HKFoods as an investment

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HKFoods Oyj:n osavuosikatsaus Q1/2025: HKFoodsin kannattavuus kasvoi selvästi tammi-maaliskuussa 2025 - Inderes

Paulin ennusteen yli hilpaistiin käyttökatteen ja liiketuloksen osalta, mutta liikevaihdossa jäätiin alle.

HKFoodsin tuloksissa tärkeintä on kuitenkin seurata velan kehitystä ja Q1:n aikana velkaisuus kasvoi noin 10 miljoonalla. Tästä n. puolet selittyy investoinneilla, joita tehtiin niin Euraan, Vantaalle kuin Puolaankin.

Ennen osarin tuloa olivat jo ilmoittaneet Puolan liiketoiminnan strategisesta tarkastelusta. Jos tarkastelu päättyisi myyntiin, olisi yhtiöllä ehkäpä varaa maksaa hybridi syyskuussa pois.

Nyt JVK:n kovenanttirajaan (3,0) oli matkaa käyttökatteen ja nettovelan suhteen ollessa 2,6. Tästä toki jaetaan vielä pääomanpalautukset, mutta jos kesän grillikausi sujuu oletettuun tapaan, niin raja pysyisi riittävän kaukana käsittääkseni.

Onko @Pauli_Lohi sinulla (tai jollain muulla) käsitystä myytyjen toimintojen lisäkauppahintojen tuloutumisista tai voisiko näitä kysellä yhtiöltä? Ylimääräiset miljoonat maistuisi mukavasti, josko sitten jatkossa rahoitusta saisi järkevämmin ehdoin.

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Tässä on Paulin kommentit aamun tuloksesta. :slight_smile:

HKFoodsin Q1-katsaus oli mielestämme positiivissävytteinen yhtiön onnistuessa parantamaan liiketulosta odotuksiamme enemmän. Alkuvuoden heikko kysyntä vähittäiskaupassa sekä pääsiäisen ajoittuminen myöhemmäksi painoivat liikevaihtoa, minkä valossa tulostason parantaminen oli erityisen hyvä saavutus.

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Pauli on tehnyt uuden yhtiöraportin Q1:n jälkeen. :slight_smile:

Kannattavuuden parantuminen jatkui Q1:llä hieman odotettua vahvemmin, vaikka alkuvuosi oli markkinaolosuhteiden ja pääsiäisen ajoituksen suhteen haastava. Luottamuksemme tuloskäänteen kestävyyteen on vahvistunut. Näemme yhtiöllä myös mahdollisuuden jatkaa kannattavuuden parantamista lähemmäs kilpailijoiden tasoa, jolloin tuotto-odotus voisi nousta korkeaksikin. Taseen liikkumavara on edelleen rajallinen ja rahoituskulut korkeat, mitkä painavat osaltaan vaakakupissa. Nostamme suosituksen tasolle lisää (aik. vähennä) ja tavoitehinnan 1,30 euroon (aik. 1,00 €).

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OP:n suositus Osta ja tavoitehinta 1,40€ .

HKFoods myös nousi niiden Osakeidealistalle.

https://www.op-mediapankki.fi/l/vtPzXXZQ8DXk

OP nosti HKFoodsin osakeideoihinsa: Kurssi ei hinnoittele tuloskäännettä – Listalla neljä Helsingin pörssin osaketta | Arvopaperi

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Op ollut edes pikkusen paremmin kartalla tämän kanssa. Itse ihmetellyt alhaisia tavoitehintoja.

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Pauli on tehnyt uuden yhtiöraportin HK:sta. :slight_smile:

Voimakas kurssinousu viimeisen kuukauden aikana on kääntänyt osakkeen tuotto-riskisuhteen mielestämme heikoksi. Odotamme HKFoodsin kannattavuuskäänteen jatkuvan, mutta suoraviivaisimpien tehostamistoimien jälkeen tuloskasvusta tulee hitaampaa ja pääomaintensiivisempää. Nykyinen osakekurssi hinnoittelee yhtiölle toimialan kontekstissa varsin hyvää, jo noin 10 %:n sijoitetun pääoman tuottoa. Laskemme suosituksen tasolle vähennä (aik. lisää) tavoitehinnalla 1,50 euroa (aik. 1,30 €).

