Huhtamäki Oyj’s Interim Report January 1–September 30, 2022: Continued strong performance

HUHTAMÄKI OYJ INTERIM REPORT 21.10.2022 AT 8:30

Huhtamäki Oyj’s Interim Report January 1–September 30, 2022: Continued strong performance

Q3 2022 in brief

• Net sales increased 31% to EUR 1,178 million (EUR 896 million)
• Adjusted EBIT was EUR 101 million (EUR 76 million); reported EBIT was EUR 137 million (EUR 65 million)
• Adjusted EPS was EUR 0.59 (EUR 0.50); reported EPS was EUR 0.89 (EUR 0.40)
• Comparable net sales growth at Group level was 17% and 23% in emerging markets
• The impact of currency movements on the Group’s net sales was EUR 83 million and EUR 7 million on EBIT

Q1-Q3 2022 in brief

• Net sales increased 31% to EUR 3,375 million (EUR 2,575 million)
• Adjusted EBIT was EUR 302 million (EUR 233 million); reported EBIT was EUR 327 million (EUR 211 million)
• Adjusted EPS was EUR 1.84 (EUR 1.52); reported EPS was EUR 2.11 (EUR 1.35)
• Comparable net sales growth at Group level was 18 % and 19% in emerging markets
• The impact of currency movements on the Group’s net sales was EUR 186 million and EUR 16 million on EBIT
• Capital expenditure was EUR 185 million (EUR 147 million)
• Free cash flow was EUR -60 million (EUR 28 million)

Key figures

Unless otherwise stated, all comparisons in this report are compared to the corresponding period in 2021. 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

"We continued to deliver strong business performance in the third quarter of 2022, despite continued volatile market conditions. Inflation remained high and affected our input costs, although early signs of easing were visible in some input costs, while the energy market remained tense, particularly in Europe.

Despite persisting challenging market conditions with continued consequence of the COVID pandemic lockdowns in China and a softer demand growth in certain categories, our net sales increased by 31% and by 17% in comparable terms during the third quarter. The growth also translated into profit, with our adjusted EBIT increasing by 33%. Higher working capital, inflated by price and supply chain challenges, in combination with investments for growth continued to impact our operational cash flow. However, the free cash flow has been improving quarter over quarter in 2022.

Early September, we concluded the divestment of our operations in Russia. As a result of the sale, we booked a gain of EUR 37.5 million, contributing to the reduction of our net debt by EUR 143 million compared to the end of the second quarter. Consequently, the operations in Russia are no longer reported in our financials from September onwards.

We are making good progress in the execution of our strategic priorities and see significant growth opportunities. We continue to focus on enhancing innovation and technological capabilities to develop sustainable packaging solutions, resulting in a good pipeline of new sustainable products. In particular, we are accelerating our investments in technology for smooth molded fiber applications and in solutions for recyclable flexible packaging. In September, we initiated a partnership with Emerald Technology Ventures’ sustainable packaging fund, to give us early access to next-generation innovation. This is in line with our ambition to be at the forefront of developing sustainable products and solutions.

Over the last couple of years, we have successfully navigated unprecedented disruption, whilst investing in our operations, capabilities and technologies. I want to thank our entire team for their great work in demanding times. Leveraging the resilience of our business portfolio and organization, we are prepared to manage continued volatility and we are confident in our ability deliver sustainable profitable growth.”

Financial review Q3 2022

Net sales by business segment

Comparable net sales growth by business segment

The Group’s net sales increased 31% to EUR 1,178 million (EUR 896 million) during the quarter and comparable net sales growth was 17%. Overall, demand continued on a good level, although with weakness in some categories and geographies. Net sales growth was mainly driven by pricing, supported by changes in currencies and the Elif acquisition. Comparable sales growth in emerging markets was 23%. Foreign currency translation impact on the Group’s net sales was EUR 83 million (EUR 3 million) compared to 2021 exchange rates.

Adjusted EBIT by business segment

Adjusted EBIT margin by business segment

The Group’s adjusted EBIT increased to EUR 101 million (EUR 76 million) and reported EBIT was EUR 137 million (EUR 65 million) in the quarter. Adjusted EBIT improved driven by sales growth and continued focus on operational efficiency. The Elif acquisition supported growth in adjusted EBIT, whereas the divestment of the operations in Russia had a negative impact. The Group’s adjusted EBIT margin increased and was 8.6% (8.5%). Foreign currency translation impact on the Group’s earnings was EUR 7 million (EUR 0 million).

Adjusted EBIT excludes EUR 35.6 million (EUR -11.4 million) of items affecting comparability (IAC). The main change in IACs relates to the profit booked from the divestment of the operations in Russia.

