Huhtamäki Oyj

Good morning all and welcome to Huhtamäki's Investor Call for the first quarter of 2025. My name is Christian Tammela, VP of Investor Relations. Today, we have a presentation from our President and CEO, Ralf K. Wunderlich, and followed by our CFO, Tuomas Geust. After that, we will have time for Q&A as always. So with further ado, handing over to Ralf.

Thank you so much, Christian, and good morning to all of you. Very happy to be here again and report on our first quarter results. We're also happy to say that we had a stable performance in a very volatile environment. The uncertainty in the environment clearly increased during the quarter. However, our financial performance was stable and at prior years level. We are also proud to say that our program to improve efficiency is proceeding well. and we are now at total savings of 87 million, with a cost to achieve of 25 million by the end of quarter one, hence really tracking well. We have also taken actions in our three focus areas, which I alluded to during our last call. Let's turn over and look at the tariff situation for Ruta Marki. Look, overall, the situation is evolving every day and it is way too early to draw conclusions. We are well positioned to manage the situation. Our business is mostly local and it's local for local with both the supply side and the demand side being local. So we are well positioned from that perspective to deal with the situation. We are monitoring and we are adapting to changes which might come. We talked about our strategy last time and I am happy to confirm that we still see it very much intact and we are supporting it with those three areas, our focus areas, and those will help us to drive our profitable growth forward. Those are number one, profitable growth supported by all levers, organic and inorganic. Second one is about disciplined capital allocation. And the third one is all around increased accountability and hence also increasing the speed of execution. Let me dive into a bit of detail on those. And I'm going to start on the right side with accountability and speed of execution. We are happy to report that over the last quarter, we worked on a number of those areas. We already on day one announced that we are splitting food service and fibre into two different businesses. They have very different focus areas and now they can manage those in a much more dedicated fashion. We also announced that we have now a global procurement organization. That procurement organization will make us even more competitive and will help us to drive for profitable growth. And then we are empowering the business segments in a number of different areas. We already announced that sustainability, especially operations and product related sustainability will be moved to our segments who can then implement much faster. The very same is true and already announced for our business development and strategy function. They will be close to their businesses, they will know what's happening in the markets and hence they will be able to support the businesses and the segments to act and react much faster. We are now also planning to bring human resources operations as well as local IT support towards the segments to strengthen them even more. Now the center and the functions in the center, which will remain in the center, are all about very specific expertise or center of expertise, governance, coordination, and all areas where we will create value by having those functions combined and coordinated in the center, namely tax, treasury, and procurement. We talked about disciplined capital allocation last time, and this remains a very important part of what we are doing. We are scrutinizing all CapEx. We are making sure that we are deploying it behind the most value creative projects. And then finally, we want to continue our profitable growth agenda. It's an environment which is very difficult and uncertain, and still we have an agenda of organic growth and inorganic growth, and we need to use both levers. On the organic side, we need to be even closer to our customers, continuously improve our relationships, and deliver on the basics. It's all around the basics. on time, in full, in spec, all the time, hassle-free for our customers that will help us to grow organically. And then we have the inorganic side. And it's important for us to find projects which obviously need to fit nicely into our strategy, are financially sound, offer us clear synergy opportunities, are in segments in which we are strong already with strong teams, And we are looking at board-ons, which are in-products and technologies which we know well, with management teams which fit nicely into our culture. I'm very happy to announce that we were able to sign and close, in fact, late last evening, an acquisition of Selwyn Farms in North America. It's a one-factory, privately-owned company. of sales with sales of approximately 20 million US dollars. It's in the egg business and flat egg and cartons egg packaging business, which fits really nicely to what we see as a growth driver for our North American business going forward. So it's a nice addition to what we think is a very clear strategic move for us. Let me turn to our business performance. From a group perspective, we see that a number of our key performance indicators are exactly in line with what we delivered in Q1 last year. So net sales in line, Although comparable growth was slightly decreasing by 2%, adjusted EBIT spot on last year with 98.5% and also our EBIT margin with 9.8% exactly in line with last year. We are proud to say that our adjusted EPS, however, did improve by 7% and stands now at 59 cents. We reduced our capital expenditure by 6.5 million and still are able to support our business growth really nicely. Some details about our segments. Let me start with food service. The soft demand in food service continues also in the quarter and we saw a decline of comparable growth of 4% in the quarter. That resulted also in a decline in EBIT. However, we were able to compensate a part of that decline with our efficiency measures and our cost out measures. So we are a couple of million, 2 million down on last year with a margin of 8.5%. It's important to state that in food service, our raw material input costs remained at the same levels as last year. Let me turn to North America. And as anticipated in the last quarter's result, we saw a very strong pull into Q4. And that pull of Q4 was, of course, then seen in the first couple of months of the quarter in 2025, as well as seasonality of our Easter holidays, which this year are much later, end of April, so in Q2. So both of that didn't help our top line and our comparable growth in North America did decrease by 3%, driven by both volume as well as pricing. I'd like to state, though, that two out of our three categories were at last year's level, namely food service as well as consumer goods. The sales decrease, which I was just talking about, really happened in the retail tableware category. Also in North America, raw material input costs remained at previous year's level. Our margin in North America for the quarter is 11.7% and we are showing an adjusted EBIT of 40.5 million euros. Let me turn now to flexible packaging. In flexible packaging, our focus on margin improvement continued and yielded in good results. We were able to really work on our cost out as well as on our overall product mix quite a lot. And we saw that even though that our comparable growth declined by 2% in our adjusted EBIT, which significantly improved by 5 million. And it stands now at 26.6 million with a margin of 8.1%. As in North America and food service, also in flexible packaging, raw material input costs remained at last year's level. And last but not least, fiber packaging. Fiber packaging continued its very strong performance. It did grow comparable growth by 10%, both driven by price and volume, and was able to bring this to the bottom line. So adjusted EBIT improved by 40%, now at 12.3 million with a margin of 12.8%. Here we were able to... with the input costs, raw material input costs, which did increase to pass on those additional costs to our customers. I'd like to give and hand over now to Thomas Goist, our CFO, to walk you through our financial review.

