Tallinn, Estonia, 2017-08-18 21:15 CEST (GLOBE NEWSWIRE) --
Overview of the economic activities
MANAGEMENT COMMENTARY
PRFoods had very exciting first half of 2017. One hand we faced the continued challenges from historically high raw material prices, affecting our profitability. On the other hand, we fundamentally changed the business of the company by adding John Ross Jr (JRJ) and Coln Valley Smokery Ltd. (CVS) to our group. PRFoods also announced the acquisition of Trio Trading (Trio) in Finland, to be approved by Extraordinary Shareholders Meeting on 28.8.2017. Consolidated pro forma sales for 2017 are expected to reach over 100 million euros this year. PRFoods can declare that it has achieved a major milestone in our strategy to develop a global leading branded premium seafood products company. JRJ and CVS have established themselves as leading international Scottish smoked salmon companies, receiving highest honours at home and abroad. JRJ carries coveted and very exclusive Royal Warrant and was awarded Queen’s Award for export in 2016.
19.07.2017 PRFoods shareholders approved the acquisition of 85% of JRJ and CVS. Financial year of JRJ and CVS ended 30.06.2017. Consolidated unaudited sales of financial year 2016-2017 were 19.7 million euros, adjusted EBITDA +2.4 million euros, net profit +1.3 million euros, net debt -0.8 million euros.
Not only have these acquisitions strengthened our brand portfolio but are expected to significantly improve our bottom-line performance going forward. Trio acquisition will enable us to further consolidate and make more profitable our previous home market Finland and also give enough capacity for export growth. We also expect CAPEX to decrease as between five production sites we have significant and immediate synergies.
PRFoods sales grew by 33.9% in Q2 reaching 13.1 mEUR. More importantly we managed to improve our gross margin in existing business by 19.7% on year on year basis to 7.5% (Q2 2016: 6.3%).
EBITDA from business operations improved by 200,000 EUR on year on year and was -0.1 mEUR in Q2 (Q2 2016: -0.3 mEUR), without one-offs related to acquisitions the improvement was 400,000 euros.
Net loss for Q2 was -0.1 mEUR compared to +0.04 mEUR in 2016. Without one-off expenses, the net profit increased by 100,000 euros on year-on-year.
While we are moderately satisfied with the improvements in Q2, we believe there is significant room to improve our performance in H2 2017, since we only saw decrease in raw material prices in the end of Q2 and price adjustments took effect in May. Cold weather in Q2 affected our fish farming business and biomass revaluation contributed only 400,000 EUR in Q2 compared to 900,000 in Q2 2016. It should be mentioned that in July we managed increase our biomass by 400 tons due to much warmer weather.
Group’s consolidated EBITDA in Q2 2017 was 340,000 euros compared to 660,000 euros in Q2 2016, mostly due to lower biomass revaluation. Without one-off expenses in Q2 related to acquisitions our Q2 EBITDA was 540,000 euros, 100,000 euros less on year on year basis.
Very high raw material prices affected our performance in first half of the year, but we are now seeing very rapid decrease in salmon raw material prices, which should contribute to better performance in H2. Rainbow trout prices have remained stable, giving our fish farming boost but on the other hand affecting production profitability, since close to half of rainbow trout needs to be sourced from 3d parties.
6 months results are weighted down by poor performance in Q1 2017. First half year sales were 23.6 mEUR, increase of 18.2% on year on year. Gross margin was 6.4% compared to 8.0% in H1 2016.
Biomass revaluation positive effect was 200,000 euros compared to 500,000 year on year. EBITDA from operations was -0.4 mEUR (6m 2016: -0.03 mEUR)
Biomass in tons was 1,414 tons at the end of first half year, increasing year on year by 15.3%. Company has biomass in value of 8.25 mEUR, increase by 2.47 mEUR or 42.6% on year on year.
Consolidated EBITDA was -220,000 euros compared to 440,000 euros in 2016. Without one-off expenses related to acquisitions in 2017, consolidated EBITDA was -10,000 euros.
Net loss for H1 was -1.0 mEUR compared to -0.4 mEUR in 2016. Without one-offs, net loss was -0.8 mEUR, decreasing by 0.3 mEUR compared to H1 2016.
We expected the performance to return to better profitability sooner, but two main factors, still high raw material in H1 and repricing our products, that happened at slower pace.
It is very positive that we have managed to reduce significantly our operating expenses. Operating expense ratio was 9.5% in Q2, compared to 12.7% during Q2 2016. First half year operating expenses ratio was 10.2% compared to 11.6% year on year. This proves that company is able to react timely and flexibly adjust to the environment of volatile cost base.
Our balance sheet remains strong. Our net debt was 1.0 mEUR compared to -1.4 mEUR in 2016. In July, we took on acquisition debt which will be reflected in Q3 reports. Our Net Debt to EBITDA is 1.6 and working capital stood at 11.5 mEUR. The increase in net debt is due to increase in biomass in fish farming at the end of the quarter due to feeding period.
