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Consolidated Unaudited Interim Report of AS PRFoods for the 1nd quarter and 3 months of 2021/2022 financial year

·8 min read

MANAGEMENT COMMENTARY

Q1 had many things we can be satisfied with- our sales grew by 11.5% and group net loss decreased by 50%. Unfortunately, there are many things, that unearthed massive management mistakes in Finnish unit. All PRFoods current problems stem from management mistakes made in 2020-2021. As of toda, we have completed 100% the change of management and key people in Finland, that we started in summer and decision to close lossmaking Kokkola factory. These steps build base for renewal of profitability in 2022.

Corona crises speed up the unearthing of weaknesses in Finnish unit, and unfortunately the previous management did not want to acknowledge their mistakes or correct them. The proof that we are on right track with right people who joined us in fall this year, is the fact as of October we back to being profitable also in Finland: Heimon Kala Oy October EBITDA was 28 thousand euros and better by 270 thousand euros on YoY basis. Finnish unit caused liquidity crisis, which we are correcting with increased performance of our farming unit and cashflow released from biomass harvesting.

Thanks to the changes made to product portfolio and production by new Finnish management, we are out of all non-profitable products in Finland and have secured price and sales increases for next year in all categories. Considering the turbulent times in Finland, we aim to provide investors with regular updates from this unit.

Very well performed our UK unit, who despite some one-offs, fulfilled its EBITDA target in the sum of 172 thousand euros. Estonian EBITDA was still in minus by 150 thousand euros in Q1 due to loss-making Finnish sales.

The decline in Finnish management continued in summer, where instead of cutting loss-making production, they increased it, resulting in 880 thousand euros EBITDA loss.

Fish farming is making very good results in current quarter thanks to increased harvest volume and prices. Fish farming could even post a better EBITDA, but we delayed our Swedish harvest until Q1 2022 due to smaller biomass increase in hot summer. Considering that fresh fish prices are higher in winter, this decision has positive economic impact. At the same time this will decrease our cash flow from biomass in current quarter by 1.5 million euros, which will be deferred until Q1 2022.

We have followed our previously announced plan to emerge from this crisis:

  1. Decrease our bank loans: cash flow from financing was -1.5 million euros in Q1

  2. Restructure totally Finnish unit, including selling possibly or closing units or closing loss making units. Eliminating form Finnish sales all low margin products: target achieved by end of 2021.

  3. Increas retail sales in UK, EU and other domestic markets: target achieved in all markets, except Finland.

  4. Group’s strategic focus is on fish farming, as area that has been constantly profitable. Group’s target ist o achieve 10 thousand tons of biomass by 2023, which should give group sales of 40-50 million euros: Swedish farms should contribute already additional 1.500-1.700 tons of biomass by fall 2022.

Group’s financial position is not easy. At the same time, we must remember that 11 million euros bonds have been issued solely for refinancing of John Ross Jr. Acquisition and John Ross Jr results have not been impacted so severly, their operational cash flow is very strong and they pay regularly dividends to parent company, therefore we find their leverage to be acceptable.

Fish farming requires long term capital for fish feed and this is under works.

Last year we were forced to reduce significantly working capital financing through banks, which put strain on company’s finances. We have reduced significantly working capital needs in operations, also through lower inventory. Most important is to restore profitability in the environment of lower sales and restructure loss-making business units.

Having cut our teeth now for second year in corona crisis, we know that it is not sustainable to rely on outside help and all tough decisions need to be taken sooner than later. For our advantage the fish market has started much stronger this year and is more predictable and demand for our products is growing. The only objective of new financial year is profit and everything that blocks our road to profitabilty must be eliminated.

KEY RATIOS

INCOME STATEMENT

mln EUR

3Q 2021

2Q 2021

1Q 2021

4Q 2020

3Q 2020

2Q 2020

1Q 2020

4Q 2019

Sales

14.2

14.7

14.2

17.0

12.7

15.1

18.5

25.4

Gross profit

0.8

0.3

0.9

2.5

1.2

0.7

2.0

4.3

EBITDA from operations

-0.8

-1.0

-0.5

0.6

-0.3

-0.1

0.0

2.1

EBITDA

0.0

-0.7

-0.7

0.7

-0.5

-0.1

-0.9

1.4

EBIT

-0.7

-1.4

-1.4

0.0

-1.1

-1.0

-1.4

0.7

EBT

-0.6

-1.6

-1.8

-0.1

-1.4

-1.2

-1.8

0.6

Net profit (-loss)

