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 mln1Q 20194Q 20183Q 20182Q 20181Q 20184Q 20173Q 2017
Sales18.126.719.422.122.732.018.0
Gross profit2.14.73.01.82.46.62.5
EBITDA from operations0.22.41.1-0.20.74.31.2
EBITDA-0.50.81.10.30.61.62.0
EBIT-1.00.20.6-0.20.11.01.5
EBT-1.20.00.4-0.5-0.20.81.3
Net profit (-loss) -1.20.20.1-1.1-0.21.21.1
Gross margin 11.7%17.7%15.2%7.9%10.6%20.5%13.6%
Operational EBITDA margin1.1%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 ratio14.1%11.2%13.5%12.0%10.5%9.3%11.1%


Balance Sheet, EUR mln31.03.201931.12.201830.09.201830.06.201831.03.201831.12.2017
Net debt18.720.021.918.116.716.6
Equity23.324.224.123.324.324.7
Working capital-1.61.02.02.84.65.3
Assets63.565.564.565.566.468.6
Liquidity ratio0.9x1.0x1.1x1.1x1.2x1.2x
Equity ratio 36.7%37.0%37.4%35.6%36.6%36.0%
Debt to total assets44.5%45.2%47.6%43.7%40.7%40.1%
Gearing ratio0.6x0.6x0.6x0.6x0.6x0.6x
Net debt-to-EBITDA5.4x5.1x3.8x3.1x2.6x3.1x
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 '00031.03.201931.03.201830.06.2018
ASSETS   
Cash and cash equivalents6,2197,1285,960
Receivables and prepayments4,2525,7734,706
Inventories11,40913,49512,678
Biological assets2,8944,5606,498
Total current assets24,77430,95629,842
    
Deferred income tax17214153
Long-term financial investments135102134
Tangible fixed assets14,84212,89612,764
Intangible assets23,71422,23322,604
Total non-current assets38,70835,44535,655
TOTAL ASSETS63,48266,40165,497
    
EQUITY AND LIABILITIES   
Loans and borrowings14,59811,61512,562
Payables11,56314,52114,254
Government grants245265216
Total current liabilities26,40626,40127,032
    
Loans and borrowings10,29612,22911,487
Payables38800
Deferred tax liabilities1,9182,2332,441
Government grants1,1981,2161,226
Total non-current liabilities13,80015,67815,154
TOTAL LIABILITIES40,20642,07942,186
    
Share capital7,7377,7377,737
Share premium14,00714,00714,007
Treasury shares-390-390-390
Statutory capital reserve514848
Currency translation reserve5561127
Retained profit (-loss)5762,7361,904
Equity attributable to parent22,53724,25023,313
Non-controlling interest73972-2
TOTAL EQUITY23,27624,32223,311
TOTAL EQUITY AND LIABILITIES63,48266,40165,497

Consolidated statement of profit or loss and other comprehensive income

EUR '0001Q 20191Q 20189m 2018/20199m 2017/201818m 2017/2018
Sales18,12022,74064,24272,722118,499
Cost of goods sold-15,999-20,332-54,447-61,299-103,811
Gross profit2,1212,4089,79511,42314,688
      
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-114152189266-250
Fair value adjustment on biological assets-457-118-2,012-1,773-524
Operating profit (-loss)-1,01155-2082,5671,491
Financial income17236510
Financial expenses-189-258-643-671-1,034
Profit (-loss) before tax-1,183-201-8151,901467
Income tax-13-18-17223-410
Net profit (-loss) for the period-1,196-219-8322,12457
      
Net profit (-loss) attributable to:     
Owners of the company-1,177-227-9482,05259
Non-controlling interests-19811672-2
Total net profit (-loss)-1,196-219-8322,12457
      
Other comprehensive income (-loss) that may subsequently be classified to profit or loss:     
Foreign currency translation differences626-61549-305-421
Total comprehensive income (-expense)-570-280-2831,819-364
      
Total comprehensive income (-expense) attributable to:     
Owners of the Company-551-288-3991,747-362
Non-controlling interests-19811672-2
Total comprehensive income (-expense) for the period-570-280-2831,819-364
      
Profit (-loss) per share (EUR)-0.01-0.01-0.010.05-0.01
      
Diluted profit (-loss) per share (EUR)-0.01-0.01-0.010.05-0.01

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

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