Fodelia - Pioneer of the Food Industry

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Pauli interviewed Fodelia’s @RiikkaWulff :slight_smile:

Topics:

00:00 Intro
00:12 Q2 performance weaker than expected
00:48 Feelia’s earnings down from the comparison period
01:45 Oikia’s earnings improvement
02:44 Outlook for the rest of the year
03:58 Opening up the Swedish market
04:53 Effects of intensifying inflation
05:51 Large investment in FodBar

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Would there be some diligent soul who could collect chronological explanations from Fodelia’s quarterly reports and financial statements over the last 5 years, as to why the results haven’t been better recently :slight_smile:. This way, we would get an overall picture of the company’s poor predictability and erratic operations.

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Amen, unsurprisingly the processes once again require unexpected investments, which supposedly eliminate investment needs in the future. :laughing: It’s been the same story for 3 out of 4 quarterly reports in the past, so it would just be more honest to admit that maintaining the concept continually requires relatively high investments so that everything doesn’t fall apart.

Sweden, on the other hand, caught me by surprise. At first, I thought it was a good thing to be able to open up a market twice the size. Previously, however, business growth in Sweden has been actively held back, and now it was raised in the report as one of the main highlights. I couldn’t help but think that they are trying to bring something positive to the table to soften an otherwise bleak quarter. At least I assumed that the strategy would be to decide to hit the gas in Sweden first and then monitor the results. Now, the results came through acquaintances, so why not highlight it then.

The stock price is down almost -9% and the share is almost at an ATL (all-time low).

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A quick query from AI:

1. Years 2021–2022: Pandemic aftermath and severe cost inflation

  • Prolonged COVID restrictions: In Fodelia’s outlook reports, management stated that the pandemic hit B2B and wholesale sales (restaurants and public kitchens) hard, which shifted growth to the end of the year. [1]
  • War in Ukraine and inflation: The war that began in 2022 dramatically increased the prices of raw materials, packaging materials, and energy. Management explained the erosion of profit margins by noting that increased costs could not be passed on to customer prices quickly enough due to long-term contracts. [1, 3]

2. Year 2023: Growth investments and inefficiency

  • Capacity expansion: Management justified the soft earnings with the extensive expansion work at the Pyhäntä factory and the ramp-up of new production lines. [1, 2]
  • Inefficiency: Initial production challenges and the startup costs of a new organizational model weighed on profitability, even though revenue itself grew. [1, 2]

3. Year 2024: Business cleanup and non-recurring items

  • Structural arrangements: The group had to sell off poorly performing segments, such as Perniön Liha, Helsingin Makkaratehdas, and the pita bread business. Management explained the weakness in reported earnings through one-off costs and write-downs caused by these divestments.

4. Year 2025: Headwinds for Oikia and Fodbar (Major profit warning)

  • Oikia’s private label issues: In a Fodelia profit warning issued in July 2025, management admitted that the profitability of the Oikia business (snacks) had collapsed. The reasons were price adjustments and loss of market share for private label products. [1, 2]
  • Fodbar’s startup costs: The joint venture Fodbar won new major contracts, but management explained the unit’s negative earnings by citing industry-typical startup costs for contracts that were heavier than anticipated.
  • Modest Foodservice market: The public and private food service market developed sluggishly, which hindered Feelia’s wholesale sales. [1, 2]

5. Year 2026: Production delays and new financing costs

  • Pyhäntä factory production investments: According to Inderes’ robo-analysis, Feelia’s growth and profitability in the latest interim reports continued to be hindered by factory development investments. [1]
  • Financing costs: The earnings reports were burdened by a capital loan granted to the Fodbar joint venture, which weakened the group’s reported net income. [, 2]
  • Geopolitical tensions: Management has also referred to indirect cost pressures on global markets caused by the conflict in the Middle East. [1]
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Here is the company report for Fodelia after Q2 from Pauli :slight_smile:

The Q2 report was weaker than expected in its headline figures and led to forecast cuts, particularly due to the growth in Feelia’s cost base. Revenue growth also fell short of expectations, which increases the risk regarding the guidance. However, we consider an improvement in growth likely in H2, and in our view, the stock’s earnings-based valuation is attractive relative to its long-term growth outlook and capital return profile. We lowered our rating to “accumulate” (previously “buy”) and the target price to 5.0 euros, following the forecast cuts and the increased guidance risk.

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What is so surprising about that? Feelia has been growing steadily all along, and you don’t get new capacity without investments.

It doesn’t look all that bad. The non-core business has been trimmed, and the focus is on a few core activities. Oikia is a bit hit-or-miss regarding growth, but the Feelia concept works well. I don’t think there are immediate plans to build a new factory in Sweden, so the risk level is moderate.

Fodbar is a bit hit-or-miss. It does, of course, support Feelia’s sales, but the strong growth should be reflected in the earnings at some point.

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Having followed Fodelia for a longer period, I must note that the narrative and arguments sound quite familiar. I no longer own the company, but it genuinely makes me wonder whether Feelia will soon have any competitive advantage left, let alone a sustainable one. I will continue to monitor the situation.

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When reading the list of largest owners, it caught my eye that Oy Lunden AB entered the lists as the 16th largest owner during August.

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Interesting find. Lunden is a company of such scale (2026 revenue EUR 119m, EBIT EUR 6.3m) that in theory, they could have the financial muscle even for a complete acquisition. The family-owned company also seems growth-oriented, although recent acquisitions have been clearly smaller in scale.

On the other hand, this could very well be purely a portfolio investment. Lunden also owns shares in HKFoods, for example.

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In addition to the previous observations, it should also be noted that Lunden’s CEO and CFO have also become private shareholders in Fodelia during the summer, in addition to their holdings through Oy Lunden Ab. Both hold the exact same stake of 5,617 shares.

As for speculation about some kind of corporate raid (nurkkaus), the stake sold by Ojala would have provided a good opportunity for it in early summer. However, that stake was sold mostly to Germany in early June.

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