Huhtamaki Oyj ((FI:HUH1V)) has held its Q1 earnings call. Read on for the main highlights of the call.
Huhtamaki Oyj’s recent earnings call painted a picture of strategic growth and operational efficiency, tempered by some short-term challenges. The company showcased its ability to enhance long-term growth prospects through strategic acquisitions and efficiency improvements. However, it also acknowledged hurdles in achieving comparable growth, particularly in its Foodservice segment and North American operations, alongside a negative cash flow. Despite these challenges, Huhtamaki remains financially stable and well-positioned to navigate the current market environment.
Efficiency Program Success
Huhtamaki’s efficiency improvement program is making significant headway, achieving total savings of €87 million with a cost to achieve of €25 million by the end of Q1 2025. This initiative underscores the company’s commitment to operational excellence and cost management, contributing positively to its financial health.
Acquisition of Selwyn Farms
The strategic acquisition of Selwyn Farms in North America, a company with approximately $20 million in sales, marks a significant step in Huhtamaki’s expansion strategy. This acquisition is expected to bolster the company’s presence in the North American market, aligning with its broader growth objectives.
Fiber Packaging Growth
Fiber Packaging emerged as a standout performer, achieving a 10% growth in comparable terms. This growth was driven by both price and volume increases, resulting in a 40% improvement in adjusted EBIT to €12.3 million, with a margin of 12.8%. This segment’s success highlights Huhtamaki’s ability to capitalize on market opportunities.
Adjusted EPS Improvement
Despite challenging market conditions, Huhtamaki reported a 7% improvement in adjusted EPS, now at 59 cents. This improvement reflects the company’s enhanced profitability and resilience in navigating a volatile economic landscape.
Strong Financial Position
Huhtamaki’s financial stability is evident with a net debt to EBITDA ratio of 2.0 and an improved gearing of 0.59. The company also boasts strong cash reserves and €404 million in unused committed facilities, underscoring its robust financial footing.
Decline in Comparable Growth
The company experienced a 2% decline in overall comparable growth, with segments like Foodservice and North America facing decreases due to soft demand and seasonality. These challenges highlight the need for strategic adjustments to counteract market fluctuations.
Soft Demand in Foodservice
The Foodservice segment faced a 4% decline in comparable growth and a decrease in EBIT, with a margin of 8.5%. Despite stable raw material input costs, the segment struggled with demand challenges, impacting its performance.
Retail Tableware Segment Challenges
In North America, the retail tableware category saw a 3% decrease in comparable growth, attributed to volume and pricing challenges. This segment’s performance underscores the competitive pressures in the market.
Negative Cash Flow
Huhtamaki reported a negative cash flow, partly due to seasonality and timing issues, with active payment of trade payables affecting the cash position. This situation calls for careful cash management in the coming quarters.
Forward-Looking Guidance
Looking ahead, Huhtamaki remains optimistic about its financial performance despite a volatile environment. The company expects to maintain stable net sales and an EBIT margin of 9.8% in the first quarter of 2025, similar to the previous year. With €87 million in efficiency savings and a strategic acquisition under its belt, Huhtamaki is poised for profitable growth, particularly in its Fiber Packaging segment.
In summary, Huhtamaki’s earnings call reflects a balanced view of strategic growth and operational challenges. While the company faces short-term hurdles in certain segments, its strong financial position and strategic initiatives provide a solid foundation for future growth. Investors and market watchers will be keen to see how Huhtamaki navigates these challenges and capitalizes on its growth opportunities in the coming quarters.