Are you quoting the right post? As far as I know, I didn’t speak about the management’s special success, but rather praised the chosen strategy. Ultimately, the strategy is decided by the board.
To elaborate a bit more on my view regarding the success of the strategic shift, one doesn’t have to go back many years to a time when Apetit’s earnings performance was being shaken by the grain trade. The company’s equity was in a downward trend and the strong balance sheet was under threat due to a generous dividend policy. The stock had been declining for a long time and was trading at 7–8 euros at its lowest. My investment decision at the time was based on the idea that the company is more than the sum of its parts. My views were that the company should sell its grain business, Sucros, and its oilseed business, and focus on food solutions where added value is increased, or alternatively, carry out a corporate restructuring for that part as well. I can’t be anything but satisfied with the execution of the strategy: the grain trade has been sold, and increasing the added value of food solutions along with international growth has been actively pursued. I’m also glad that Sucros wasn’t sold when its results were poor. Now would be a better time for such an arrangement.
The oilseed business and Sucros probably won’t be able to maintain this level of profitability this year, but the strong upward trend in Food Solutions seems to be compensating for it. Let’s revisit this as the year progresses!
I wrote in the morning report about Sucros and why we believe Apetit will likely hold onto its 20% stake in the coming years as well. Sucros’s impact on earnings is significant for Apetit as a whole, at least in the current market situation, so I think investors should familiarize themselves well with this business too. In the long term, the earnings impact will decrease, however, if our forecasts materialize as the market normalizes.
Pauli has been a busy boy and written a Comprehensive report on Apetit. This is, of course, available for everyone to read, as are all comprehensive reports.
In the big picture, Apetit’s positive earnings development is a result of focusing on the most competitive segments, where active investments have also been made to achieve earnings growth. Recently, the market has also been particularly favorable for vegetable oil and sugar refining, which is why we consider a slight downward normalization of earnings levels likely over the coming years. In the long term, the company can continue moderate and capital-intensive earnings growth.
00:00 Introduction
00:17 Unprofitable parts pruned from business operations
01:25 Positive development seen in recent years
02:27 Impact of market prices on earnings
04:26 Visibility into market price development
05:02 Investments in growth
07:10 Product portfolio supported by megatrends
08:07 Ambitious targets
09:33 Stock valuation
Juho Toratti has written a piece on Apetit, which can be read in a few minutes.
For 2024, Apetit guided that its operating profit will remain at the level of the previous financial year. However, thanks to its strong balance sheet, the company has room to increase its dividend per share in 2024 as well. The dividend can be expected to grow, as long as nothing unexpected happens and Apetit is able to deliver a result in line with its guidance.
I attended the Annual General Meeting. The amendment to the Articles of Association passed this time without much drama. Otherwise, the AGM proceeded in a fairly harmonious spirit, meaning the proposals from the board and shareholders were swiftly approved. The CEO also presented some future outlooks. I was perhaps a bit surprised that the targets for the strategy period ending in 2025 were considered likely to be achieved. The profit target is quite ambitious, considering that half of the current result comes from Sucros and sugar prices are in a sharp decline. Where does Apetit intend to suddenly pull a four-million-euro improvement in operating profit from if sugar prices and production return to normal levels? And at the same time, purchasing power is constantly decreasing and people are switching to the cheapest possible food products.
Here are Pauli’s preview comments as Apetit releases its Q1 results on Friday.
Apetit reports its Q1 results on Friday, April 26. We expect the result to have weakened slightly, but to have nonetheless remained at a good level. There is likely no need to make changes to the guidance at least yet after Q1, even though our full-year forecast is slightly weaker than the company’s earnings guidance.
Apetit performed surprisingly well, here are analyst Pauli’s comments.
Apetit reported its Q1 interim report this morning. Operating profit was clearly higher than our forecast, as cost levels in Oilseed Products in particular have fallen faster relative to sales prices. Apetit has also succeeded in improving production efficiency. Overall, we find the general outlook of the report to be quite positive.
Here is the fresh company report following the Q1 results.
Following the strong Q1 results, achieving the 2024 guidance looks likely, and a guidance upgrade is also possible. If the profitability of the Oilseed Products segment remains at its current level, there would be at least 10% upside potential in the valuation in addition to the annual dividend. However, we expect profitability to decline in the medium term at the latest, in which case the expected return would mainly consist of a 5% dividend yield. In our view, the risk-reward ratio is currently favorable for the investor.
Pauli has provided an interesting overview of this year’s harvest outlook and how it affects different companies.
Naturally, Apetit was also included in the review.
