Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Huhtamaki Oyj (STU:HUKI, Financial) reported a 2% improvement in adjusted EBIT compared to the previous year, driven by cost-saving measures.
- The company has successfully implemented a cost efficiency program, generating savings above the linear trajectory, with EUR18 million saved year-to-date.
- North American sales showed a 3% growth, indicating a recovery in demand, particularly in the food service sector.
- The fiber packaging segment experienced volume growth, especially in egg packaging, supported by additional capacity installations.
- Huhtamaki Oyj (STU:HUKI) has reduced capital expenditures by 30% year-to-date, supporting a solid cash flow position.
Negative Points
- Overall sales decreased by 1% in the third quarter, with food service packaging demand remaining soft due to high inflation.
- The company faces continued pricing pressure due to lower demand volumes and competitive market conditions.
- The flexible packaging segment showed significant variations in demand across different regions, with India and Turkey underperforming.
- The fiber packaging segment's profitability was temporarily subdued due to a 50% increase in recycled paper prices.
- Currency fluctuations, particularly with the Indian Rupee and Brazilian Real, negatively impacted financial results.
Q & A Highlights
Q: Is there any plan to control administration costs to improve margins?
A: Thomas Geust, CFO, mentioned that while administration costs are a focus area, the key to margin improvement is volume growth. Cost management is ongoing, but the administration line is influenced by various factors, including incentive programs.
Q: How should we think about future CapEx given the current lower volumes?
A: Charles Heaulme, CEO, explained that due to subdued demand, CapEx will be lower than previous years. They expect to invest between EUR200 million and EUR300 million annually, balancing capacity and innovation needs.
Q: Can we expect a margin improvement in 2025 and 2026?
A: Charles Heaulme stated that margin improvement is linked to volume growth. If volumes recover as expected, a 50 basis point margin improvement could be a reasonable assumption for 2025.
Q: What are the sources of margin improvement in the flexible segment?
A: Charles Heaulme noted that while India faces pricing pressure, Europe and Asia are performing well. The focus is on selling better and reducing costs to improve margins.
Q: How is the flexible strategy progressing, particularly with new products?
A: Charles Heaulme highlighted three pillars: recyclable mono-material structures, turnaround in underperforming areas like India and Turkey, and continuous improvement in cost efficiency and commercial practices.
Q: How is the North American market performing, and are you gaining market share?
A: Charles Heaulme confirmed that Huhtamaki is gaining market share with smaller brands in North America, benefiting from a market restart and strong commercial relationships.
Q: What is the impact of promotional activities on volume and pricing pressure?
A: Charles Heaulme emphasized that cost efficiency aims to enhance competitiveness, which, combined with promotional activities, should help offset pricing pressure and drive volume growth.
Q: How is the cost savings program progressing, and should we expect savings to continue above the linear trajectory?
A: Thomas Geust indicated that while the program is currently above the linear trajectory, future savings will depend on ongoing negotiations and will be detailed in the next quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
