Huhtamäki Oyj’s Results January 1-December 31, 2021: Strong net sales growth and solid profitability in a challenging market

HUHTAMÄKI OYJ FINANCIAL STATEMENT RELEASE 10.2.2022 AT 8:30

Huhtamäki Oyj’s Results January 1-December 31, 2021: Strong net sales growth and solid profitability in a challenging market

Q4 2021 in brief

• Net sales increased 23% to EUR 999 million (EUR 813 million)
• Adjusted EBIT was EUR 82 million (EUR 73 million); reported EBIT was EUR 84 million (EUR 48 million)
• Adjusted EPS was EUR 0.54 (EUR 0.48); reported EPS was EUR 0.56 (EUR 0.30)
• Comparable net sales growth was 12% at Group level and 19% in emerging markets
• The impact of currency movements was EUR 24 million on the Group’s net sales and EUR 2 million on EBIT
  
  

Q1-Q4 2021 in brief

• Net sales increased 8% to EUR 3,575 million (EUR 3,302 million)
• Adjusted EBIT was EUR 315 million (EUR 302 million); reported EBIT was EUR 296 million (EUR 265 million)
• Adjusted EPS was EUR 2.07 (EUR 1.95); reported EPS was EUR 1.91 (EUR 1.69)
• Comparable net sales growth was 7% at Group level and 13% in emerging markets
• The impact of currency movements was EUR -54 million on the Group’s net sales and EUR -6 million on EBIT
• Capital expenditure was EUR 259 million (EUR 223 million)
• Free cash flow was EUR -26 million (EUR 207 million)
• The Board of Directors proposes a dividend of EUR 0.94 (0.92) per share

Key figures

Unless otherwise stated, all comparisons in this report are compared to the corresponding period in 2020. 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.

President and CEO’s review

"The year 2021 was marked by a challenging business environment. This was linked to the continued COVID-19 pandemic, with appearance of new variants, and the significant disruption of the value chain. Throughout 2021 we continued to focus on the health, safety and wellbeing of our employees and to ensure business continuity under these exceptional circumstances.

During the year, we saw a gradual improvement in consumption, as vaccination deployment sped up and restrictions were eased across most geographies. This was visible in our foodservice packaging business globally, particularly in Europe and US. Solid growth continued in categories which were supported by in-home consumption, such as flexible packaging and retail tableware. The pandemic-driven supply chain disruptions throughout the year led to scarcity, particularly in raw materials, that resulted in an extraordinary Inflation in input costs, and started to impact our operations. Freight, energy and labor inflation also increased significantly in the second half of 2021.

We delivered a solid performance in the face of this challenging operational environment. This reflects the resilience of our diversified portfolio and the ability of our company to manage adverse conditions. Huhtamaki delivered a solid fourth quarter in sales and profitability, with comparable net sales growth of 12%. For the full year 2021, our net sales amounted to EUR 3.6 billion with comparable net sales growth of 7%. In 2021, our profitability was constantly challenged by extraordinary input cost levels, however our adjusted EBIT improved 4%, reflecting our operational performance and ability to manage the impact of inflation. Negative cashflow was mainly impacted by increased working capital following market recovery and inflationary impact in raw materials as well as higher cash taxes.

Our long-term focus is on creating value by delivering growth, improving competitiveness, developing talent, embedding sustainability in everything we do and digitalizing our core operations. In 2021, we continued to implement these strategic priorities, making very good progress. Huhtamaki’s climate targets were approved and validated by the globally recognized Science Based Targets initiative (SBTi). We also received recognition of our commitment to our ESG agenda by improved ratings in three key ESG Ratings: EcoVadis, CDP and S&P Global Corporate Sustainability Assessment (part of DJSI). In 2021 we also saw the launch of several of our new transformative sustainable packaging solutions. We recently launched Push Tab® paper, an industry-first sustainable renewable paper-based blister solution for the global healthcare industry. We also announced the next generation of tube laminates for use in both the cosmetics and food sectors in partnership with LyondellBasell, Plastuni Lisses and Groupe Rocher. Earlier in the year, we launched our award-winning Future Smart fiber lids, replacing plastic lids. These new fiber lids made of renewable material are recyclable and compostable.

In line with these successful innovations in sustainable solutions, we increased our investments for deployment and capacity expansion, enabling profitable growth in technologies where Huhtamaki has developed a competitive advantage. We also announced investments in a new state-of-the-art foodservice manufacturing unit in Malaysia and in a new fiber packaging manufacturing site in South Africa.

