conversion, higher distribution costs, and start-up of the Goodyear facility. The Flexible Packaging segment reported slightly weaker profitability due to tight pricing and competitive situation in Europe, while in India sales and profitability developed well.

During the quarter we were ramping up the new capacity of the Goodyear plant in North America. The project is progressing according to our plan and has met the first quarter technical and operational targets. Later in the year we will commission new lines and machines that have been part of our capital expenditure in 2017 and in the early part of 2018. The additional capacity allows us to capture further growth opportunities.

During the quarter we announced an acquisition of a labeling company Ajanta Packaging in India to expand our product offer and improve our competitive position in this key market for us. We also established a joint venture with Smith Anderson Group to manufacture and sell foodservice paper bags in Eastern Europe, strengthening our position as a one-stop-shop to foodservice customers.

Our high season is starting and we are confident about the growth momentum in our business.”

The Group’s comparable net sales growth was 5% with all segments making good progress. Comparable growth in emerging markets was 8%. In absolute terms growth was strongest in Eastern Europe, India, and Middle East and Africa. The Group’s reported net sales declined and were EUR 725 million (EUR 739 million). Foreign currency translation impact on the Group’s net sales was EUR -59 million (EUR 20 million) compared to 2017 exchange rates. The majority of the negative currency impact came from the weakening of the U.S. dollar versus euro, however, all key currencies weakened against euro contributing to the negative translation impact.

The Group’s reported earnings declined but in comparable currencies the Group’s earnings improved slightly compared to the previous year. Foodservice Europe-Asia-Oceania segment’s earnings increased significantly as a result of sales growth and operational efficiency. Fiber Packaging segment’s earnings grew as well, while earnings in Flexible Packaging and North America segments declined. Earnings decline in the North America segment was due to negative currency impact, higher distribution costs and costs related to the start-up of the Goodyear plant. The Group’s earnings before interest and taxes (EBIT) were EUR 60 million (EUR 63 million). Foreign currency translation impact on Group’s EBIT was EUR -4 million (EUR 2 million positive).
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