We reviewed the 2024 harvest outlook and highlighted the most significant company-specific impacts on domestic listed food companies. Overall, the cost environment in the food industry has stabilized, and in some cases, raw material prices have even seen a slight decrease, though this is partly explained by modest demand. Changes in grain sowing areas are relatively moderate this summer. Higher rainfall in June compared to last year supports the harvest outlook compared to the dry previous summer.
Pauli’s preview comments as Apetit releases its Q2 results on Thursday.
Apetit reports its Q2 interim report on Thursday morning, August 15th. We expect both revenue and operating profit to decline relative to the strong comparison period. In our view, the company still has good prospects to reach or even exceed its 2024 guidance, which indicates a stable earnings level. We expected earnings performance to weaken already in Q1, but at that time, the company was even able to significantly improve its profitability.
Here is the post-Q2 company report on Apetit by Pauli.
Apetit’s revenue and profitability fell short of expectations in Q2, although this was partly due to the timing of deliveries between quarters. However, the weakness in Q2 reinforced our view of a downward trend in earnings towards 2025. With the declining earnings level, we no longer see the expected return as attractive, so we lower our recommendation to Reduce (prev. Accumulate) and our target price to EUR 14.0 (prev. EUR 15.5).
In this comment, Pauli discusses the harvest outlook for Apetit and Raisio.
The harvest outlook for the summer of 2024 is favorable from the perspective of the food processors we follow. The availability of key raw materials, such as oats for Raisio and peas and oilseeds for Apetit, is now higher than in recent years, which should reduce upward pressure on production costs. In the food industry, gross margins are typically quite low, meaning that cost developments impact earnings levels especially in the short term.
Pauli’s preview comments for Apetit’s Q3 interim report release on Friday, Oct 25.
We estimate that the Group’s operating profit decreased slightly, driven by the normalization of the refining margin for Oilseed Products, but the possibility of a positive surprise cannot be ruled out either. The summer 2024 harvest is favorable for several of Apetit’s key raw materials, which particularly supports the growth outlook for Food Solutions over the next 12 months.
Apetit reported its Q3 interim report this morning, which was stronger in terms of profitability than our forecasts. Both segments exceeded our forecasts. From a long-term perspective, the clear earnings improvement in the Food Solutions segment is noteworthy, driven particularly by volume growth in retail.
Apetit’s Q3 profitability clearly exceeded our expectations, but in our view, one should not draw too strong conclusions from a single quarter regarding the long-term direction. Exceeding the current year’s guidance is possible thanks to the strong January–September performance, even though we estimate that the Q4 result will remain weak. The profit level may face downward pressure in the near future, partly due to increased raw material prices for oilseed products, which is why we believe the earnings-based valuation for 2025 does not offer significant upside for the stock.
Pauli Lohi has made a review of the food sector, so this should interest everyone interested in Apetit.
The food sector’s profitability development has been very favorable in 2024, which is explained by both slowing inflation and the completion of company-specific investments and successful efficiency measures. When examining concrete earnings drivers, such as raw material costs, demand, or company-specific factors, we believe the industry still has the opportunity to further improve its earnings level in 2025. However, our forecasts are quite stable, as, relative to historical performance, results are already at a good level, and the industry is susceptible to various surprising cost shocks arising from the operating environment. However, we currently view the industry’s valuation level as exceptionally attractive relative to its risk level.
@henrielo has conducted an analysis of Apetit and interviewed its management.
Apetit’s balance sheet situation is, as in recent years, very strong. The company was almost net debt-free in September. Interest-bearing liabilities were slightly higher than cash reserves because the company paid off all food business purchase liabilities in September due to the implementation of the ERP (Enterprise Resource Planning) system and, on the other hand, has made raw material purchases proactively.
Management has assessed that the market is moving in a direction where this is advantageous for the company and possible within the limits of cash reserves.
Note.
IR-window is a channel for SalkunRakentaja’s and Sijoittaja.fi’s corporate partners for background and analytical articles, as well as other interesting investor information. The article is part of a commercial collaboration with the company. The article does not contain investment recommendations.
It’s interesting to see how companies like Apetit develop. Apparently, a plant-based diet is practically better than a diet containing animal products by all health-related metrics. Almost all nutrition science experts recommend a plant-based diet if one wants to live as long as possible.
Below is a clip with a somewhat sensational thumbnail, where a 100-year-old nutrition expert briefly talks about reducing meat and animal products starting from the 10:37 mark.
This channel has a lot of material that reviews various nutrition-related studies with good humor. Practically, in almost all situations, the plant-based option is healthier than meat, chicken, or fish.
So, a plant-based diet is not just greenwashing and left-wing enforced propaganda; there are fact-based reasons for it.
I recommend these topics to investors because living to old age is a very effective way to get rich if your money is invested in funds and stocks
