Pauli has provided his comments on how Apetit is trimming its less profitable operations.
Apetit announced on Thursday that it is considering closing its frozen pizza factory in Pudasjärvi and exploring alternative models, such as contract manufacturing, for the production of frozen pizzas. We consider the winding down of low-profitability production to be a likely sensible move, as Apetit’s market share in frozen pizzas is low and the prerequisites for competitiveness are therefore weak. Discontinuing the business could have a decreasing impact on the company’s revenue but, on the other hand, a strengthening effect on profitability. At the same time, trimming operations would support investment capacity in growth areas at the core of the strategy. Furthermore, Sucros, an associate company 20% owned by Apetit, is also planning to discontinue cube and icing sugar production, among other things, to improve profitability.
The share price dropped 5% before the profit warning was released. It raises the question of whether it makes sense for anyone to invest in this outfit if insider information leaks to family members and relatives so easily and for such marginal pennies. Even now, some retail investor might have had a buy order at €14.40, which was a perfectly reasonable price based on publicly available information from previous days, and which might have been filled even without the profit warning. As a reward for the retail investor’s “cleverness,” the buy order went through, and 3 hours later, a profit warning was issued and they took a 5% hit. Of course, by paying a roughly 2% premium (a low-liquidity stock), the buy order would have gone through immediately and this would have been avoided, but then again, who would buy stocks at all if trading costs were always 2% and then some.
This is something for the Financial Supervisory Authority (Finanssivalvonta) to investigate. My own guess is that no honest actor sold the stock below €14.20 before the profit warning was released, but I can’t prove it.
Today, alongside the profit warning, another stock exchange release was issued.
The Pudasjärvi factory will be closed. However, Apetit pizzas will still be available in the future. They will be produced through contract manufacturing in Finland.
It has been decided to discontinue production at the Pudasjärvi frozen pizza factory and close the factory. Work at the frozen pizza factory will continue until approximately the end of 2026.
In the future, Apetit’s frozen pizzas will be produced through contract manufacturing in Finland. Contract manufacturing will begin during 2026. The production reorganization will not cause any delivery interruptions for the products.
The annual cost savings resulting from the closure of the Pudasjärvi frozen pizza factory will be approximately EUR 0.7 million starting from 2027. The Group’s one-off investment needs for the coming years will decrease by approximately EUR 3 million due to the factory closure. The one-off costs and write-downs related to the factory closure, impacting the operating profit for 2026, are approximately EUR 2.3 million.
What are your thoughts on the new Chairman of the Board? About twenty years ago, Seikku was leading HK’s international expansion, and now, based on the impression I got at the AGM, Apetit’s strategy is leaning towards growth and expanding further into international markets as well. In my opinion, his track record from that HKScan situation wasn’t exactly a complete success; hopefully, things go better with Apetit.
Kaisa has written a pre-earnings report on Apetit, as Apetit reports its results on Friday, April 24.
We forecast that the company’s revenue grew, driven by an acquisition, but that the operating profit fell short of the comparison period, weighed down by the loss-making nature of Foodhills. We have lowered our forecasts for the current year’s reported result after the company issued a technical profit warning yesterday related to the closure of the Pudasjärvi frozen pizza factory. Our operational forecasts thus remain unchanged, and therefore we reiterate our reduce recommendation and EUR 13.0 target price.
Apetit released a Q1 report this morning that was clearly weaker than our expectations, as the company’s result fell into a loss, missing our forecasts. Revenue grew from the comparison period but fell slightly short of our forecast due to lower sales volumes. The result was weighed down especially by the losses of Foodhills as well as cost pressures, particularly due to the rise in electricity prices. As expected, the company reiterated its recently lowered guidance in the report, but according to our preliminary assessment, the Q1 operational performance creates downward pressure on our forecasts, considering the risk posed by inflationary pressures.
Kaisa and Pauli have prepared a company report on Apetit following Q1
Apetit’s Q1 report fell short of our expectations, as the result was weighed down especially by the losses of Foodhills and cost pressures. The company reiterated its guidance, but in our assessment, the earnings outlook is weaker than before, with cost pressures overshadowing the outlook. Following the report, we cut our profitability forecasts for both the current year and the coming years. The stock’s valuation is high on an earnings basis, and visibility regarding an earnings turnaround remains hazy. Consequently, we are lowering our recommendation for Apetit to Sell (prev. Reduce) and lowering our target price to EUR 12.5 (prev. EUR 13.0) along with the forecast cuts.
