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 EUR |2Q 2021|1Q 2021|4Q 2020|3Q 2020|2Q 2020|1Q 2020|4Q 2019|3Q 2019|
+--------------+-------+-------+-------+-------+-------+-------+-------+-------+
|Sales | 14.7| 14.2| 17.0| 12.7| 15.1| 18.5| 25.4| 19.3|
+--------------+-------+-------+-------+-------+-------+-------+-------+-------+
|Gross profit | 0.3| 0.9| 2.5| 1.2| 0.7| 2.0| 4.3| 2.6|
+--------------+-------+-------+-------+-------+-------+-------+-------+-------+
|EBITDA from | | | | | | | | |
|operations | -1.0| -0.5| 0.6| -0.3| -0.4| 0.0| 2.1| 0.7|
+--------------+-------+-------+-------+-------+-------+-------+-------+-------+
|EBITDA | -0.7| -0.7| 0.7| -0.5| -0.4| -0.9| 1.4| 1.5|
+--------------+-------+-------+-------+-------+-------+-------+-------+-------+
|EBIT | -1.4| -1.4| 0.0| -1.1| -1.0| -1.4| 0.7| 1.0|
+--------------+-------+-------+-------+-------+-------+-------+-------+-------+
|EBT | -1.6| -1.8| -0.1| -1.4| -1.2| -1.8| 0.6| 0.8|
+--------------+-------+-------+-------+-------+-------+-------+-------+-------+
|Net profit (- | | | | | | | | |
|loss) | -1.7| -1.8| -0.2| -1.4| -1.3| -1.7| 0.5| 0.6|
+--------------+-------+-------+-------+-------+-------+-------+-------+-------+
|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 ratio | 15.4%| 15.6%| 15.6%| 18.2%| 13.9%| 14.3%| 12.5%| 13.4%|
+--------------+-------+-------+-------+-------+-------+-------+-------+-------+
BALANCE SHEET
+---------+----------+----------+----------+----------+----------+----------+----------+
|mln EUR |30.06.2021|31.03.2021|31.12.2020|30.09.2020|30.06.2020|31.03.2020|31.12.2019|
+---------+----------+----------+----------+----------+----------+----------+----------+
|Net debt | 20.9| 21.4| 21.9 21.5| 20.7| 17.0| 17.8|
+---------+----------+----------+---------------------+----------+----------+----------+
|Equity | 15.8| 17.6| 18.6 18.5| 19.8| 21.6| 23.3|
+---------+----------+----------+---------------------+----------+----------+----------+
|Working | | | | | | |
|capital | -2.9| -5.0| -3.9 -4.4| -4.0| -2.5| -3.5|
+---------+----------+----------+---------------------+----------+----------+----------+
|Assets | 55.3| 54.5| 57.5 57.4| 57.1| 56.9| 60.5|
+---------+----------+----------+---------------------+----------+----------+----------+
|Liquidity| | | | | | |
|ratio | 0.9x| 0.8x| 0.8x 0.8x| 0.8x| 0.9x| 0.9x|
+---------+----------+----------+---------------------+----------+----------+----------+
|Equity | | | | | | |
|ratio | 28.6%| 32.4%| 32.4% 32.3%| 34.7%| 37.9%| 38.5%|
+---------+----------+----------+---------------------+----------+----------+----------+
|Gearing | | | | | | |
|ratio | 56.9%| 54.9%| 54.0% 53.7%| 51.1%| 44.0%| 43.3%|
+---------+----------+----------+---------------------+----------+----------+----------+
|Debt to | | | | | | |
|total | | | | | | |
|assets | 0.7x| 0.7x| 0.7x 0.7x| 0.7x| 0.6x| 0.6x|
+---------+----------+----------+---------------------+----------+----------+----------+
|Net debt | | | | | | |
|to EBITDA| | | | | | |
|op | -16.9x| -55.3x| 160.0x 12.8x| 7.5x| 5.3x| 5.3x|
+---------+----------+----------+---------------------+----------+----------+----------+
|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 euros | 30.06.2021 | 30.06.2020 |
+---------------------------------+------------+------------+
| ASSETS | | |
+---------------------------------+------------+------------+
| Cash and cash equivalents | 2,500 | 2,276 |
+---------------------------------+------------+------------+
| Receivables and prepayments | 3,295 | 3,578 |
+---------------------------------+------------+------------+
| Inventories | 5,691 | 7,884 |
+---------------------------------+------------+------------+
| Biological assets | 4,795 | 4,249 |
+---------------------------------+------------+------------+
| Total current assets | 16,281 | 17,987 |
+---------------------------------+------------+------------+
| | | |
+---------------------------------+------------+------------+
| Deferred income tax | 21 | 54 |
+---------------------------------+------------+------------+
