Altia Plc Half-Year Report January-June 2020: Strong result in an exceptional market environment
Altia Plc Half-Year Report January-June 2020: Strong result in an exceptional market environment
This release is a summary of Altia Plc's Half-Year Report January-March 2020. The complete report is attached to this release and is also available on the company website at www.altiagroup.com/investors.
January–June 2020 compared to January–June 2019
Reported net sales decreased by 9.5% to EUR 149.3 (165.0) million
In constant currencies, net sales decreased by 8.4%
The Finland & Exports segment’s net sales were EUR 53.0 (59.6) million
The Scandinavia segment’s net sales were EUR 50.1 (50.7) million; in constant currencies net sales grew by 2.5%
Altia Industrial’s net sales were EUR 46.1 (54.7) million
Comparable EBITDA was EUR 18.8 (13.7) million, 12.6% (8.3%) of net sales
Reported EBITDA was EUR 18.0 (13.5) million, 12.1% (8.2%) of net sales
Net cash flow from operating activities was EUR 10.3 (-4.0) million
Net debt / comparable EBITDA (rolling 12 months) was 0.6 (2.0)
April–June 2020 compared to April–June 2019
Reported net sales were EUR 81.0 (91.2) million
In constant currencies, net sales decreased by 10.3% compared to previous year
Comparable EBITDA was EUR 13.2 (9.4) million, 16.3% (10.4%) of net sales
Reported EBITDA was EUR 12.6 (9.2) million, 15.5% (10.1%) of net sales
Guidance remains suspended due to the prolonged uncertainties related to COVID-19. A new guidance will be provided if the impacts of COVID-19 on the operating environment and business conditions can be assessed in a reliable manner.
|Q2 20||Q2 19||H1 20||H1 19||2019|
|Net sales, EUR million||81.0||91.2||149.3||165.0||359.6|
|Comparable EBITDA, EUR million||13.2||9.4||18.8||13.7||44.8|
|% of net sales||16.3||10.4||12.6||8.3||12.4|
|EBITDA, EUR million||12.6||9.2||18.0||13.5||43.1|
|Comparable operating result, EUR million||8.9||5.0||9.9||4.7||26.8|
|% of net sales||10.9||5.5||6.7||2.9||7.5|
|Operating result, EUR million||8.2||4.8||9.2||4.5||25.1|
|Result for the period, EUR million||6.1||3.6||7.5||4.0||18.4|
|Earnings per share, EUR||0.17||0.10||0.21||0.11||0.51|
|Net cash flow from operating activities, EUR million||25.7||24.7||10.3||-4.0||52.6|
|Net debt / comparable EBITDA, rolling 12 months||0.6||2.0||0.6||2.0||0.6|
|Average number of personnel||659||705||651||701||682|
This half-year report has been prepared in accordance with the International Financial Reporting Standards (IFRS) and IAS 34 Interim Financial Reporting as approved by the EU. The figures in the report are unaudited. A reconciliation of alternative key ratios to IFRS figures is presented in appendix 1 on page 32.
CEO Pekka Tennilä:
“Considering the exceptional conditions, I am proud to say that we are managing the COVID-19 crisis extremely well, and Altia has shown resilience. During the second quarter of 2020, COVID-19 impacted our business significantly and it brought uncertainties to our operating environment. We reacted quickly to keep our operations running efficiently and stayed active in the sales channels that remained open, while securing the safety of our employees. At the same time, we made an important contribution to society by meeting the high demand for denatured ethanol for hand sanitisers. To mitigate the impacts of COVID-19 we implemented remote and part-time work as well as temporary lay-offs and cost savings measures. I want to express my sincere thanks to all our skilled employees for their commitment and hard work during these challenging times.
In Q2, the important sales channels – travel retail, on-trade and exports - were closed and our beverage net sales decreased, but not in the extent that we expected in the Q1 report. With consumers shifting purchases to the monopolies, the volume growth in the monopolies has been at an all-time high. Our performance in the monopoly channel has been strong led by double-digit net sales growth in spirits in all monopoly countries. Net sales in the Finland & Exports segment declined due to sales in travel retail, exports and on-trade being close to zero. However, in Finland, sales growth in the monopoly and grocery trade channels, and our focus on revenue management increased total beverage sales and improved profitability. In the Scandinavia segment, the reported net sales decline was driven by lower sales in Denmark due to the new business model and the closing of on-trade. In Sweden, our overall sales grew with strong growth in spirits sales, supported by market share growth in the strategically important gin, rum and liqueur categories. In Norway, performance was strong across all categories and we have continued to gain market share.
In Altia Industrial, thanks to a strong commitment by our employees and a clear focus on production continuity, our operations have run without major disruptions during the crisis. In industrial products, our performance was solid, driven by strong ethanol sales partly due to the increased demand for hand sanitisers. On the contract manufacturing side, we have seen a decline in volumes due to COVID-19. We are, however, extremely pleased about the renewal of the Finlandia Vodka production agreement with Brown-Forman. The renewed agreement runs until 2035 and continues a long-lasting strategic collaboration between Altia and Brown-Forman, which began already in 2000.
