PRF: Consolidated Unaudited Interim Report of AS PRFoods for 3rd quarter and 9 months of 2018/2019 financial year

19-05-2019

Overview of the economic activities

Management commentary

We remind you that since we changed our financial year, the previous financial year was 18 months long. The current financial year that began on 01.07.2018 is of standard length and ends on 30.06.2019. The comparable data presented in the report stems from comparable periods: the 3rd quarter of the current financial year i.e. the 1st quarter of 2019 is compared to the 1st quarter of 2018, and 9 months of the financial year i.e. the period from 01.07.2018 till 31.03.2019 is compared to the period from 01.07.2017 till 31.03.2018.

PRFoods’ sales in Q3 of the financial year 2018/2019 were 18.1 million euros (same period previous year 22.7 million euros) and 9-months’ sales were 64.2 million euros (72.7 million euros). Decrease of sales is largely attributable to slower sales from Estonia to Finland and a decrease of trading revenue i.e. sales of raw fish in Finland.

At the same time the decrease of gross profit was substantially less. In Q3 of 2018/2019 gross profit was 2.1 million euros compared to 2.4 million euros last year. Hence, we managed to increase gross profit margin in Q3, but not yet achieve the required sales levels. 9-months gross profit was 9.8 million euros compared to 11.4 million euros last year.

The Group’s EBITDA in Q3 was -0.5 million euros (last year 0.6 million euros). 9-months’ EBITDA was 1.4 million euros compared to 4.1 million euros last year. EBITDA was negatively affected mainly by extraordinarily weak result from the Estonian unit, which continued to some extent into Q3.

The Group’s consolidation unit’s, Saaremere Kala’s EBITDA forecast for 2018/2019 full financial year is 4.3 million euros (this does not include expenses related to the Group’s holding company PRFoods).

2018/2019 financial year’s primary activities are mainly focussed on changing the product portfolio, and to exit lower margin products, which has caused significant decrease in comparable sales. Higher gross margins do not yet compensate for lost sales in overall profit. Only in April we managed to increase sales year-on-year basis. Also, a decrease in fish prices had a negative effect on biomass valuation (compared to last year, in Q3 the difference was -0.3 million euros, on 9-months basis -0.2 million euros).

When analysing the Group’s activities on country basis, we are happy to declare that our main Finnish unit, Heimon Kala, achieved 82% higher EBITDA in Q3 than last year. Trio Trading is still making loss both in Q3 and 9-months basis, and we have since launched a radical cost cutting programme there.

The biggest decrease in the performance comes from Estonia. The loss is mainly attributable to two causes: higher personnel costs and ca 1.5 million euros lower sales to Finland. We cannot be happy with the performance of Estonian unit. At the same time, the Estonian unit has managed to increase domestic sales by 700,000 euros, mainly to retail segment and bigger ship handlers.

In the UK, we finished the transfer of production from Coln Valley to Aberdeen in April, which will cause ca 200,000 euros extra costs for termination of Coln Valley factory rental agreement in Q4. At the same time, long-term savings amount to 500,000 euro over the next 7 years.

The Group’ balance sheet continues to be good, we have 6,2 million euros cash balance (last year same time 7.1 million euros).

In Q3 we launched a significant synergy and cost cutting programme. According to plans already realized, we have reduced thanks to the group synergies, costs in Trio Trading on annual basis by 480,000 euros. In Estonia similar measures amount presumably to 360,000 euros in annual savings. The Group’s target is to reduce costs in the next financial year by at least 1 million euros.

While we cannot be content with the speed of restructurings in our production and sales units, we have achieved positive developments in our fish farming unit. We expect additional farming licences from Sweden already this year. In Estonia, the authorities have started the official process for environmental impact analysis, which we hope to complete in 2019, so we could start preparing for new fish farms in Estonia already in 2020. In case of positive developments, we can increase our farming capacity by at least 5000 tons in coming years. We have also launched a project to study the feasibility of fish farms in Paldiski, Estonia.

By the end of 2018/2019 financial year, we have started synergy and cost optimisation programmes in all of the Group companies and in the next year we aspire to achieve significantly bigger sales compared to the current year.