| Long-term financial investments | 302 | 232 |
+---------------------------------+------------+------------+
| Tangible fixed assets | 15,236 | 16,179 |
+---------------------------------+------------+------------+
| Intangible assets | 23,457 | 22,672 |
+---------------------------------+------------+------------+
| Total non-current assets | 39,016 | 39,137 |
+---------------------------------+------------+------------+
| TOTAL ASSETS | 55,297 | 57,124 |
+---------------------------------+------------+------------+
| | | |
+---------------------------------+------------+------------+
| EQUITY AND LIABILITIES | | |
+---------------------------------+------------+------------+
| Loans and borrowings | 6,396 | 10,611 |
+---------------------------------+------------+------------+
| Payables | 12,530 | 11,132 |
+---------------------------------+------------+------------+
| Government grants | 207 | 211 |
+---------------------------------+------------+------------+
| Total current liabilities | 19,133 | 21,954 |
+---------------------------------+------------+------------+
| | | |
+---------------------------------+------------+------------+
| Loans and borrowings | 16,988 | 12,368 |
+---------------------------------+------------+------------+
| Payables | 723 | 190 |
+---------------------------------+------------+------------+
| Deferred tax liabilities | 1,868 | 1,920 |
+---------------------------------+------------+------------+
| Government grants | 746 | 873 |
+---------------------------------+------------+------------+
| Total non-current liabilities | 20,325 | 15,351 |
+---------------------------------+------------+------------+
| TOTAL LIABILITIES | 39,458 | 37,305 |
+---------------------------------+------------+------------+
| | | |
+---------------------------------+------------+------------+
| Share capital | 7,737 | 7,737 |
+---------------------------------+------------+------------+
| Share premium | 14,198 | 14,007 |
+---------------------------------+------------+------------+
| Treasury shares | -390 | -390 |
+---------------------------------+------------+------------+
| Statutory capital reserve | 51 | 51 |
+---------------------------------+------------+------------+
| Currency translation reserve | 583 | -366 |
+---------------------------------+------------+------------+
| Retained profit (-loss) | -6,682 | -1,654 |
+---------------------------------+------------+------------+
| Equity attributable to parent | 15,497 | 19,385 |
+---------------------------------+------------+------------+
| Non-controlling interest | 342 | 434 |
+---------------------------------+------------+------------+
| TOTAL EQUITY | 15,839 | 19,819 |
+---------------------------------+------------+------------+
| TOTAL EQUITY AND LIABILITIES | 55,297 | 57,124 |
+---------------------------------+------------+------------+
Consolidated Statement of Profit or Loss And Other Comprehensive Income
+--------------------+------------+------------+---------------+---------------+
|Thousand euros | | | 12 months| 12 months|
| |4Q 2020/2021|4Q 2019/2020| 2020/2021| 2019/2020|
+--------------------+------------+------------+---------------+---------------+
|Sales | 14,740| 15,101| 58,692| 78,292|
+--------------------+------------+------------+---------------+---------------+
|Cost of goods sold | -14,437| -14,412| -53,717| -68,710|
+--------------------+------------+------------+---------------+---------------+
|Gross profit | 303| 689| 4,975| 9,582|
+--------------------+------------+------------+---------------+---------------+
| | | | | |
+--------------------+------------+------------+---------------+---------------+
|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 / | | | | |
|expense | 146| 211| 309| 519|
+--------------------+------------+------------+---------------+---------------+
|Fair value | | | | |
|adjustment on | | | | |
|biological assets | 441| 239| 311| -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| -117| 949| -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
|