Indeed, we had a strong end to the year. The result received additional support from a couple of directions:
Many of our customers were very active in campaigning, which supported sales volumes
Some customers increased their purchases to build up their inventories before potential US tariffs
For the Fiber segment, profitability (and growth) were at an exceptionally good level. The margin clearly recovered from the weaker Q3 level, where increased raw material costs were passed on to pricing, but this happens with a certain delay.
The dividend proposal is 1.10, an increase from last year’s level of 1.05. This would be the 16th consecutive year of growth, the longest on the Helsinki Stock Exchange.
We also announced the split of the Fiber Foodservice EAO segment into two, so that the smaller but profitable Fiber business would receive more attention. This will come into effect on April 1, 2025. In external reporting, these have already been separate, so there will be no significant changes to reporting, possibly some minor fine-tuning.
In the future, we will also organize our own “earnings call” for sustainability, so that this theme receives more attention. The call will be held on March 24th; we will publish more information about it later.
Viljakainen has published a new company report on Huhtamäki.
We reiterate our Add recommendation for Huhtamäki and adjust our target price for the company to EUR 41.00 (previously EUR 40.00). Huhtamäki’s Q4 report met our expectations. In our view, the company’s earnings growth outlook is quite good given the demand showing cautious signs of recovery and the efficiency measures largely implemented. We did not make significant forecast changes after the report. Huhtamäki’s annual earnings growth of just under 10% in the coming years and a dividend yield of approximately 3% still raise the stock’s return expectation above the required rate of return.
Huhtamäki launches recyclable single-coated paperboard cups for yogurt and dairy products.
Innovative ProDairy packaging reduces the amount of plastic to less than 10% without compromising high quality standards.
Huhtamäki, a global leader in sustainable food packaging solutions, launches the recyclable single-coated ProDairy paperboard cup. The product is specifically designed for packaging yogurt and dairy products. Yogurt packaging, in particular, has very high food safety requirements. The practical and innovative ProDairy packaging solution meets these requirements, and its polymer content is lower than traditional packaging options. The product contains less than 10% plastic, enabling full recyclability in Europe.
Huhtamaki is launching a new concept, the sustainability results call, which will be held on March 24, 2025 at 3:00 PM. In this new annual call, we will discuss last year’s developments in sustainability, as well as our strategy and measures to continue this positive progress. Our Head of Sustainability and Communications Salla Ahonen will be speaking, with time for questions at the end. All information can be found here: Huhtamäki järjestää vastuullisuuden tulospuhelun
Inderes published its updated Huhtamäki analysis. The recommendation rises to BUY (previous: ADD), the target price is adjusted to EUR 38.00 (previous: EUR 41.00).
We will publish our results on April 24th, when the Annual General Meeting will also be held. We also changed the consensus estimate service provider; now the estimates are updated as analysts update them. So, no longer just one update round before the results. The consensus can be found here: Konsensusennusteet
Huhtamaki acquires Zellwin Farms Company
Huhtamaki has acquired Zellwin Farms, operating in Zellwood, Florida, USA. The debt-free value of the privately owned business is USD 18 million. The acquisition supports Huhtamaki’s growth in molded fiber packaging, especially for egg cartons and trays.
Zellwin Farms has served egg producers in the Southeastern United States from its location for over 20 years. The acquired business has an annual turnover of approximately USD 20 million. With this acquisition, Huhtamaki gains additional capacity and expertise in the field of molded fiber packaging.
Net sales remained at the previous year’s level and were EUR 1,002 million (EUR 1,004 million)
Comparable growth in net sales was -2% at group level
Reported operating profit EUR 94 million (EUR 78 million), adjusted operating profit was EUR 98 million (EUR 99 million)
Reported earnings per share EUR 0.54 (EUR 0.35), adjusted earnings per share was EUR 0.59 (EUR 0.55)
The impact of exchange rate fluctuations on the Group’s net sales was EUR 11 million and on operating profit EUR 1 million
CEO: Our financial performance in the first quarter of 2025 was at the previous year’s level despite increased market uncertainty. Customers and consumers became more cautious during the quarter due to geopolitical events.
Huhtamäki’s Q1 report was roughly as subdued as expected, as the year started with flat earnings, and the company is likely to suffer from consumer caution in the near future. However, the report did not contain any clear disappointments, and we did not make significant forecast changes after the report. Huhtamäki’s very low valuation upside, reasonable medium-term earnings growth potential, and over 3% dividend yield raise the stock’s return expectation above the required rate of return in both the short and longer term.
Quoted from the report:
Debt level is already at the lower end of the target range
Huhtamäki’s net gearing was 59% at the end of Q1 (Q1’24: 62%), and the net debt to EBITDA ratio decreased to the lower end of the target range (2x-3x) at 2.0x (Q1’24: 2.1x). Thus, we believe the company’s balance sheet is in good condition, enabling it to continue organic and inorganic growth investments.
