Summary of financial results for 1st quarter of 2010
In the opinion of the management, the 1st quarter of 2010 was a success for
Premia Foods. Financial results compared to the same period of the previous year
improved in all important indicators. Despite the continued market recession in
Estonia and Latvia, sales in Finland and Lithuania grew considerably. Of our
operating segments, the fish and fish product segment showed significantly
better results than the previous year. This was helped by more active sales
operations as well as a substantial rise in the price of raw fish in the global
market.
To adapt to the changed market situation, in 2009 a thorough cost optimisation
programme was carried out in the Premia Foods group companies as a result of
which the annual operating expenses of the companies decreased by about 54
million kroons i.e. by about 16.5%. Of the operating expenses in the 1st quarter
of 2010 the greatest reductions were achieved in labour costs (ca 11%),
administrative expenses (ca 25%) and selling expenses (ca 8%). Due to the
improved credit market, the decreased Euribor and changed capital structure,
also the financial expenses of the company have decreased considerably (ca 28%).
Cost optimisation and changes in capital structure shall be continued in 2010
with the aim of further improving the financial position of the company.
Premia Foods is still the market leader in the ice-cream market in Estonia,
having an approximate monetary market share of 40% in the 1st quarter of 2010
according to the management's estimates (the market share in the 1st quarter of
2009 was approximately 37%), in Latvia the company continues in second position
with an approximate market share of 15% (in the 1st quarter of 2009 the
approximate market share was 12%) and in Lithuania the company is also in second
position with an approximate market share of 20% (the respective indicator for
the 1st quarter of 2009 being 19%). Premia Foods continues in leading positions
in other frozen foods segments (semi-finished products, vegetables, meat and
dough products etc) in the Baltics.
The company's monetary market share in the Finnish packed chilled fish products
retail market is approximately 25% by the management's estimates and the market
share has not changed compared to the 1st quarter of 2009, though sales revenue
has significantly increased in the HoReCa segment.
The operations of Premia Foods are seasonal, especially in the ice-cream
segment, which is to some extent balanced by the frozen products and fish
segments. Regardless of that, the 1st quarter sales revenue usually accounts for
only 20% of annual sales revenue. Second and third quarter sales revenues
account for approximately 55% and fourth quarter sales revenue for approximately
25% of annual sales revenue. In the case of ice-cream, the differences between
quarters are even greater and the corresponding number in the first quarter is
13%, in the second and third quarters summarily about 76% and in the fourth
quarter about 11%. At the same time a significant portion of annual ice-cream
production takes place in the first and second quarters of the year due to
preparations for the summer, which in turn has a negative effect on the results
of the first quarters of the years. Due to the abovementioned and the
substantial role of ice-cream in the development of the company's gross margin,
the company is historically in loss in the first and fourth quarters, the main
income is earned in the second and third quarters.
Short su mmary of results in 1st quarter of 2010 (in millions of EEK):
--------------------------------------------------------------------------------
| | 1st quarter 2010 | 1st quarter 2009 | Change |
--------------------------------------------------------------------------------
| Sales | 234,4 | 223,1 | +5,0% |
--------------------------------------------------------------------------------
| EBITDA | -0,0 | -3,1 | +98,4% |
--------------------------------------------------------------------------------
| EBIT | -14,3 | -18,9 | +24,1% |
--------------------------------------------------------------------------------
| Net profit* | -17,9 | -26,2 | +31,7% |
--------------------------------------------------------------------------------
1 EUR = 15,6466 EEK
* Net profit before non-controlling interest
SALES REVENUE
Sales revenue of Premia Foods by operating segments (in millions of EEK):
--------------------------------------------------------------------------------
| | 1st quarter 2010 | 1st quarter 2009 | Change |
--------------------------------------------------------------------------------
| Ice-cream | 29,8 | 32,8 | -9,3% |
--------------------------------------------------------------------------------
| Frozen products | 78,5 | 93,8 | -16,2% |
--------------------------------------------------------------------------------
| Fish and fish | 121,3 | 95,9 | +26,4% |
| products | | | |
--------------------------------------------------------------------------------
| Other | 4,8 | 0,6 | +693,6% |
--------------------------------------------------------------------------------
1 EUR = 15,6466 EEK
The distribution of the product portfolio of Premia Foods percentage-wise by
operating segments in 1st quarter of 2010 was as follows:
--------------------------------------------------------------------------------
| | 1st quarter 2010 | 1st quarter 2009 |
--------------------------------------------------------------------------------
| Ice-cream | 12,7% | 14,7% |
--------------------------------------------------------------------------------
| Frozen products | 33,5% | 42,0% |
--------------------------------------------------------------------------------
| Fish and fish products | 51,7% | 43,0% |
--------------------------------------------------------------------------------
| Other | 2,1% | 0,3% |
--------------------------------------------------------------------------------
Due to the recession of Baltic markets and the harsher than average winter, the
sales quantities of both ice-cream and other frozen foods decreased and at the
same time, due to more active sales operations in Finland and the raised price
of raw fish, the sales quantities of fish and fish products increased as a
result of which the proportions of the operating segments in the product
portfolio changed to some extent. These changes, though, are neither significant
nor long term in their nature.