-0.7

-1.7

-1.8

-0.2

-1.4

-1.3

-1.7

0.5

Gross margin

5.4%

2.1%

6.6%

14.9%

9.4%

4.4%

10.8%

17.0%

Operational EBITDA margin

-5.5%

-7.0%

-3.5%

3.4%

-2.6%

-0.9%

0.1%

8.4%

EBITDA margin

-0.1%

-4.8%

-5.3%

4.1%

-3.8%

-0.5%

-4.6%

5.3%

EBIT margin

-4.7%

-9.3%

-9.9%

0.2%

-8.8%

-6.4%

-7.8%

2.9%

EBT margin

-4.6%

-10.8%

-12.5%

-0.6%

-11.3%

-8.3%

-9.8%

2.2%

Net margin

-5.2%

-11.6%

-12.5%

-1.2%

-11.3%

-8.4%

-9.2%

2.0%

Operating expense ratio

16.3%

15.4%

15.6%

15.6%

18.2%

14.0%

14.3%

12.5%

BALANCE SHEET

mln EUR

30.09.2021

30.06.2021

31.03.2021

31.12.2020

30.09.2020

30.06.2020

31.03.2020

Net debt

24.2

20.9

21.4

21.9

21.5

20.7

17.0

Equity

14.9

15.8

17.6

18.6

18.5

19.8

21.6

Working capital

-2.6

-2.9

-5.0

-3.9

-4.4

-4.0

-2.5

Assets

56.0

55.3

54.5

57.5

57.4

57.1

56.9

Liquidity ratio

0.9x

0.9x

0.8x

0.8x

0.8x

0.8x

0.9x

Equity ratio

26.7%

28.6%

32.4%

32.4%

32.3%

34.7%

37.9%

Gearing ratio

61.8%

56.9%

54.9%

54.0%

53.7%

51.1%

44.0%

Debt to total assets

0.7x

0.7x

0.7x

0.7x

0.7x

0.7x

0.6x

Net debt to EBITDA op

-14.3x

-16.9x

-55.3x

160.0x

12.8x

7.5x

5.3x

ROE

-26.7%

-28.7%

-23.8%

-21.9%

-7.0%

-9.1%

-5.7%

ROA

-7.9%

-9.1%

-8.4%

-7.8%

-2.4%

-3.2%

-2.1%

Consolidated Statement of Financial Position

Thousand euros

30.09.2021

30.09.2020

30.06.2021

ASSETS

Cash and cash equivalents

748

1.091

2.500

Receivables and prepayments

3.231

3.232

3.512

Inventories

5.638

8.746

5.691

Biological assets

7.746

5.423

4.795

Total current assets

17.363

18.492

16.498

Deferred income tax

38

54

38

Long-term financial investments

305

232

302

Tangible fixed assets

14.897

16.006

15.300

Intangible assets

23.368

22.606

23.460

Total non-current assets

38.608

38.898

39.100

TOTAL ASSETS

55.971

57.390

55.598

EQUITY AND LIABILITIES

Loans and borrowings

6.521

10.322

7.325

Payables

13.219

12.385

12.124

Government grants

207

212

207

Total current liabilities

19.947

22.919

19.656

Loans and borrowings

18.411

12.261

17.561

Payables

0

900

0

Deferred tax liabilities

1.996

1.934

1.861

Government grants

695

833

746

Total non-current liabilities

21.102

15.928

20.168

TOTAL LIABILITIES

41.049

38.847

39.824

Share capital

7.737

7.737

7.737

Share premium

14.007

14.198

14.007

Treasury shares

-390

-390

-390

Statutory capital reserve

51

51

51

Currency translation reserve

447

-397

559

Retained profit (-loss)

-7.641

-3.056

-6.723

Equity attributable to parent

14.211

18.143

15.241

Non-controlling interest

711

400

533

TOTAL EQUITY

14.922

18.543

15.774

TOTAL EQUITY AND LIABILITIES

55.971

57.390

55.598

Consolidated Statement of Profit or Loss And Other Comprehensive Income

Thousand euros

3m 2021/2022

3m 2020/2021

Sales

14.207

12.737

Cost of goods sold

-13.433

-11.537

Gross profit

774

1.200

Operating expenses

-2.309

-2.322

Selling and distribution expenses

-1.581

-1.558

Administrative expenses

-728

-764

Other income / expense

51

91

Fair value adjustment on biological assets

820

-94

Operating profit (loss)

-664

-1.125

Financial income/-expenses

16

-309

Profit (loss) before tax

-648

-1.434

Income tax

-92

-4

Net profit (loss) for the period

-740

-1.438

Net profit (loss) attributable to:

Owners of the company

-918

-1.402

Non-controlling interests

178

-36

Total net profit (loss)

-740

-1.438

Other omprehensive income (loss) that may subsequently be classified to profit or loss:

Foreign currency translation differences

-112

-31

Total comprehensive income (expense)

-852

-1.469

Total comprehensive income (expense) attributable to:

Owners of the Company

-842

-1.433

Non-controlling interests

-10

-36

Total comprehensive income (expense) for the period

-852

-1.469

Profit (loss) per share (EUR)

-0.02

-0.04

.

.

Diluted profit (loss) per share (EUR)

-0.02

-0.04

Indrek Kasela

AS PRFoods

Member of the Management Board

Phone:+372 452 1470

investor@prfoods.ee

www.prfoods.ee


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