In September, we completed the acquisition of Elif, a major supplier of sustainable flexible packaging for global FMCG brand owners, operating out of Turkey and Egypt. The acquisition of Elif expands our technology capabilities and product range. It also strengthens our position as a leading flexible packaging company in emerging markets. In addition, during the year we acquired Hihio-Art Packaging, a leading manufacturer of paper bags, wrapping paper and folding carton packaging in China.

In 2021, Huhtamaki made demonstrable progress on its strategic priorities. This was only possible because of our high-performing teams, whom we thank for the continued dedication, entrepreneurship and focus on delivery. We are also thankful for the support and recognition our customers, suppliers and other stakeholders have shown us throughout the year.”

Charles Héaulmé, President and CEO

Thomas Geust, Interim Deputy CEO

Financial review Q4 2021  

Net sales by business segment

Comparable net sales growth by business segment

The Group’s net sales increased 23% to EUR 999 million (EUR 813 million) during the quarter. Comparable net sales growth was 12%. Net sales growth was mainly driven by recovery in foodservice demand, continued growth in retail tableware in North America and strong growth in flexible packaging. Comparable growth was the highest in the Foodservice EAO and the Flexible Packaging segment. Comparable sales growth in emerging markets was 19%. Foreign currency translation impact on the Group’s net sales was EUR 24 million (EUR -52 million) compared to 2020 exchange rates.

Adjusted EBIT by business segment

Adjusted EBIT margin by business segment

The Group’s adjusted EBIT increased to EUR 82 million (EUR 73 million) and reported EBIT was EUR 84 million (EUR 48 million) in the quarter. Adjusted EBIT improved mainly driven by sales growth and was supported by acquisitions. Earnings in Fiber Packaging segment declined due to increased input cost. The Group’s adjusted EBIT margin decreased and was 8.2% (9.0%). Foreign currency translation impact on the Group’s earnings was EUR 2 million (EUR -5 million).

Adjusted EBIT excludes EUR 2.3 million (EUR -24.9 million) of items affecting comparability (IAC).

Adjusted EBIT and IAC

Net financial expenses were EUR 9 million (EUR 6 million) in the quarter. Tax expense was EUR 16 million (EUR 9 million). Profit for the fourth quarter was EUR 59 million (EUR 32 million). Adjusted earnings per share (EPS) was EUR 0.54 (EUR 0.48) and reported EPS EUR 0.56 (EUR 0.30). Adjusted EPS is calculated based on adjusted profit for the period, which excludes EUR 1.1 million (EUR -19.3 million) of IAC.

Adjusted profit and IAC

Financial review 2021

Net sales by business segment

Comparable net sales growth by business segment

The Group’s net sales increased 8% to EUR 3,575 million (EUR 3,302 million) during the reporting period. Comparable net sales growth was 7%. Net sales increased especially in the Foodservice Europe-Asia-Oceania segment, driven by the continued recovery in demand for foodservice products. Sales of retail tableware in North America was strong. Comparable sales growth in emerging markets was 13%. Foreign currency translation impact on the Group’s net sales was EUR -54 million (EUR -89 million) compared to 2020 exchange rates.

Adjusted EBIT by business segment

Adjusted EBIT margin by business segment

The Group’s adjusted EBIT increased to EUR 315 million (EUR 302 million) and reported EBIT was EUR 296 million (EUR 265 million). Adjusted EBIT improved following net sales growth, continued focus on operational efficiency and pricing actions and was offset by higher input costs. The Group’s adjusted EBIT margin decreased and was 8.8% (9.1%). Foreign currency translation impact on the Group’s earnings was EUR -6 million (EUR -8 million).

Adjusted EBIT excludes EUR -19.3 million (EUR -36.8 million) of items affecting comparability (IAC).

Adjusted EBIT and IAC

Net financial expenses were EUR 33 million (EUR 28 million). Tax expense was EUR 60 million (EUR 53 million). The effective tax rate was 23% (23%). Profit for the period was EUR 203 million (EUR 184 million). Adjusted earnings per share (EPS) were EUR 2.07 (EUR 1.95) and reported EPS EUR 1.91 (EUR 1.69). Adjusted EPS is calculated based on adjusted profit for the period, which excludes EUR -17.1 million (EUR -26.2 million) of IAC.