The distribution of the sales revenue of Premia Foods by geographical markets in
1st quarter of 2010 (in million EEK):
--------------------------------------------------------------------------------
| | 1st | Share | 1st quarter | Share | Change |
| | quarter | | 2009 | | |
| | 2010 | | | | |
--------------------------------------------------------------------------------
| Finland | 109,4 | 46,7% | 78,2 | 35,1% | +39,9% |
--------------------------------------------------------------------------------
| Estonia | 67,4 | 28,8% | 79,3 | 35,5% | -15,0% |
--------------------------------------------------------------------------------
| Latvia | 36,2 | 15,4% | 43,4 | 19,5% | -16,5% |
--------------------------------------------------------------------------------
| Lithuania | 20,6 | 8,8% | 18,9 | 8,5% | +9,1% |
--------------------------------------------------------------------------------
| Other | 0,8 | 0,3% | 3,3 | 1,4% | -75,8% |
--------------------------------------------------------------------------------
Among geographical markets of Premia Foods, Finland was the least influenced by
the economic crisis and therefore as a result of more active sales operations in
the HoReCa segment as well as the Kesko retail chain, it was possible to
significantly increase sales revenue in this market. Also the increased price of
raw fish has a substantial role in the increase of sales revenue.
Among the geographical markets of Premia Foods, the Baltic markets were the most
influenced by the economic crisis and due to the harsh winter and decreased
purchasing power of the population, the sales of both ice-cream and frozen food
in these markets decreased. The effect of the crisis was especially noticeable
in Latvia, where revenue decreased in all operating segments, especially in the
HoReCa segment in which the company has through the years held a strong
position. In Lithuania, the company managed to increase sales revenue mostly due
to the more active sales operations of frozen products and also the increased
sales volume of logistics services had a positive effect on the results. At the
same time, the main sales article in Lithuania is still ice-cream and primary
sales happen in the 2nd and 3rd quarters, thus the good results of the
Lithuanian market in the 1st quarter are not of great significance for the whole
year.
Premia Foods gross profit and gross margin in 1st quarter of 2010 by segments:
--------------------------------------------------------------------------------
| | Gross profit | Gross | Gross profit | Gross |
| | 1st quarter 2010 | margin | 1st quarter 2009 | margin |
| | (million EEK) | 1st | (million EEK) | 1st |
| | | quarter | | quarter |
| | | 2010 | | 2009 |
--------------------------------------------------------------------------------
| Ice-cream | 11,8 | 33% | 13,3 | 34% |
--------------------------------------------------------------------------------
| Frozen | 17,5 | 22% | 20,2 | 22% |
| products | | | | |
--------------------------------------------------------------------------------
| Fish and | 21,6 | 15% | 21,2 | 18% |
| fish | | | | |
| products | | | | |
--------------------------------------------------------------------------------
Despite complicated economic conditions in geographical markets, the company
managed to maintain the gross margin of ice-cream and frozen food. Also the
EBITDA margins of these segments improved compared to the 1st quarter of 2009.
