Finnish feel the pinch

Another packaging company, another set of disappointing financial results. This time it's consumer packaging specialist Huhtamaki, which has reported earnings before interest, tax and amortisation (EBITA) of €34 million in the third quarter. This compares to €53 million in the equivalent period of 2002 - a decline in profitability of some 36 per cent.

Things don't look much better when viewed over the whole year. Huhtamaki's nine-month EBITA was €114 million, compared to €171 million in 2002 - a decline of 34 per cent. The EBITA margin was 6.4 per cent of net sales in the third quarter compared to 9.6 per cent in 2002. Similarly, the nine-month EBITA margin was 7.1 per cent compared to 10 per cent in the corresponding period in 2002.

The Finnish company claims that third quarter margins were mainly impacted by sales in the Americas, where the EBITA margin declined to 2.4 per cent. The company says that margins suffered from low sales volumes and unfavorable product mix. The company's markets in Asia, Oceania and Africa reported an EBITA margin of 4.9 per cent in the quarter compared to 9.6 per cent in the previous year. It was only in Europe that margins improved.

European comparable sales were up by 3 per cent, though this figure excludes the effect of lower waste paper trading. Consumer goods had a strong quarter, with flexibles, films and ice cream reporting solid growth.

In the Americas, sales volumes increased by 2 per cent in the third quarter, reversing the negative trend of the past 18 months. The food service sector reported good growth, while consumer goods declined due to lower off-take in ice cream.

Overall sales volumes did pick up by 4 per cent in the third quarter. However, currency translations managed to depress the sales figure by 4 per cent and price/mix/other factors depressed the figure by a further 3 per cent. Reported net sales amounted to €530 million, 3 per cent below last year's period.

In contrast, the operating cash flow in the third quarter has been strong, at €59 million. This compares favourably to figure of €49 million for the same period last year. A series of actions is now in implementation in order to improve the cost base.

Huhtamaki estimates that in terms of profitability, the fourth quarter will be broadly similar to the third quarter, impacted by restructuring related non-recurring costs. Several actions have been taken to adjust the cost base and to restore profitability, but the main effects will be visible in early 2004.

Following the publication of the results, Huhtamäki is hosting a capital markets Day for investors and analysts on 18 November 2003 at its premises in Espoo, Finland. The event is designed to brief the audience on the company's business strategies and priorities.

CEO Timo Peltola is scheduled to start the proceedings by discussing industry dynamics and Huhtamaki strategy, while CFO Hannu Kottonen will analyse Huhtamaki's past financial performance and give an outline of the financial targets.

Each of the group's executive committee members will then go through the current initiatives and priorities within their respective responsibility areas.

Invitations to the event as well as enrolment details are available at Huhtamaki's website​. In addition, the materials presented in the event will shortly be available together with an audio file the day after the presentations.