Consolidated Unaudited Interim Report of AS PRFoods for the 4nd quarter and 12 months of 2020/2021 financial year

Tallinn, ESTONIA


MANAGEMENT COMMENTARY

The most difficult year in the history of the group is over. We were attacked from three fronts: from one side, corona crises, caused a situation of drastic drop in prices and demand for fish products, causing drop in gross margin and sales. Secondly, we entered the crisis with very high leverage due to recent acquisitions and were forced by banks to reduce aggressively our loan portfolio. Third, our now-ex management in Finnish unit did not want and could not react to market changes, whereby we accumulated problems there with long-term effect. Dealing with all three criseses simulteanously increased significantly our loss, as we were forced to take decisions, that would have not happened under normal circumstances.

As a result of all this group’s sales decreased by 25% to 58,7 million euros ( 78,7 million euros yoy).

As end result we had our first historical EBITDA loss of -1,24 million euros (2,75 million euros yoy) and net loss of -5,1 million euros (-1,9 million euros yoy).

Q4 EBITDA was largely impacted by the fact that raw material prices suddenly increased due to loosening of coroan restrictions, while our Finnish market product end prices were fixed in winter, when raw material prices were significantly lower. This caused a situation in last quarter, where we sold some of our products below COGS. In order to end such practice , we had to terminate our local CEO and notified clients of termination of such contracts.

If to find anything positiive, then group’s cash flow from operations was positiive by 2 million euros and total cashflow over the periood improved by 0.51 million euros. We also reduced our net debt and reduced significantly short term liabilities of the company. Also our fish farming unit posted a better result and was the backbone of our Scandinavian operations. Our biggest problem is that Estonian government is delaying decision to allow sea farming in Estonia, due to which we could not earn significant additional income from last periood.

Our Scottish division was very brave, and even though their sales and net profit decreased by 30%,  John Ross Jr still managed to post 1,4 million euros EBITDA. I would also like to thank our Estonian unit, that despite the disappreance of HoReCa, managed to grow each month sales in retail significantly.

The number of employees decreased by ca 10% on annual basis, but obviously the cost base of Finnish unit did not respond to decrease in sales and margins. In summary, we can say that root cause of our problems is Finnish business division.

PRFoodsi action plan to overcome the crisis is: 

  1. Decrease overall debt level through positiive EBITDA and strengthening of equity base.
  2. Completely restructure Finnish division, either through disposal or closure of loss-making business units. Eliminate totally all low margin products form Finnish sales.
  3. Increase retail sales in UK, EU markets, including home market Estonia.
  4. Group’strategic focus is on fish farming, as divisjon that has been profitable every year. Target is to reach by 2023 fish farming võlume of 10,000 tons, giving additional 45-50 million euros in sales.

Group’s financial position is not easy. At the same time, we must remember that 11 million euros bonds have been issued solely for refinancing of John Ross Jr. Acquisition and John Ross Jr results have not been impacted so severly, their operational cash flow is very strong and they pay regularly dividends to parent company, therefore we find their leverage to be acceptable. Fish farming requires long term capital for fish feed and this is under works.

Last year we were forced to reduce significantly working capital financing through banks, which put strain on company’s finances. We have reduced significantly working capital needs in operations, also through lower inventory. Most important is to restore profitability in the environment of lower sales and restructure loss-making business units.

Having cut our teeth now for second year in corona crisis, we know that it is not sustainable to rely on outside help and all tough decisions need to be taken sooner than later. For our advantage the fish market has started much stronger this year and is more predictable and demand for our products is growing. The only objective of new financial year is profit and everything that blocks our road to profitabilty must be eliminated.

KEY RATIOS

INCOME STATEMENT 

mln EUR2Q 20211Q 20214Q 20203Q 20202Q 20201Q 20204Q 20193Q 2019
Sales14.714.217.012.715.118.525.419.3
Gross profit0.30.92.51.20.72.04.32.6
EBITDA from operations-1.0-0.50.6-0.3-0.40.02.10.7
EBITDA-0.7-0.70.7-0.5-0.4-0.91.41.5
EBIT-1.4-1.40.0-1.1-1.0-1.40.71.0
EBT-1.6-1.8-0.1-1.4-1.2-1.80.60.8
Net profit (-loss) -1.7-1.8-0.2-1.4-1.3-1.70.50.6
Gross margin 2.1%6.6%14.9%9.4%4.6%10.8%17.0%13.4%
Operational EBITDA margin-7.0%-3.5%3.4%-2.6%-2.6%0.1%8.4%3.8%
EBITDA margin-4.8%-5.3%4.1%-3.8%-2.6%-4.6%5.3%7.6%
EBIT margin-9.3%-9.9%0.2%-8.8%-6.4%-7.8%2.9%5.0%
EBT margin-10.8%-12.5%-0.6%-11.3%-8.1%-9.8%2.2%3.9%
Net margin -11.6%-12.5%-1.2%-11.3%-8.4%-9.2%2.0%2.9%
Operating expense ratio15.4%15.6%15.6%18.2%13.9%14.3%12.5%13.4%