The gross profit of the fish products segment increased while the gross margin
decreased. The main reason for this was the substantial increase in the turnover
of the fish products segment, which enabled to earn greater profit in absolute
value despite the decreased margin. Easter falling into the first quarter (in
2009, Easter was in April) had a positive effect on the turnover of fish
products. The price of raw fish (mainly salmon and trout) has increased by 30%
compared to a year ago due to the disease spreading in Chilean fish farms, while
the end product price in the Finnish retail market as the main market has not
increased to that extent. The price increase on the global market has a negative
effect on all fish industries, Premia Foods is less influenced by the price
increase compared to the competition as 40% of the fish needed is grown by
Premia Foods itself.
FINANCIAL RESULTS
The consolidated unaudited turnover of Premia Foods increased by 5% i.e. by 11.2
million kroons (0.72 million EUR) in the 1st quarter of 2010 reaching 234.4
million kroons (14.98 million EUR). The turnover in the 1st quarter of 2009 was
223.1 million kroons (14.26 million EUR). The increase in turnover is mainly the
result of the increase in sales of frozen and chilled fish in Finland.
Due to the price increase of production inputs, the cost of goods sold increased
by 7.8% i.e. by 13.5 million kroons (0.86 million EUR) in the 1st quarter of
2010, as a result of which gross profit decreased by 4.7% i.e. by 2.3 million
kroons (0.15 million EUR). At the same time labour costs decreased by 11% i.e.
by 4.4 million kroons (0.28 million EUR) and operating expenses by about 12%
i.e. by 8 million kroons (0.51 million EUR) as a result of which loss from
operating activities decreased by 24% to 14.3 million kroons (0.92 million EUR).
Financial expenses decreased by 28% i.e. by 3.1 million kroons (0.2 million EUR)
and the company foresees their continuing decrease in the near future.
The sales and marketing expenses of Premia Foods in the 1st quarter of 2010
decreased by 7.8% i.e. by 3.9 million kroons (0.25 million EUR) compared to the
same period of the previous year. Administrative costs decreased by 24.7% i.e.
by 4.1 million kroons (0.26 million EUR).
Expense due to the fair value adjustment on fish stocks was 5.6 million kroons
(0.36 million EUR) in the first quarter of 2010. In valuating fish stocks it is
normal that in the first and last quarter an expense due to fair value
adjustment is incurred as at water temperatures below 5C additional growth of
fish stocks does not take place while the production cost of fish stocks
increases.
The net loss of Premia Foods group in the 1st quarter of 2010 decreased by 8.3
million kroons (0.53 million EUR compared to the same period of the previous
year, reaching 17.9 million kroons (1.14 million EUR). The net loss of the 1st
quarter of 2009 was 26.2 million kroons (1.67 EUR). Thus, net loss decreased by
31.6%.
ICE-CREAM
The sales revenue of ice-cream reached 29.7 million kroons (1.9 million EUR) in
the 1st quarter of 2010 decreasing by 9.3% i.e. by 3.1 million kroons (0.2
million EUR) in the last year. The EBITDA of the ice-cream segment decreased by
32.7% to 1.13 million kroons (0.07 million EUR) compared to 1.67 million kroons
(0.11 million EUR) achieved in the 1st quarter of 2009.
FROZEN PRODUCTS
The sales revenue of frozen products reached 78.5 million kroons (5.02 million
EUR) in the 1st quarter of 2010 decreasing by 16.2% i.e. by 15.2 million kroons
(0.97 million EUR) in the last year. The EBITDA of the frozen products segment
increased by 21.7% to -4.4 million kroons (-0.28 million EUR) compared to -5.6
million kroons (‑0.36 million EUR) achieved in the 1st quarter of 2009.
FISH AND FISH PRODUCTS
The sales revenue of fish and fish products reached 121.3 million kroons (7.75
million EUR) in the 1st quarter of 2010 increasing by 26.5% i.e. by 25.5 million
kroons (1.63 million EUR) in the last year. The EBITDA of the fish and fish
products segment decreased to -0.47 million kroons (-0.03 million EUR) compared
to 0.64 million kroons (0.04 million EUR) achieved in the 1st quarter of 2009.
The reason for this was the logistical reorganisation finished in Finland in
February 2010 and the one-time expense arising from it. The reorganisation of
logistics should is estimated to help save approximately 4.7 million kroons
annually.