3rd quarter of the financial year 2018/2019 (i.e., hereinafter 1st quarter of 2019) compared to the 1st quarter of 2018:

  • Unaudited consolidated revenue 18.12 million euros, a decrease by 4.62 million euros, i.e. 20.3%.
  • Gross margin 11.7% (1Q 2018: 10.6%).
  • Negative impact from revaluation of biological assets 0.46 million euros (1Q 2018: negative impact 0.12 million euros).
  • Negative effect of one-offs on the result 0.20 million euros (1Q 2018: negative impact 0.004 million euros).
  • EBITDA from operations 0.21 million euros, a decrease by 0.49 million euros.
  • EBITDA -0.45 million euros, a decrease by 1.03 million euros (without one-off effects EBITDA -0.25 million euros, a decrease by 0.83 million euros).
  • Operating loss 1.01 million euros, a decrease by 1.07 million euros (without one-off effects operating loss 0.81 million euros, a decrease by 0.87 million euros).
  • Net loss 1.20 million euros, an increase by 0.98 million euros. (without one-off effects net loss 0.99 million euros, an increase by 0.78 million euros).

9 months of the financial year 2018/2019 compared to 9 months of 2017/2018:

  • Unaudited consolidated revenue 64.24 million euros, a decrease by 8.48 million euros, i.e. -11.7%.
  • Gross margin 15.2% (9m 2017/2018: 15.7%).
  • Negative impact from revaluation of biological assets 2.01 million euros (9m 2017/2018: negative impact 1.77 million euros).
  • Negative effect of one-offs on the result 0.23 million euros (9m 2017/2018: negative impact 0.29 million euros).
  • EBITDA from operations 3.69 million euros, a decrease by 2.51 million euros.
  • EBITDA 1.45 million euros, a decrease by 2.70 million euros (without one-off effects EBITDA 1.68 million euros, a decrease by 2.75 million euros).
  • Operating loss 0.21 million euros, a decrease by 2.78 million euros (without one-off effects operating profit 0.03 million euros, a decrease by 2.83 million euros).
  • Net loss 0.83 million euros, a decrease by 2.96 million euros (without one-off effects net loss 0.60 million euros, a decrease by 3.01 million euros).

Quarterly presentation will be published on our website latest at 24th of May.

KEY RATIOS

Income Statement, EUR mln 1Q 2019 4Q 2018 3Q 2018 2Q 2018 1Q 2018 4Q 2017 3Q 2017
Sales 18.1 26.7 19.4 22.1 22.7 32.0 18.0
Gross profit 2.1 4.7 3.0 1.8 2.4 6.6 2.5
EBITDA from operations 0.2 2.4 1.1 -0.2 0.7 4.3 1.2
EBITDA -0.5 0.8 1.1 0.3 0.6 1.6 2.0
EBIT -1.0 0.2 0.6 -0.2 0.1 1.0 1.5
EBT -1.2 0.0 0.4 -0.5 -0.2 0.8 1.3
Net profit (-loss) -1.2 0.2 0.1 -1.1 -0.2 1.2 1.1
Gross margin 11.7% 17.7% 15.2% 7.9% 10.6% 20.5% 13.6%
Operational EBITDA margin 1.1% 9.1% 5.4% -1.1% 3.1% 13.4% 6.7%
EBITDA margin -2.5% 2.9% 5.8% 1.2% 2.5% 4.9% 11.1%
EBIT margin -5.6% 0.9% 3.0% -1.1% 0.2% 3.1% 8.5%
EBT margin -6.5% 0.1% 1.8% -2.3% -0.9% 2.5% 7.3%
Net margin -6.6% 0.8% 0.7% -5.1% -1.0% 3.9% 6.2%
Operating expense ratio 14.1% 11.2% 13.5% 12.0% 10.5% 9.3% 11.1%


Balance Sheet, EUR mln 31.03.2019 31.12.2018 30.09.2018 30.06.2018 31.03.2018 31.12.2017
Net debt 18.7 20.0 21.9 18.1 16.7 16.6
Equity 23.3 24.2 24.1 23.3 24.3 24.7
Working capital -1.6 1.0 2.0 2.8 4.6 5.3
Assets 63.5 65.5 64.5 65.5 66.4 68.6
Liquidity ratio 0.9x 1.0x 1.1x 1.1x 1.2x 1.2x
Equity ratio 36.7% 37.0% 37.4% 35.6% 36.6% 36.0%
Debt to total assets 44.5% 45.2% 47.6% 43.7% 40.7% 40.1%
Gearing ratio 0.6x 0.6x 0.6x 0.6x 0.6x 0.6x
Net debt-to-EBITDA 5.4x 5.1x 3.8x 3.1x 2.6x 3.1x
ROE -8.2% -4.0% 0.1% 0.2% 8.6% 5.8%
ROA -3.0% -1.5% 0.0% 0.1% 4.1% 2.7%