The prices of raw fish have been very high in Q1 compared to historical prices of raw material, affecting both demand and profitability. Extraordinarily, the price of rainbow trout has been higher than salmon and considering that rainbow trout is our main raw material, the Q1 was most difficult for us. We forecast that in 2nd half of the year, the prices of raw material will start to drop, this is good news for us as a producer as well to our customers.
PRFoods has finished preparations for brand renewal in Finland and will launch new brand concept this fall.
PRFoods expects pro forma revenues to be in excess of 100 mEUR and normalized and consolidated EBITDA to reach 6 mEUR in 2017.
The 2nd quarter of 2017 compared to the 2nd quarter of 2016
- Unaudited consolidated revenue 13.1 million euros, increase +3.3 million euros, i.e. +33.9%.
- Gross margin 7.5%, increase +1.2 percentage points, i.e. +19.7%.
- Positive impact from revaluation of biological assets +0.4 million euros (Q2 2016: positive effect +0.9 million euros).
- EBITDA from operations -0.1 million euros, increase +0.2 million euros (without one-off effects in year 2017 EBITDA from business operations +0.1 million euros, increase +0.4 million euros).
- EBITDA +0.3 million euros, increase +0.2 million euros (without one-off effects in 2017 EBITDA +0.5 million euros, increase +0.4 million euros).
- The operating profit +0.03 million euros, decrease -0.2 million euros (without one-off effects operating profit +0.2 million euros, decrease -0.1 million euros).
- Net loss -0.1 million euros, increase -0.2 million euros (without one-off effects net profit 0.1 million euros, increase +0.04 million euros).
The 6 months of 2017 compared to the 6 months of 2016
- Unaudited consolidated revenue 23.6 million euros, increase +3.6 million euros, i.e. +18.2%.
- Gross margin 6.4%, decrease -1.6 percentage points.
- Positive impact from revaluation of biological assets +0.2 million euros (6 months 2016: positive impact of +0.5 million euros).
- EBITDA from operations -0.4 million euros, decrease -0.3 million euros (without one-off effects in year 2017 EBITDA from business operations -0.2 million euros, decrease -0.1 million euros).
- EBITDA -0.2 million euros, decrease -0.7 million euros (without one-off effects in 2017 EBITDA -0.01 million euros, decrease -0.5 million euros).
- The operating loss -0.8 million euros, decrease -0.7 million euros (without one-off effects in 2017 operating loss -0.6 million euros, increase by -0.5 million euros).
- Net loss -1.0 million euros, decrease -0.5 million euros (without one-off effects in 2017 net loss -0.8 million euros, increase -0.3 million euros).
KEY RATIOS
| Income Statement, EUR mln | Q1 2017 | Q2 2017 | 6m 2017 | Q1 2016 | Q2 2016 | 6m 2016 | 12m 2016 |
| Sales | 10.6 | 13.1 | 23.6 | 10.2 | 9.8 | 20.0 | 47.4 |
| Gross profit | 0.5 | 1.0 | 1.5 | 1.0 | 0.6 | 1.6 | 4.0 |
| EBITDA from operations | -0.3 | 0.1 | -0.2 | 0.2 | -0.3 | -0.03 | 0.8 |
| EBITDA | -0.6 | 0.3 | -0.2 | -0.2 | 0.7 | 0.4 | 2.6 |
| EBIT | -0.9 | 0.03 | -0.8 | -0.5 | 0.3 | -0.2 | 1.4 |
| EBT | -0.9 | -0.1 | -1.0 | -0.6 | 0.2 | -0.3 | 1.1 |
| Net profit (-loss) | -0.8 | -0.1 | -1.0 | -0.5 | 0.04 | -0.4 | 0.7 |
| Gross margin | 5.0% | 7.5% | 6.4% | 9.5% | 6.3% | 8.0% | 8.5% |
| Operational EBITDA margin | -2.7% | 1.0% | -0.7% | 2.1% | -2.6% | -0.2% | 1.6% |
| EBITDA margin | -5.3% | 2.6% | -0.9% | -2.2% | 6.8% | 2.2% | 5.5% |
| EBIT margin | -8.3% | 0.2% | -3.6% | -5.2% | 3.6% | -0.9% | 2.9% |
| EBT margin | -8.5% | -0.4% | -4.0% | -5.5% | 2.3% | -1.7% | 2.4% |
| Net margin | -7.9% | -1.0% | -4.1% | -4.5% | 0.4% | -2.1% | 1.5% |
| Operating expense ratio | 11.2% | 9.5% | 10.2% | 10.5% | 12.7% | 11.6% | 10.1% |
| Balance Sheet, EUR mln | 31.03.2017 | 30.06.2017 | 31.03.2016 | 30.06.2016 | 31.12.2016 |