FINANCIAL POSITION
The consolidated balance sheet total of Premia Foods as of March 31, 2010 was
976.5 million kroons (62.4 million EUR). At the end of the year 2009 the balance
sheet total of Premia Foods was 983.1 million kroons (62.8 million EUR). The
balance sheet total decreased by 0.67% during the year.
Receivables and prepayments increased by 15.2% i.e. by 20.3 million kroons (1.3
million EUR) compared to the end of 2009 reaching 154.4 million kroons (9.87
million EUR).
Inventories decreased by 2.4% i.e. by 5 million kroons (0.32 million EUR)
compared to the end of 2009 totalling at 200.2 million kroons (12.8 million
EUR).
The company's current assets increased by 1.7% reaching 392.2 million kroons
(25.1 million EUR).
Supplier payables increased by 14.3% i.e. by 18.8 million kroons (1.2 million
EUR) compared to the end of 2009 reaching 150.5 million kroons (9.6 million
EUR).
Total payables increased by 2.1% i.e. by 11.3 million kroons (0.72 million EUR)
reaching 560.3 million kroons (35.8 million EUR).
Loans and borrowings and
factoring payables form 344.4 million kroons (22 million EUR) of it decreasing
by 2.2% i.e. 7.6 million kroons (0.49 million EUR) during the quarter. The
company's net debt as of March 31, 2010 was 334.2 million kroons (21.4 million
EUR) and the ratio of net debt to total equity was 80.7%.
The total equity of AS Premia Foods as of March 31, 2010 was 414.3 million
kroons (26.48 million EUR) decreasing by 3.7% i.e. by 16 million kroons (1.03
million EUR) in the quarter.
INVESTMENTS
The investments of Premia Foods in the 1st quarter of 2010 were 2 million kroons
(0,127 million EUR). The largest investment was acquiring a 24.286% share in OÜ
GourmetHouse increasing the share Premia Foods in this company to 75.714%. The
investments in the 1st quarter of 2009 were 2,1 million kroons (0,134 million
EUR).
PERSONNEL
Premia Foods group employed 615 at the end of the 1st quarter of 2010. The
average number of employees in the group in the first quarter was 584. On March
31, 2009, the group employed 641 people.
The sum total of salaries in the 1st quarter of 2010 was 35.5 million kroons
(2.26 million EUR). In the first quarter of 2009, the sum total of salaries was
39.7 million kroons (2.54 million EUR).
Key numerical indicators of the group:
--------------------------------------------------------------------------------
| | 1st quarter 2010 | 1st quarter 2009 | Change |
--------------------------------------------------------------------------------
| Sales revenue | 234,4 | 223,1 | +5% |
| (million EEK) | | | |
--------------------------------------------------------------------------------
| Gross profit | 46,8 | 49,1 | -4,7% |
| (million EEK) | | | |
--------------------------------------------------------------------------------
| EBITDA (million | -0,0 | -3,1 | +98,4% |
| EEK) | | | |
--------------------------------------------------------------------------------
| EBIT (million EEK) | -14,3 | -18,9 | +24,1% |
--------------------------------------------------------------------------------
| Net profit (million | -17,9 | -26,2 | +31,7% |
| EEK) | | | |
--------------------------------------------------------------------------------
| Gross margin | 20% | 22% | |
--------------------------------------------------------------------------------
| EBITDA margin | 0% | -1,4% | |
--------------------------------------------------------------------------------
| EBIT margin | -6,1% | -8,5% | |
--------------------------------------------------------------------------------
| Net profit margin | -7,6% | -11,7% | |
--------------------------------------------------------------------------------
| Operating expense | 25% | 30% | |
| ratio | | | |
--------------------------------------------------------------------------------
| Equity ratio | 42,6% | 44,2% | |
--------------------------------------------------------------------------------
| Liquidity factor | 1,12 | 1,15 | -2,6% |
--------------------------------------------------------------------------------
| Debt-to-equity | 82,7% | 81,1% | |
| ratio | | | |
--------------------------------------------------------------------------------
Formulas for ratios and margins:
Gross profit = Sales revenue - cost of goods sold
EBITDA = earnings before financial items, tax, depreciation, and amortisation
EBIT = earnings before financial items and tax
Net profit/loss = profit/loss before minority share
EBITDA margin = EBITDA / Sales revenue
Gross margin = Gross profit / Sales revenue
EBIT margin = EBIT / Sales revenue
Net profit margin = Net profit / Revenue from business activities
