Overview of 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 1 July 2018 is
of standard length and ends on 30 June 2019. The comparable data presented in
the management report stems from comparable periods: the 12 months of the
financial year i.e. the period from 01 July 2018 till 30 June 2019 is compared
to the period from 01 July 2017 till 30 June 2018 since 2014/2015.
PRFoods' 2018/2019 full year sales were 85.7 million euros (last year 94.9
million euros). The reasons for decreased sales were mainly lower sales from our
Estonian factory to Finland and a decrease in trading of fresh fish in Finland.
Full year gross profit was 11.9 million euros, last year 13.2 million euros.
Full year gross margin stayed at the same level as last year - 13.9%. Hence, we
managed to keep our efficiency, the decrease of gross profit comes simply from a
decrease of sales.
The Group's EBITDA was 1.7 million euros, compared to 4.4 million euros last
year. EBITDA was mainly affected by a very weak result in Q2 and partly also in
Q3 in our Estonian unit. The main problem was over acquisition of raw material
in Estonia and Finland and taking into account that trout prices decreased, the
realization of inventory resulted in a loss. Today we have put our inventory
management on a new footing and our stock is kept at an optimum level.
2018/2019 full year EBITDA from operations was 4.0 million euros, EBITDA
including impacts of biomass revaluation and one-offs was 1.7 million euros.
2018/2019 net loss was 1.5 million euros, which was mainly triggered by decrease
of biomass fair value caused by lower volume of fish farming and trout price
drop. Additionally, decrease of sales volumes and increase of labour costs had a
negative impact on the result.
Poor results in winter period this financial year weighted down the entire year.
From Q2 we have improved our efficiency and results in all units.
In order to summarize, main areas affecting loss in profits are:
* Raw material inventory at higher prices from last year (situation fixed by
now).
* Increase in labour costs temporarily due to merger process and duplication
of functions (labour cost optimization started in summer, full effect in
place from October).
* Lower sales to Finland (due to restructuring of production management in
Estonia-Finland).
* Coln Valley relocation costs to John Ross Jr factory (at the same time we
got significant cost efficiencies, fully to be realized in 2019/2020
financial year).
* Change in price of fish affected the biological assets' i.e. fish farming
profitability. The negative impact of revaluation of biological assets was
1.1 million euros higher compared to last year 12 months. The main reason
was a drop in harvested volume by 437 tonnes. Also, price of trout decreased
by 19.9% in a year. Taking into account that 100% our farmed fish is used in
our factories, a change in fair value of biomass reflects an accounting
principal. Due to decrease of biological assets the absent additional raw
material is purchased from third parties at the same price level as
intercompany sales from our own farms to factories.
From positive side, we can remark:
* Improvement in operational cash flow.
* Finishing of large-scale investment programme in production in Estonia, UK
and in fish farms.
* Getting BRC-certificate for Saaremaa factory, allowing John Ross Jr products
to be produced also in Estonia.
* Cost cutting programme from merger, resulting in savings of more than 0.5
million euros annually.
* Onboarding new managers and specialists. From July 2019, we have new CEO for
companies in Finland and Estonia. The Group has new CFO.
* Investments were made to turn PRFoods into the region's most ecologically
conscious fish processor (new packaging lines, solar power in Estonia and
Finland)
In essence, 2018/2019 was one of the most challenging years in company's
history. Several circumstances (high inventory levels, decreased trout price,
overlapping functions in Estonia and Finland, production restructuring in
Estonia, introduction of new products) and launch of several new projects
simultaneously resulted in the Group ending the year in loss.
While the Group's speed of restructuring of production and sales units in
Estonia and Finland last year was not satisfactory, the positive development in
the Group's fish farming unit was achieved. The Group expects to receive new
farming licences in Sweden and has launched environmental surveys in three areas
in Estonia. Presumably these will be carried out in 2019, to begin new farming
activities in 2020. In case of positive scenarios, the production volume within
next years shall be increased by at least 5,000 tonnes. In addition, a
feasibility study for a fish farm in Paldiski, Estonia is launched.
For 2019/2020 financial year the Group expects sales increase by at least 5% and
EBITDA improvement of 25-30%. Also, the packaging and product development of
Heimon Kala and John Ross Jr have been totally relaunched. Fish purchases in
Finland and Estonia are made in consolidated basis, resulting in significant
savings in raw material prices.
Key Ratios of the Group
For the sake of comparability, the previous financial years have been adjusted
to 12-months long periods beginning on 1 July and ending on 30 June.
Consequently, the figures of previous years are not reconcilable with the
financial statements.
KEY RATIOS
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INCOME STATEMENT 2018/ 2019 2017/2018 2016/2017 2015/2016 2014/2015
mln EUR (unless stated
otherwise)
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Sales 85.7 94.9 51.1 48.5 46.1
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Gross profit 11.9 13.2 3.9 5.8 5.5
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EBITDA from operations 4.0 6.0 0.6 2.1 0.8
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EBITDA 1.7 4.4 2.0 2.5 0.0
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EBIT -0.5 2.3 0.7 1.3 -1.1
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EBT -1.2 1.4 0.5 1.2 -1.4
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Net profit (-loss) -1.5 1.0 0.2 1.0 -1.4
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Gross margin 13.9% 13.9% 7.7% 12.0% 11.8%
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Operational EBITDA
margin 4.7% 6.3% 1.2% 4.3% 1.7%
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EBITDA margin 2.0% 4.7% 3.8% 5.2% 0.0%
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EBIT margin -0.5% 2.5% 1.4% 2.7% -2.4%
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EBT margin -1.4% 1.5% 1.1% 2.4% -3.1%
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Net margin -1.7% 1.1% 0.4% 2.1% -3.1%
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Operating expense ratio 12.5% 10.5% 9.6% 10.8% 12.8%
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BALANCE SHEET 30.06.2019 30.06.2018 30.06.2017 30.06.2016 30.06.2015
mln EUR (unless stated
otherwise)
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Net debt 20.5 18.1 1.0 -1.4 -6.5
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Equity 21.9 23.3 22.7 22.7 33.3
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Working capital -3.1 2.8 11.5 11.2 21.7
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Assets 62.5 65.5 33.5 29.3 39.4
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Liquidity ratio 0.9x 1.1x 2.3x 3.4x 5.9x
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Equity ratio 35.0% 35.6% 67.8% 77.6% 84.6%
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Gearing ratio 48.3% 43.7% 4.1% -6.7% -24.1%
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Debt to Asset 0.7x 0.6x 0.3x 0.2x 0.2x
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Net debt-to-EBITDA from
operations 5.1x 3.0x 1.6x -0.7x -8.2x
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ROE -6.5% 4.3% 0.9% 3.6% -3.9%
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ROA -2.3% 2.0% 0.6% 2.9% -2.6%
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* before one-offs and fair value adjustment of fish stock
Indrek Kasela
AS PRFoods
Member of the Management Board
Phone: +372 452 1470
investor@prfoods.ee
www.prfoods.ee
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