BALANCE SHEET

mln EUR30.06.202131.03.202131.12.202030.09.202030.06.202031.03.202031.12.2019
Net debt20.921.421.921.520.717.017.8
Equity15.817.618.618.519.821.623.3
Working capital-2.9-5.0-3.9-4.4-4.0-2.5-3.5
Assets55.354.557.557.457.156.960.5
Liquidity ratio0.9x0.8x0.8x0.8x0.8x0.9x0.9x
Equity ratio 28.6%32.4%32.4%32.3%34.7%37.9%38.5%
Gearing ratio56.9%54.9%54.0%53.7%51.1%44.0%43.3%
Debt to total assets0.7x0.7x0.7x0.7x0.7x0.6x0.6x
Net debt to EBITDA op-16.9x-55.3x160.0x12.8x7.5x5.3x5.3x
ROE-28.7%-23.8%-21.9%-7.0%-9.1%-5.7%-3.2%
ROA-9.1%-8.4%-7.8%-2.4%-3.2%-2.1%-1.2%


Consolidated Statement of Financial Position

Thousand euros30.06.202130.06.2020
ASSETS  
Cash and cash equivalents2,5002,276
Receivables and prepayments3,2953,578
Inventories5,6917,884
Biological assets4,7954,249
Total current assets16,28117,987
   
Deferred income tax2154
Long-term financial investments302232
Tangible fixed assets15,23616,179
Intangible assets23,45722,672
Total non-current assets39,01639,137
TOTAL ASSETS55,29757,124
   
EQUITY AND LIABILITIES  
Loans and borrowings6,39610,611
Payables12,53011,132
Government grants207211
Total current liabilities19,13321,954
   
Loans and borrowings16,98812,368
Payables723190
Deferred tax liabilities1,8681,920
Government grants746873
Total non-current liabilities20,32515,351
TOTAL LIABILITIES39,45837,305
   
Share capital7,7377,737
Share premium14,19814,007
Treasury shares-390-390
Statutory capital reserve5151
Currency translation reserve583-366
Retained profit (-loss)-6,682-1,654
Equity attributable to parent15,49719,385
Non-controlling interest342434
TOTAL EQUITY15,83919,819
TOTAL EQUITY AND LIABILITIES55,29757,124

 

Consolidated Statement of Profit or Loss And Other Comprehensive Income

Thousand euros4Q 2020/20214Q 2019/202012 months 2020/202112 months 2019/2020
Sales14,74015,10158,69278,292
Cost of goods sold-14,437-14,412-53,717-68,710
Gross profit3036894,9759,582
     
Operating expenses-2,264-2,107-9,468-10,509
Selling and distribution expenses-1,499-1,387-6,389-7,060
Administrative expenses-765-720-3,079-3,449
Other income / expense146211309519
Fair value adjustment on biological assets441239311-291
Operating profit (loss)-1,374-968-3,873-699
Financial income/-expenses-223-254-1,031-1,062
Profit (loss) before tax-1,597-1,222-4,904-1,761
Income tax-110-47-216-134
Net profit (loss) for the period-1,707-1,269-5,120-1,895
     
Net profit (loss) attributable to:    
Owners of the company-1,697-1,254-5,028-1,718
Non-controlling interests-10-15-92-177
Total net profit (loss)-1,707-1,269-5,120-1,895
     
Other omprehensive income (loss) that may subsequently be classified to profit or loss:    
Foreign currency translation differences-100-117949-152
Total comprehensive income (expense)-1,807-1,386-4,171-2,047
     
Total comprehensive income (expense) attributable to:    
Owners of the Company-1,797-1,371-4,079-1,870
Non-controlling interests-10-15-92-177
Total comprehensive income (expense) for the period-1,807-1,386-4,171-2,047
     
Profit (loss) per share (EUR)-0.04-0.03-0.13-0.04
     
Diluted profit (loss) per share (EUR)-0.04-0.03-0.13-0.04

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

Attachment



Attachments

PRF_interim_12m2020_2021