Operating expense ratio = Operating expenses / Sales revenue
Equity ratio = Equity / Total assets
Liquidity factor = Current assets / Short term liabilities
Debt-to-equity ratio = Interest-bearing liabilities / Equity
--------------------------------------------------------------------------------
| Consolidated Statement of Financial Position | | |
--------------------------------------------------------------------------------
| | 31.03.10 | 31.03.10 | 31.12.09 | 31.12.09 |
--------------------------------------------------------------------------------
| ASSETS | EEK '000 | EUR '000 | EEK '000 | EUR '000 |
--------------------------------------------------------------------------------
| Cash and cash equivalents | 10 257 | 656 | 19 618 | 1 254 |
--------------------------------------------------------------------------------
| Receivables and prepayments | 154 405 | 9 868 | 134 070 | 8 569 |
--------------------------------------------------------------------------------
| Inventories | 200 170 | 12 793 | 205 164 | 13 112 |
--------------------------------------------------------------------------------
| Fixed assets held for sale | 27 365 | 1 749 | 26 721 | 1 708 |
--------------------------------------------------------------------------------
| Total current assets | 392 197 | 25 066 | 385 573 | 24 643 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Deferred income tax asset | 5 541 | 354 | 5 541 | 354 |
--------------------------------------------------------------------------------
| Long-term financial | 1 507 | 96 | 1 507 | 96 |
| investments | | | | |
--------------------------------------------------------------------------------
| Investment property | 32 600 | 2 084 | 32 600 | 2 084 |
--------------------------------------------------------------------------------
| Tangible fixed assets | 230 913 | 14 758 | 241 980 | 15 465 |
--------------------------------------------------------------------------------
| Intangible assets | 313 754 | 20 053 | 315 850 | 20 186 |
--------------------------------------------------------------------------------
| Total fixed assets | 584 315 | 37 345 | 597 478 | 38 186 |
--------------------------------------------------------------------------------
| TOTAL ASSETS | 976 512 | 62 411 | 983 051 | 62 828 |
--------------------------------------------------------------------------------
| LIABILITIES AND EQUITY | | | | |
--------------------------------------------------------------------------------
| Loans and borrowings | 180 258 | 11 521 | 159 556 | 10 198 |
--------------------------------------------------------------------------------
| Factoring payable | 19 074 | 1 219 | 42 754 | 2 732 |
--------------------------------------------------------------------------------
| Liabilities and prepayments | 150 512 | 9 619 | 131 686 | 8 416 |
--------------------------------------------------------------------------------
| Short-term liabilities | 349 844 | 22 359 | 333 996 | 21 346 |
--------------------------------------------------------------------------------
| Loans and borrowings | 145 097 | 9 273 | 149 731 | 9 569 |
--------------------------------------------------------------------------------
| Payable to shareholders | 17 581 | 1 124 | 17 226 | 1 101 |
--------------------------------------------------------------------------------
| Deferred income tax | 20 035 | 1 280 | 21 900 | 1 400 |
| liabilities | | | | |
--------------------------------------------------------------------------------
| Target financing | 27 702 | 1 770 | 26 085 | 1 667 |
--------------------------------------------------------------------------------
| Long-term liabilities | 210 415 | 13 448 | 214 942 | 13 737 |
--------------------------------------------------------------------------------
| Share capital | 241 829 | 15 456 | 24 183 | 1 546 |
--------------------------------------------------------------------------------
| Share premium | 181 042 | 11 571 | 398 688 | 25 481 |
--------------------------------------------------------------------------------
| Treasury shares | -3 986 | -255 | -3 986 | -255 |
--------------------------------------------------------------------------------
| Currency translation reserve | 3 428 | 219 | 1 415 | 90 |
--------------------------------------------------------------------------------
| Retained earnings | -8 050 | -514 | 10 003 | 639 |
--------------------------------------------------------------------------------
| Equity attributable to the | 414 263 | 26 476 | 430 303 | 27 501 |
| equity holders of the | | | | |
| Company | | | | |
--------------------------------------------------------------------------------