Adjusted profit and IAC

Acquisitions and divestments

On April 21, 2021 Huhtamaki announced its agreement to acquire the assets of Jiangsu Hihio-Art Packaging Co. Ltd., a leading manufacturer of paper bags, wraps and folding carton packaging in China. With this acquisition, Huhtamaki continues to strengthen its position as the leading foodservice packaging provider in Asia and expands its product portfolio in China, allowing it to better serve its existing and new customers in this exciting growth market. Jiangsu Hihio-Art Packaging employs approximately 200 people in its manufacturing unit in Xuzhou city, Jiangsu. In 2020 the annual net sales of the privately owned business were approximately EUR 20 million. The debt free purchase price was EUR 31 million. The acquisition was completed on June 11, 2021 and since then the business has been reported as part of the Foodservice Europe-Asia-Oceania business segment.

On August 16, 2021 Huhtamaki announced its agreement to acquire Elif Holding A.S. (Elif), a major supplier of sustainable flexible packaging to global FMCG brand owners, with operations in Turkey and in Egypt. In line with Huhtamaki’s 2030 growth strategy, the acquisition adds scale in strategic geographies and supports Huhtamaki’s progress towards reaching its high sustainability ambitions. The acquisition also expands Huhtamaki’s technology capabilities and product range, allowing it to serve its customers even better. The net sales of the acquired business were approximately EUR 163 million (USD 195 million) in 2020. Elif employs approximately 1,500 people in its two manufacturing locations in Istanbul, Turkey and Cairo, Egypt. The cash free debt free purchase price was EUR 412 million (USD 483 million). The acquisition was completed on September 23, 2021 and since then the business has been reported as part of Huhtamaki’s Flexible Packaging business segment.

On November 30, 2021, Huhtamaki acquired full ownership of its Ireland based joint venture company Huhtamaki CupPrint Limited from the founding shareholders. Huhtamaki acquired 70% majority ownership in the company (that time Cup Print Unlimited Company) on May 31, 2018. CupPrint is specialized in short run custom printed cups with quick delivery time. It has an on-line service model which allows efficient design and delivery of small volumes. The purchase price for the additional shares was approximately EUR 11 million. The business has been reported as part of the Foodservice Europe-Asia-Oceania business segment since June 2018.

Significant events after the reporting period

On January 3, 2022, Huhtamaki announced that it has acquired full ownership of its Polish joint venture company Huhtamaki Smith Anderson sp. z o.o. from Smith Anderson Group Ltd. The company manufactures and sells foodservice paper bags in Eastern Europe at Huhtamaki's facility in Czeladz, Poland.Paper bags have become an increasingly important part of Huhtamaki’s product offering and the acquisition enables the company to invest in and further grow the business in Eastern Europe. The purchase price for additional shares and related manufacturing equipment is approximately EUR 2 million. The business has been reported as part of the Foodservice Europe-Asia-Oceania business segment since beginning of operations in 2018.

Outlook for 2022

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.

Dividend proposal

On December 31, 2021 Huhtamäki Oyj’s distributable funds were EUR 462 million (EUR 542 million). The Board of Directors will propose to the Annual General Meeting that a dividend of EUR 0,94 (EUR 0.92) per share be paid.

Annual General Meeting 2022

The Annual General Meeting of Shareholders (AGM) will be held on Wednesday, April 27, 2022 with exceptional meeting procedures based on the Finnish temporary legislative act (375/2021). The AGM will be held without the presence of shareholders or their representatives in order to ensure the health and safety of the Company‘s shareholders, personnel and other stakeholders. After the AGM, shareholders will be provided with an opportunity to follow a webcast where the Chairman of the Board and other Company’s representatives will address topical themes of the Company.

Financial reporting in 2022

In 2022, Huhtamaki will publish financial information as follows:

Interim Report, January 1 - March 31, 2022                        April 27
Half-yearly Report, January 1 - June 30, 2022                     July 21
Interim Report, January 1 - September 30, 2022                 October 21

Annual Accounts 2021 will be published on the week commencing February 28, 2022.

This is a summary of Huhtamäki Oyj's Results January 1–December 31, 2021. 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:

Thomas Geust, Deputy CEO, tel. +358 10 686 7880

HUHTAMÄKI OYJ
Global Communications

About Huhtamaki
Huhtamaki is a key global provider of sustainable packaging solutions for consumers around the world, enabling wellbeing and convenience. Our innovative products protect on-the-go and on-the-shelf food and beverages, ensuring hygiene and safety, and help 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 38 countries and 114 operating locations around the world. Our values Care Dare Deliver guide our decisions and help our team of 19,600 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 on www.huhtamaki.com.

Attachment

• Huhtamäki Oyj Results 2021