Consolidated statement of financial position

EUR '000 31.03.2019 31.03.2018 30.06.2018
ASSETS      
Cash and cash equivalents 6,219 7,128 5,960
Receivables and prepayments 4,252 5,773 4,706
Inventories 11,409 13,495 12,678
Biological assets 2,894 4,560 6,498
Total current assets 24,774 30,956 29,842
       
Deferred income tax 17 214 153
Long-term financial investments 135 102 134
Tangible fixed assets 14,842 12,896 12,764
Intangible assets 23,714 22,233 22,604
Total non-current assets 38,708 35,445 35,655
TOTAL ASSETS 63,482 66,401 65,497
       
EQUITY AND LIABILITIES      
Loans and borrowings 14,598 11,615 12,562
Payables 11,563 14,521 14,254
Government grants 245 265 216
Total current liabilities 26,406 26,401 27,032
       
Loans and borrowings 10,296 12,229 11,487
Payables 388 0 0
Deferred tax liabilities 1,918 2,233 2,441
Government grants 1,198 1,216 1,226
Total non-current liabilities 13,800 15,678 15,154
TOTAL LIABILITIES 40,206 42,079 42,186
       
Share capital 7,737 7,737 7,737
Share premium 14,007 14,007 14,007
Treasury shares -390 -390 -390
Statutory capital reserve 51 48 48
Currency translation reserve 556 112 7
Retained profit (-loss) 576 2,736 1,904
Equity attributable to parent 22,537 24,250 23,313
Non-controlling interest 739 72 -2
TOTAL EQUITY 23,276 24,322 23,311
TOTAL EQUITY AND LIABILITIES 63,482 66,401 65,497

Consolidated statement of profit or loss and other comprehensive income

EUR '000 1Q 2019 1Q 2018 9m 2018/2019 9m 2017/2018 18m 2017/2018
Sales 18,120 22,740 64,242 72,722 118,499
Cost of goods sold -15,999 -20,332 -54,447 -61,299 -103,811
Gross profit 2,121 2,408 9,795 11,423 14,688
           
Operating expenses -2,561 -2,387 -8,180 -7,349 -12,423
  Selling and distribution expenses -1,775 -1,695 -5,702 -5,201 -8,841
  Administrative expenses -786 -692 -2,478 -2,148 -3,582
Other income / expense -114 152 189 266 -250
Fair value adjustment on biological assets -457 -118 -2,012 -1,773 -524
Operating profit (-loss) -1,011 55 -208 2,567 1,491
Financial income 17 2 36 5 10
Financial expenses -189 -258 -643 -671 -1,034
Profit (-loss) before tax -1,183 -201 -815 1,901 467
Income tax -13 -18 -17 223 -410
Net profit (-loss) for the period -1,196 -219 -832 2,124 57
           
Net profit (-loss) attributable to:          
Owners of the company -1,177 -227 -948 2,052 59
Non-controlling interests -19 8 116 72 -2
Total net profit (-loss) -1,196 -219 -832 2,124 57
           
Other comprehensive income (-loss) that may subsequently be classified to profit or loss:          
Foreign currency translation differences 626 -61 549 -305 -421
Total comprehensive income (-expense) -570 -280 -283 1,819 -364
           
Total comprehensive income (-expense) attributable to:          
Owners of the Company -551 -288 -399 1,747 -362
Non-controlling interests -19 8 116 72 -2
Total comprehensive income (-expense) for the period -570 -280 -283 1,819 -364
           
Profit (-loss) per share (EUR) -0.01 -0.01 -0.01 0.05 -0.01
           
Diluted profit (-loss) per share (EUR) -0.01 -0.01 -0.01 0.05 -0.01

Indrek Kasela
AS PRFoods
Member of the Management Board
Phone: +372 452 1470
investor@prfoods.ee
www.prfoods.ee

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