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Tässä on SalkunRakentajan juttu HKFoodista, ei hirveästi pitäisi tulla uutta, jos Inderesin materiaaleja on lukenut. :slight_smile:

Alaotsikot:

  1. HKFoods on karsinut rönsyjään
  2. Panostus valmisruokiin
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Kaisa’s comments stating that after the future assessment, it has been decided that the Polish unit will continue as part of the group.

HKFoods announced on Thursday that it had completed the future assessment concerning its Polish production unit. The unit will continue as part of the group, and thus the business will not be divested. The outcome has no impact on our forecasts, and therefore, in our view, the impact on the share value remains neutral.

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On the other hand, it could mean that there is no need to sell the Polish production unit for HKFoods’ liquidity to remain at a sufficient level. “The profit-making unit is in good condition,” so it would be foolish to sell it unless absolutely necessary.

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In food industry company acquisitions, balance sheet-based valuation (P/B) often carries more weight than in other industries. Buyers also compare the purchase price to how much it would cost to build a similar operation with organic capex investment. Of course, other factors are also involved, but this is an oversimplification. For example, a rather good compensation was received for the loss-making Baltic operations when they were sold, even though the profit level had been around zero for a long time.

One possible scenario would therefore be that potential buyers have not been willing to pay enough above book value for the Polish bacon factory, in which case the earnings-based valuation multiples might have remained low from HKFoods’ perspective in a potential deal.

Factors related to HKFoods’ own balance sheet have also likely weighed in the consideration.

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Lohen Pauli is anticipating, as HooKoo will publish its results next Wednesday. :slight_smile:

We expect the company to be able to continue efficiency-driven earnings growth, supported by, among other things, automation investments completed last year. The operating environment in Q2 has been somewhat challenging due to, for example, strikes and a cool early summer.

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Here are Pauli’s comments on HKFoods’ Q2 result. :slight_smile:

HKFoods reported its Q2 interim review today. Adjusted operating profit grew from the comparison period, although it remained slightly below our estimate. The operating environment in Q2 was challenging from both a demand and cost perspective. The company, as expected, reiterated its upward-trending earnings guidance for 2025.

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I was pondering the repayment of the hybrid loan. It is an expensive loan, but if one also considers the EUR 90 million bond maturing on June 17, 2027, a somewhat trickier short-to-medium-term cash flow struggle emerges.

In the Q2/2024 interim report, the bond is stated on page 7 as follows:

“The three-year bond matures on June 17, 2027, and pays a variable interest rate, which is the three-month Euribor rate plus a 7.5 percent margin.”

I made a simple comparison of the five-year interest expenses for these two loans for the period July 1, 2025 - June 30, 2030, with the following scenarios:

  1. The hybrid loan is repaid this year, and the bond would need to be refinanced for another two years on June 17, 2027.
  2. The hybrid loan is not repaid (thus avoiding a negative cash flow of EUR 25.9 million), and efforts are made to accumulate cash to repay the bond on June 17, 2027, without the need for refinancing. Interest on the hybrid loan would still be paid for five years.

I use only the margin portion as the interest expense for the bond, so this expense will be smaller in this calculation than the 3-month Euribor portion, and I assume the margin for the refinanced bond to be the same as the current one. I assume the hybrid loan’s interest rate will remain at 16%.

Interest expenses for Scenario 1 for the period July 1, 2025 - June 30, 2030:

Bond (5*0.075*90 = 33.75 million) + Hybrid (4.1 million) = 37.85 million in interest expenses for the five-year period

Interest expenses for Scenario 2 for the period July 1, 2025 - June 30, 2030:

Hybrid (5*0.16*25.9 = 20.72 million) + Bond (2*0.075*90 = 13.5 million) = 34.22 million in interest expenses for the five-year period

In this comparison, the five-year interest expenses for these two loans are approximately EUR 3.6 million lower in the scenario where the hybrid loan is kept at a 16% interest rate for another five years, and the bond is repaid without refinancing on June 17, 2027.

For the bond to be fully repaid without refinancing, based on my gut feeling, there should be at least EUR 100 million in cash on the maturity date. This is because, in my opinion, a base cash reserve of EUR 10 million would be good to have after the loan repayment. At the end of Q2/2025, there was EUR 46.7 million in cash, so EUR 53.3 million would remain to be accumulated to reach that EUR 100 million. Including the current quarter, there are a total of 7 full quarters before Q2/2027, which means that cash should be accumulated by an average of approximately EUR 7.62 million per quarter to reach the EUR 100 million target.