After a busy last week, here’s a summary of the latest developments:
Q1: A stable start to the year, with figures mostly on par with last year amidst market uncertainty. Regarding US tariffs, the situation is stable, but it’s too early to draw conclusions. Our operations are mainly local, but on the other hand, we import a small amount of raw materials and finished products. Overall, we anticipate the impact on us to be neutral. I will also comment on these matters on 1.11.2024 in this thread.
We also made a small acquisition when we bought an egg packaging manufacturing business in the US. The approximately USD 20 million business supports our North America operations and will strengthen the group’s profitability and earnings per share immediately in the first year.
Our Annual General Meeting approved all proposals, and we gained two new board members. Our dividend has now grown continuously for 16 years, and it is now paid at 1.10 euros per share in two installments of 0.55 euros. You can find our new CEO’s review from the Annual General Meeting on our website: Muut sijoittajaesitykset
It’s worth watching if you’re interested in the company; Ralf explains our strategic focus areas very well.
Then, regarding management’s share purchases. Pekka’s and Ralf’s share purchases are their own decisions and are not related to remuneration or mandatory actions.
S&P raised Huhtamäki’s credit rating to BBB- (previously BB+), outlook stable. This means we made a leap to Investment Grade status. This is positive in the longer term, especially as we have significant refinancing needs in 2026-27 (see image below). However, this news was not very surprising. We received the credit rating in 2022, and even then, we were very close to reaching IG status. Last autumn, S&P raised our credit rating outlook to positive, which indicated a potential upgrade within the next 12 months.
Thanks to Kristian and Huhtamäki, which is one of the few companies that follow and react to the most important domestic discussion forums!
I second Viljakainen’s report with my own observation that Huhtamäki has been an easy company for owners for years. It’s enough to ensure that one adds at least the dividend amount each year. A good example of a company with a reasonably low dividend level suitable even for a dividend investor.
When committing to a growing dividend, there is always a risk for the investor that with a low dividend payout ratio, money is hoarded in the cash reserves, which in a better case just sits unproductive, weakening capital return figures, or in a worse case is invested “somewhere” as money burns a hole in pockets. At Huhtamäki, I see these risks as small, so I gladly leave my wealth to be managed by the company’s management even with a lower dividend payout ratio.
Recently, development has been weak, but on the other hand, Huhtamäki’s business cycle resilience and geographical diversification are at a good level, which makes these shares easy to hold and add to now that valuation multiples are lower than before.
The acquisition of an egg carton manufacturer from the United States right after the American egg crisis was a funny coincidence.
Crises come and go, but the egg has been the world’s most convenient food packaging for centuries and will continue to be..the packaging itself is quite susceptible to bumps, so packaging needs packaging, and their need is unlikely to decrease in the future…
I once owned Huhtamäki shares last century and have now returned to the fray after a break of over 20 years…the company has changed a lot since then, but what pleases me about the current Huhtamäki is its broad global presence…it makes me wonder a bit why, in recent years, analysts’ estimates for the stock price have repeatedly been quite high compared to its real value? However, the company has made good and steady profits, and it doesn’t seem like it’s stagnating; instead, there are clear desires for expansion..is the sector as a whole somehow not ‘investment-sexy’ or what’s the deal?
Thanks for the nice feedback @740_GLE, and at the same time, in response to @Ommik1
I’m happy to answer more questions here!
While we naturally don’t comment on the share price, it’s clear that the entire packaging industry hasn’t been highly valued in recent years. This becomes clear if one looks broadly at the development of valuation multiples for packaging industry players. At the same time, it should be noted that we are not entirely satisfied with our own performance, mainly regarding revenue development. The market has gone from one crisis/exceptional situation to another; corona, war, inflation and its impact on consumption, tariffs, etc. From this perspective, we are pleased that we have been able to improve our profitability (both comparable operating profit in euros and its margin). Last year, our comparable operating profit was at a record high. As a result, we have been able to continue increasing dividends, now for 16 consecutive years. The market situation was not very favorable even at the beginning of the year, but we focus on what we can influence ourselves. But even though our results have grown, it is clear that our return on capital has not reached our long-term financial goal. We are very aware of this and naturally strive to improve in this regard.
As for the “moderate” dividend payout ratio, we have not “hoarded” funds, as such, as we have net debt (gross debt - cash and cash equivalents) of 2.0x in relation to comparable EBITDA (“adj. EBITDA”). So we use funds for investments (though less last year compared to 2022-23), dividends, and debt repayment. We also do not rule out the possibility of buying back our own shares if other needs have been met. Our CEO spoke about this at the Annual General Meeting; a recording of which can be found on our website.
Regarding debt, we are indeed now at an “investment grade” level, which over time may have a cautiously positive impact on our financing costs. Regarding indebtedness, our message remains that the aforementioned ratio would move in the 2-3 range. In the packaging industry, and especially among “converters” like us, very high levels of indebtedness are typically seen. Especially in the US, several of our peers operate at levels above 3x, some above 4x. This is mainly due to the fact that our industry is typically considered a relatively stable industry, especially concerning food packaging. Of course, historical performance is no guarantee of future results.
Greetings to the thread! We bought Huhtamäki today with a 10% weighting in the Femmesalkku portfolio. More detailed justifications for the purchase are in the report, and a video is also coming soon