Adjusted EBIT and IAC

Net financial expenses were EUR 22 million (EUR 10 million) in the quarter. The increase was due to higher debt during the quarter as well as an increase in interest rates. Tax expense was EUR 20 million (EUR 13 million). Profit for the third quarter was EUR 95 million (EUR 42 million). Adjusted earnings per share (EPS) was EUR 0.59 (EUR 0.50) and reported EPS EUR 0.89 (EUR 0.40). Adjusted EPS is calculated based on adjusted profit for the period, which excludes EUR 31.8 million (EUR -10.3 million) of IAC.

Adjusted profit and IAC

Financial review Q1-Q3 2022

Net sales by business segment

Comparable net sales growth by business segment

The Group’s net sales increased 31% to EUR 3,375 million (EUR 2,575 million) during the reporting period, and comparable net sales growth was 18%. Net sales growth was mainly driven by pricing, changes in currencies, the Elif acquisition and increased sales volumes. Comparable sales growth in emerging markets was 19%. Foreign currency translation impact on the Group’s net sales was EUR 186 million (EUR -78 million) compared to 2021 exchange rates.

Adjusted EBIT by business segment

Adjusted EBIT margin by business segment

The Group’s adjusted EBIT increased to EUR 302 million (EUR 233 million) and reported EBIT was EUR 327 million (EUR 211 million). Adjusted EBIT improved driven by sales growth and continued focus on operational efficiency as well as with the support from acquisitions. The Group’s adjusted EBIT margin decreased and was 8.9% (9.1%). Foreign currency translation impact on the Group’s earnings was EUR 16 million (EUR -8 million).

Adjusted EBIT excludes EUR 25.4 million (EUR -21.6 million) of items affecting comparability (IAC). The main change in IACs relates to the profit booked from the divestment of the operations in Russia.

Adjusted EBIT and IAC

Net financial expenses were EUR 37 million (EUR 24 million). The increase was due to higher debt during the period as well as an increase in interest rates. Tax expense was EUR 64 million (EUR 44 million). The effective tax rate was 22% (23%). Profit for the period was EUR 226 million (EUR 144 million). Adjusted earnings per share (EPS) were EUR 1.84 (EUR 1.52) and reported EPS EUR 2.11 (EUR 1.35). Adjusted EPS is calculated based on adjusted profit for the period, which excludes EUR 27.6 million (EUR -18.2 million) of IAC.

Adjusted profit and IAC

Impacts of the war in Ukraine and the divestment of operations in Russia

On September 2, 2022, Huhtamaki announced the divestment of its operations in Russia to Espetina Ltd. Espetina is a holding company owned by Alexander Govor and Iury Kushnerov. The transaction has been completed. The cash and debt free sales price was EUR 151 million. As a result of the sale, Huhtamaki booked a gain of EUR 37.5 million in its third quarter. The transaction included four manufacturing units in Russia, employing 724 people. Net sales in Russia amounted to EUR 99.5 million in 2021, representing less than 3% of the Group’s net sales. The factories in Russia mostly served the local market and only a minor part of production was exported. Following the divestment, Huhtamaki does not have any operations in Russia.

Huhtamaki has operations in Ukraine but does not operate in Belarus. In Ukraine, the company has one factory, which has mostly served the local market. The factory has been temporarily closed since the war started. Net sales in Ukraine had only a minor contribution to the Group level net sales in 2021.

Outlook for 2022 (unchanged)

The Group’s trading conditions are expected to improve compared to 2021, however with continued volatility in the operating environment. Huhtamaki's diversified product portfolio provides resilience and the Group’s good financial position enables addressing profitable growth opportunities.

Teleconference

Huhtamaki will arrange a combined webcast and teleconference on the same day at 9:30 Finnish time. Huhtamaki´s President and CEO Charles Héaulmé and CFO Thomas Geust will present the results. The event will be followed by a Q&A session. The event will be held in English, it can be followed real-time at:

https://huhtamaki.videosync.fi/2022-q3-results/

If you wish to ask questions, please dial one of the following numbers 5-10 minutes prior to the call start:

Finland:  +358 9 2319 5436

Sweden:  +46 (0) 8 5051 0086

UK:  +44 (0) 33 0551 0211

US:  +1 646 843 4609

Participant Passcode:  0422950#

Huhtamaki's financial reporting in 2023

Financial reporting in 2023

In 2023, Huhtamaki will publish financial information as follows:

Results 2022                                                                      February 9

Interim Report, January 1 - March 31, 2023                          April 27

Half-yearly Report, January 1 - June 30, 2023                       July 20

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

The Annual Report 2022 will be published on the week commencing February 27, 2023.

Huhtamäki Oyj’s Annual General Meeting is planned to be held on April 27, 2023.

For further information, please contact:

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

About Huhtamaki

Huhtamaki is a key 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, 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.

We are a participant in the UN Global Compact 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 114 operating locations around the world. Our values Care Dare Deliver guide our decisions and help our team of over 19,000 employees make a difference where it matters. Our 2021 net sales totaled EUR 3.6 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

• Interim Report Q3 2022