| Net debt | 1.6 | 1.0 | -3.1 | -1.4 | 0.3 |
| Equity | 22.8 | 22.7 | 22.7 | 22.7 | 23.8 |
| Working capital | 11.5 | 11.5 | 11.0 | 11.2 | 12.4 |
| Assets | 33.3 | 33.5 | 28.6 | 29.3 | 35.1 |
| Liquidity ratio | 2.4 | 2.3 | 3.7 | 3.4 | 2.4 |
| Equity ratio | 68.5% | 67.8% | 79.4% | 77.6% | 67.9% |
| Gearing ratio | 6.4% | 4.1% | -15.7% | -6.7% | 1.2% |
| Net debt-to-EBITDA | 6.4 | 1.6 | -1.1 | -0.7 | 0.4 |
| ROE | 1.5% | 0.7% | 4.5% | 3.6% | 3.0% |
| ROA | 1.1% | 0.5% | 3.7% | 2.9% | 2.2% |
Consolidated statement of financial position
| EUR '000 | 30.06.2017 | 30.06.2016 | 31.12.2016 |
| ASSETS | |||
| Cash and cash equivalents | 4,088 | 2,632 | 4,374 |
| Receivables and prepayments | 2,694 | 2,361 | 4,056 |
| Inventories | 5,105 | 5,125 | 5,393 |
| Biological assets | 8,251 | 5,786 | 7,584 |
| Total current assets | 20,138 | 15,904 | 21,407 |
| Deferred income tax | 226 | 136 | 230 |
| Long-term financial investments | 102 | 106 | 103 |
| Tangible fixed assets | 7,019 | 7,065 | 7,285 |
| Intangible assets | 5,981 | 6,080 | 6,031 |
| Total non-current assets | 13,328 | 13,387 | 13,649 |
| TOTAL ASSETS | 33,466 | 29,291 | 35,056 |
| EQUITY AND LIABILITIES | |||
| Loans and borrowings | 4,266 | 286 | 3,716 |
| Payables | 4,243 | 4,211 | 5,131 |
| Government grants | 170 | 162 | 162 |
| Total current liabilities | 8,679 | 4,659 | 9,009 |
| Loans and borrowings | 788 | 925 | 940 |
| Deferred tax liabilities | 758 | 337 | 747 |
| Government grants | 544 | 635 | 551 |
| Total non-current liabilities | 2,090 | 1,897 | 2,238 |
| TOTAL LIABILITIES | 10,769 | 6,556 | 11,247 |
| Share capital | 7,737 | 7,737 | 7,737 |
| Share premium | 14,007 | 14,007 | 14,007 |
| Treasury shares | -390 | -206 | -256 |
| Statutory capital reserve | 48 | 12 | 12 |
| Currency translation reserve | 417 | 441 | 428 |
| Retained profit (-loss) | 878 | 744 | 1,881 |
| Equity attributable to parent | 22,697 | 22,735 | 23,809 |
| TOTAL EQUITY | 22,697 | 22,735 | 23,809 |
| TOTAL EQUITY AND LIABILITIES | 33,466 | 29,291 | 35,056 |
Consolidated statement of profit or loss and other comprehensive income
| EUR '000 | Q2 2017 | Q2 2016 | 6m 2017 | 6m 2016 | 12m 2016 |
| Sales | 13,066 | 9,761 | 23,628 | 19,996 | 47,429 |
| Cost of goods sold | -12,081 | -9,146 | -22,117 | -18,404 | -43,410 |
| Gross profit | 985 | 615 | 1,511 | 1,592 | 4,019 |
| Operating expenses | -1,237 | -1,235 | -2,416 | -2,313 | -4,785 |
| Selling and distribution expenses | -879 | -789 | -1,716 | -1,555 | -3,346 |
| Administrative expenses | -358 | -446 | -700 | -758 | -1,439 |
| Other income/expenses | -138 | 59 | -88 | 71 | -118 |
| Fair value adjustment on biological assets | 420 | 910 | 150 | 466 | 2,263 |
| Operating profit (-loss) | 30 | 349 | -843 | -184 | 1,379 |
| Financial income | -5 | 1 | 1 | 1 | 2 |
| Financial expenses | -80 | -123 | -114 | -155 | -240 |
| Profit (-loss) before tax | -55 | 227 | -956 | -338 | 1,141 |
| Income tax | -73 | -185 | -11 | -84 | -426 |
| Net profit (-loss) for the period | -128 | 42 | -967 | -422 | 715 |
| Other comprehensive income (-loss) that may subsequently be classified to profit or loss: | |||||
| Foreign currency translation differences | -11 | -24 | -11 | -30 | -43 |
| Total comprehensive income (-expense) | -139 | 18 | -978 | -452 | 672 |
| Total comprehensive income (-expense) attributable to: | |||||
| Owners of the Company | -139 | 18 | -978 | -452 | 672 |
| Total comprehensive income (-expense) for the period | -139 | 18 | -978 | -452 | 672 |
| Profit (-loss) per share (EUR) | 0.00 | 0.00 | -0.03 | -0.01 | 0.02 |
| Diluted profit (-loss) per share (EUR) | 0.00 | 0.00 | -0.03 | -0.01 | 0.02 |
Indrek Kasela
AS PRFoods
Member of the Management Board
Phone: +372 452 1470
investor@prfoods.ee
www.prfoods.ee