Well, the situation with the bond is probably not so black and white that it must either be paid entirely from cash or entirely refinanced. It can certainly be paid partly from cash and then partly refinanced.

From this calculation, I got the idea that HK is probably now calculating quite precisely how to proceed with this hybrid loan and bond. With the hybrid loan’s interest expense being EUR 4.1 million per year, the saved interest expenses have compensated for the negative cash flow caused by the repayment in 6.3 years.

So, if the hybrid loan is not repaid this year, my educated guess is that it stems from this bond. Of course, I could be wrong. I strive for diligence in my calculations, but there might be an error.

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Here is a company report from Pauli right after Q2. :slight_smile:

HKFoods achieved a clear and expected improvement in results in a challenging operating environment. According to our assessment, the faster-than-expected strengthening of the balance sheet in H1 could enable the redemption of the hybrid bond already in September 2025, which could have a moderately positive impact on the share’s risk and value creation profile. We raise our recommendation to add (previously reduce) and the target price to 1.7 euros (previously 1.5 €).

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This hybrid loan was now rearranged. My own thought was confirmed that the convertible bond (jvk) maturing in 2027 now weighs quite heavily in financing reviews. And no wonder, as it will incur more interest costs in euros than even this current hybrid loan, and additionally, it is on the liabilities side of the balance sheet (vs. hybrid on the equity side). At the very least, they probably want to reduce the size of that convertible bond when it matures, and in the best case, pay it off entirely.

I noticed the following about the size of the new hybrid loan:

When the current hybrid loan is redeemed, 25.9 million + the last interest payment of 4.1 million will be paid. These total 30 million. From the Baltic sale, approximately 10 million should be received in the third quarter, and when the new hybrid of approximately 20 million is added to this, these also total approximately 30 million. It could, of course, be a coincidence, but I personally suspect that this is probably not a coincidence.

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Link to this morning’s stock exchange release: Inside information: HKFoods considers issuing a new hybrid bond and redeeming the hybrid bond issued in 2018 Sisäpiiritieto: HKFoods harkitsee uuden hybridilainan liikkeeseenlaskua ja vuonna 2018 liikkeeseen lasketun hybridilainan lunastusta | Kauppalehti

That didn’t go optimally, and profit distribution started too early from a capital optimization perspective, but as long as the interest rate of that hybrid bond is significantly lower than the current 16%, this is a solid step towards more sustainable financing costs and a stronger balance sheet.

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Here are Pauli’s comments regarding the latest release. :slight_smile:

Replacing the old hybrid with a new one helps HKFoods simultaneously cut its financing costs and maintain good solvency. This could enable more favorable terms for a larger senior bond, which will be refinanced in H2 2026. However, from the perspective of short-term financing costs, the measure is slightly more expensive than our current forecasts. We will review our financing cost forecasts in the near future. However, we see operational earnings development as the most crucial driver for the equity story.

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Here are Pauli’s comments on the confirmed terms and details of the hybrid. :slight_smile:

The interest rate of the new hybrid bond was confirmed and, as we expected, it is even slightly more favorable compared to the company’s senior bond. The new hybrid and the redemption of the old one will lower the company’s total financing costs. We do not foresee the financing operation causing significant pressure for change on earnings per share forecasts.

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A 2.4 million annual reduction in financing costs is fine by me. It could have gone better, but considering the company’s history, it went reasonably well.

Despite all the detours (capital returns, etc.), the company’s story is progressing in the right direction, and the results are developing favorably from the owner’s perspective.

Moderate valuation multiples (seen on KL’s website on 13.8.) prompted me to make a small addition:
image

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Here are Pauli’s comments on HKFoods’ updated targets announced yesterday. :slight_smile:

The financial targets were updated to be slightly more ambitious than before, reflecting the company’s successful structural change in recent years, including a turnaround in profitability and a strengthening of the balance sheet. Operationally, the strategy is based on a familiar continuum from previous years, emphasizing, among other things, growth in poultry products and products that make everyday life easier, such as ready meals and snacks.