In the first half of the year, our profitability improved significantly from the previous year and all segments improved in a tough environment. Altia Industrial’s strong result improvement is due to the normalised barley price and the high volumes of technical ethanol. In both consumer segments, strong sales growth in the monopoly channel, revenue management and cost savings measures implemented throughout the organisation have supported positive profitability development. Comparable Group EBITDA improved by 37% or EUR 5.1 million to EUR 18.8 (13.7) million.
Altia’s financial position strengthened further during the first six months with a solid positive development of net cash flow from operations. The improvement of EBITDA and the positive development of net working capital contributed to the development and net cash flow from operations totalled EUR 10.3 (-4.0) million at the end of the period. Also, the liquidity position of the Group has remained strong throughout the period.
Altia is a forerunner in sustainability in our industry. For us, sustainability is both a strategic priority and a key success factor in business. In April, our sustainability work was recognised with a Gold Medal in the EcoVadis Corporate Social Responsibility rating. More than 55 000 companies were rated by EcoVadis and Altia was ranked among the top 2%. We got positive feedback for our advanced management system in environmental topics.
Preliminary forecasts for the barley harvest have been published and based on these the barley crop this year is likely to be smaller than last year, but in line with the long-term average crop.
Guidance for the rest of the year remains suspended due to the prolonged uncertainties related to COVID-19. New guidance will be provided if the impacts of COVID-19 on the operating environment and business conditions can be assessed in a reliable manner.”
Outlook for 2020
The development of the Group’s business operations and profitability are affected by the competitive environment, the overall economic outlook and changes in alcohol taxation and regulation. Uncertainty related to changes in consumer buying behaviour and consumer demand continues. In addition, overall fluctuations of direct product costs affect the Group’s profitability.
COVID-19 update: Uncertainty in the operating environment is high. The recovery of the market depends on the level and extent of governmental restrictions and recommendations on travelling, movement and social distancing. The pace of recovery is difficult to estimate and it is affected by changes in consumer behaviour and is expected to vary across sales channels.
There are substantial seasonal fluctuations in the consumption of alcoholic beverages impacting the net sales and cash flow of Altia. The company typically generates large amounts of its revenue and cash flow during the fourth quarter of the year, whereas the first quarter of the year is significantly lower. In addition, excise taxes related to the high season at the end of the year are paid in January, resulting in large cash outflows at the beginning of the year.
Guidance for 2020 remains suspended due the prolonged uncertainties related to COVID-19. New guidance will be provided if the impacts of COVID-19 on the operating environment and business conditions can be assessed in a reliable manner.
The restrictions and instructions from governments and health authorities have a significant impact on Altia’s operating environment. The visibility for the rest of the year continues to be poor and forecasting is difficult. Uncertainty in the economy remains at a high level and the risk of an economic slowdown is high.
The recovery of the consumer beverage sales depends on the level and extent of governmental restrictions and recommendations on travelling, movement and social distancing. The pace of recovery is difficult to estimate and it is affected by changes in consumer behaviour and is expected to vary across sales channels: on-trade channels could be expected to recover faster than travel retail.
Previous guidance published on 13 February 2020:
The continued decline in market volumes in Finland puts pressure on profitability growth. The uncertainties in global travelling impacts border trade and travel retail regionally and in Asia. Guidance assumes a normal barley price level following the 2020 harvest. Industrial services are impacted by phasing of volumes between the years.
The comparable EBITDA is expected to be at the same level as or higher than in 2019 (2019: EUR 44.8 million).
Financial calendar for 2020
Altia will publish the Business Review for January-September 2020 on 6 November.
Helsinki, 18 August 2020
Board of Directors
Pekka Tennilä, CEO
Niklas Nylander, CFO
Analysts and investors: Tua Stenius-Örnhjelm, Investor Relations, tel. +358 40 7488864
Media: Petra Gräsbeck, Corporate Communications, tel. +358 40 767 0867
The H1 results presentation will be held on 19 August 2020 at 11:00 am EET as a Microsoft Teams Meeting. We recommend that participants join the event using the online meeting option. Call-in option is also available.
Option A: Online meeting
Access meeting online here: Altia's H1 results presentation
Option B: Call-in
Call into the meeting about 5 minutes earlier at the below numbers.
FI: +358 9 2310 6678
SE: +46 8 502 428 54
UK: +44 20 3443 9579
US: +1 917-781-4622
Conference ID: 308 898 979#
We recommend that questions to the management are sent through the Teams chat.
Presentation material and on-demand recording
The presentation material will be shared in the online meeting and it can be downloaded on Altia’s website at: www.altiagroup.com/investors<u style="text-decoration:underline">. A recording of the event will be available later at the same address.
Nasdaq Helsinki Ltd