| Non-controlling interest | 1 990 | 127 | 3 810 | 244 |
--------------------------------------------------------------------------------
| Total equity | 416 253 | 26 603 | 434 113 | 27 745 |
--------------------------------------------------------------------------------
| TOTAL EQUITY AND | 976 512 | 62 411 | 983 051 | 62 828 |
| LIABITILITES | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Consolidated Statement of | 1st q | 1st q | 1st q | 1st q |
| Comprehensive Income | 2010 | 2010 | 2009 | 2009 |
--------------------------------------------------------------------------------
| | EEK '000 | EUR '000 | EEK '000 | EUR '000 |
--------------------------------------------------------------------------------
| Sales | 234 351 | 14 978 | 223 125 | 14 260 |
--------------------------------------------------------------------------------
| Cost of goods sold | -187 528 | -11 985 | -174 017 | -11 121 |
--------------------------------------------------------------------------------
| Gross profit | 46 823 | 2 993 | 49 108 | 3 139 |
--------------------------------------------------------------------------------
| Total operating expenses | -58 771 | -3 756 | -66 759 | -4 267 |
--------------------------------------------------------------------------------
| Selling and distribution | -46 354 | -2 963 | -50 266 | -3 213 |
| expenses | | | | |
--------------------------------------------------------------------------------
| Administrative expenses | -12 417 | -794 | -16 493 | -1 054 |
--------------------------------------------------------------------------------
| Other income/expense | 3 201 | 205 | -279 | -18 |
--------------------------------------------------------------------------------
| Fair value adjustment on | -5 587 | -357 | -945 | -60 |
| biological assets | | | | |
--------------------------------------------------------------------------------
| Operating profit | -14 334 | -916 | -18 875 | -1 206 |
--------------------------------------------------------------------------------
| Financial income | 2 334 | 149 | 2 977 | 190 |
--------------------------------------------------------------------------------
| Financial expense | -7 868 | -503 | -10 934 | -699 |
--------------------------------------------------------------------------------
| Profit before income tax | -19 868 | -1 270 | -26 832 | -1 715 |
--------------------------------------------------------------------------------
| Deferred income tax | 1 965 | 126 | 671 | 43 |
--------------------------------------------------------------------------------
| Net profit for the period | -17 903 | -1 144 | -26 161 | -1 672 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Foreign currency translation | 2 013 | 129 | -231 | -15 |
| differences | | | | |
--------------------------------------------------------------------------------
| Other comprehensive income | 2 013 | 129 | -231 | -15 |
| (loss) | | | | |
--------------------------------------------------------------------------------
| Total comprehensive income | -15 890 | -1 015 | -26 392 | -1 687 |
| for the period | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net loss for the period | | | | |
| attributable to: | | | | |
--------------------------------------------------------------------------------
| Owners of the Company | -18 054 | -1 154 | -26 397 | -1 687 |
--------------------------------------------------------------------------------
| Non-controlling interest | 151 | 10 | 236 | 15 |
--------------------------------------------------------------------------------
| Total net loss for the | -17 903 | -1 144 | -26 161 | -1 672 |
| period: | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total comprehensive loss | | | | |
| attributable to: | | | | |
--------------------------------------------------------------------------------
| Owners of the Company | -16 041 | -1 025 | -26 628 | -1 702 |
--------------------------------------------------------------------------------
| Non-controlling interest | 151 | 10 | 236 | 15 |
--------------------------------------------------------------------------------
| Total comprehensive loss for | -15 890 | -1 015 | -26 392 | -1 687 |
| the period | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Basic earnings per share | -1,37 | -0,09 | -21,48 | -1,37 |
--------------------------------------------------------------------------------
| Diluted earnings per share | -1,37 | -0,09 | -21,48 | -1,37 |
--------------------------------------------------------------------------------
Additional information:
Andri Avila
CFO, Member of the Management Board
+372 603 3800
andri.avila@premia.ee