Thank you, Ralf. Happy to take over at this point and continue where Ralph stopped. The heading here says a lot, EPS driven by lower financing costs. So as Ralph said, we managed well in this volatile market to defend both our top line and our adjusted EBIT on previous year's level, reminding you of the fact that quarter one is normally one of the quarters which have variations between years. So that's also to be accounted for when we look at some of the numbers which I will be presenting. So the EBIT margin, we remain on previous year's level with a slightly improved EBITDA margin. And looking at the parameters contributing to that one, we are still getting the biggest benefits in our gross margin from value add. So managing the cost levels well, and obviously for industrial company, managing cost levels are significantly important when the top line is still moderately soft. Looking at the other lines of this more detailed, P&L, you can see that we have benefits from FX. The benefits from FX participate both to the top line and to the EBIT. And then on top of that one, we can conclude that our net financial items are contributing positively to the EPS. So it's really that part which is contributing positively as the adjusted tax rate remains on previous year's level You might remember that last year in Q1, we had a negative impact in financing cost from the devaluating Egyptian pound, which is not in the like for like numbers yet. Looking at the currencies, currencies are obviously a theme of interest for a company which has a lot of business in the US. The US dollar has been quite fluctuating over the last weeks, as we all know, going from up to weakening to 1.15 roughly. And you can see that compared to where we reported in the Q1, where the average rate was at a From our point of view, a good level of 105, closing rate 108. But as I said, the predictability of the US dollar is quite difficult at this point of time. Other currencies are mainly trending negatively in the first quarter, especially when looking at the closing rates. Happy to state that we remain on a good leverage level, so at a net debt EBITDA of two. So our deleveraging down to the two level stays firm. Our gearing is at 0.59, so also there we have improved over the last year significantly. And then if we think about the cash position, we have strong cash in the balance sheet and unused committed facilities of 404. So we are well positioned in volatile times. Our net debt is down to 1.252 billion. The loan maturities are on a healthy level. We are obviously, as you have seen, actively renewing our debt structure in order to maintain the maturity at a good level. Our average maturity is now at 2.9 years, when it was at the end of Q1 2025 at 2.6. Maturing facilities coming up, for instance, should shine here in Q2. The cash flow was a disappointment. It's a negative one, but there are some excuses to it as well, partly the seasonality in Q1, where the Easter this year in North America is in April, end of April, sorry, so really at the back end of the time. But clearly, looking at the working capital here, we are We are fat on both inventory and then you can see that we have been active in paying our trade payables. So cash flow is and remains a focus area and we are actively working to turn the trend positive. But I would say seasonality or timing is the main element here. As Ralph alluded to, our capital expenditure is on a lower level than previous year. We are not shying away from doing capital in the areas where we find the returns and where we believe the timing is right, but we are quite strict on going ahead of the curve when it comes to capital. Looking at the balance sheet, the balance sheet movements are to a great extent FX related beyond what I already said about the working capital. So main movements here coming from FX revaluations. And then looking at the return on investment, where we have been ticking upwards over the last year. We are now at 12, we were at 12.1 at the back end of last year, but as you can see, we are improving significantly versus previous year. Reminding you of the fact that it's quite a lagging indicator, so coming through slowly. When we turn to the long-term ambition, the long-term ambition, as you might recall, was launched in 2023. Here we have the story of compatible net sales remaining below our target ambition, so a minus two in the quarter for compatible net sales growth. uh adjust the debit margin uh slightly below uh our range as you recall we ended up for the first time on a full year basis last year at 10.1 and And then looking at the return on investments, there we are still 1% point below our lower corridor of the ambition. Net debt debit, as stated, remains on the low end of the corridor. And then today we will have the AGM deciding on the payout of the dividend. On the short-term risks and uncertainties, there is a small update with regards to the trade tariffs, including them in the risk profile. Beyond that, our outlook on short-term risks and uncertainties remain unchanged. And with that one, I would open up for questions and answers.