PRFoods: announces Q4 and FY 2019-2020 interim results

Tallinn / EE. (prf) Global fish farming and production company PRFoods LLC announced its consolidated unaudited interim results for the fourth quarter and twelve months of 2019/2020 financial year. Overview of the economic activities:

Management Commentary

The financial results of AS PRFoods for the last quarter of the financial year have been strongly affected by the states of emergency declared due to the Covid-19 pandemic in all countries where the Group companies operate (Estonia, Finland, Great Britain and Sweden). Sales revenue for the quarter decreased by 29.7 percent compared to the same period last year, amounting to 15.1 million EUR (Q4 18/19: 21.5 million EUR). In the year as a whole, the sales decline was 8.7 percent (12m 19/20: 78.3 million EUR; 12m 18/19: 85.7 million EUR) and the Ebitda for the financial year was 1.6 million EUR (12m 18/19: 1.7 million EUR). Considering the situation in the market and comparing the results of our competitors, we can be satisfied with the year. Based on the results of the first half of the financial year, we expected a much stronger result. Given that the impact of the coronavirus on global demand and fish prices rising from China already in January, was negative, we were able to respond satisfactorily during the second half of the financial year, but it was extremely difficult to achieve a positive result with the entire market in descent.

HoReCa’s restrictions and the drastic decline in air transport affected the company’s turnover since mid-March, and unfortunately the recovery of the hotel, restaurant and other catering segments has been difficult in PRFoods’ main markets in Finland and the United Kingdom. Due to the decline in salmon and trout prices, finished products have also become cheaper, especially in the Finnish market, affecting profitability. PRFoods withstood the Covid-19 pandemic with a strengthened balance sheet, having refinanced short-term loans with five-year bonds at the beginning of the year, and also, we have improved cash flows by keeping the level of raw material inventory at an optimal level.


Group sales revenue

The unaudited preliminary consolidated turnover of the 4th quarter of 2019/2020 financial year was 15.1 million EUR, decreasing by 29.7 percent compared to the same period in the previous financial year (4Q 18/19: 21.5 million EUR). The initial turnover for the 12 months of the financial year was 78.3 million EUR (12m 18/19: 85.7 million EUR).

The total decrease in sales in the 4th quarter was 29.7 percent, including sales growth in retail chains by 7.3 percent; sales decline in the HoReCa sector by 65.0 percent and in wholesale by 49.6 percent (partly also affected by the HoReCa (hotels, restaurants, cafés) sector) compared to the same period last year. The total decrease in 12-month turnover compared to the same period last year was 8.7 percent mostly affected by the decline in the 4th quarter. Also, during 2019/2020 there was a change in the product portfolio; the share of raw fish and fillets product group increased by 4 pp and the share of smoked products decreased accordingly. The share of raw fish and fillets in the product portfolio is 45.6 percent (41.7 percent last year) and the share of smoked products is 38.4 percent (43.0 percent last year).

The sales price of raw fish and fillets is directly affected by the export prices of salmon and trout, which have been on a downward trend since the beginning of the calendar year. During the reporting period, the market price of fish fluctuated significantly, for example in March 2020 the market price of salmon had decreased by 31.1 percent and the price of rainbow trout by 32.0 percent compared to a year ago. Compared to the prices two years ago, the price of salmon had fallen by 43.2 percent and trout by 31.7 percent. Foremost, it had a negative impact on wholesale prices and turnover of fresh fish.

Result for the 4th quarter and 12 months of the financial year

Ebitda from operating activities in the 4th quarter was -0.4 million EUR, decreasing by 0.7 million EUR (Q4 18/19: 0.3 million EUR). The above-mentioned decline in sales in the HoReCa sector and the decline in fish market prices caused a 5.2 pp decrease in the gross margin of the last quarter (gross margin Q4 19/20: 4.6 percent vs. Q4 18/19: 9.8 percent). The net loss for the quarter was 1.3 million EUR, increasing by 0.6 million EUR (Q4 18/19: -0.6 million EUR), mainly due to the above-mentioned decrease in gross profit.

The Group’s 12-month consolidated Ebitda was 1.6 million EUR (12m 18/19: 1.7 million EUR), a decrease of 9.8 percent compared to the previous year. Ebitda from operations (i.e. before one-offs and revaluation of bioassets) was 2.5 million EUR (12m 18/19: 4.0 million EUR). Ebitda from operations was negatively impacted by a decrease in the share of smoked products in sales, which was mainly due to lower sales volumes in Finland in the private label segment, by the negative impact of Covid-19 on sales in the HoReCa sector and the fall in market prices for fish. In the year as a whole, the gross margin decreased by 1.7 pp compared to the previous financial year (12m 19/20: 12.2 percent vs 12m 18/19: 13.9 percent).

The net loss for the reporting year was 1.9 million EUR (12m 18/19: 1.5 million EUR), incl. an increase in financial expenses by 0.3 million EUR due to the increase in interest expenses (investment loan interest rate 3.25 percent vs. bond interest rate 6.25 percent).

Financial position

The company’s net debt was 19.4 million EUR as at 30.06.2020 (30.06.2019: 20.5 million EUR). The Group’s working capital as at 30.06.2020 was minus 3.8 million EUR as current liabilities include liabilities to related parties in the amount of 4.2 million EUR, which are long-term in nature, but due to accounting principles must be categorised as short-term liabilities. Eliminating the accounting effect, the working capital is 0.4 million EUR. PRFoods successfully completed a private placement of bonds in January 2020, as a result of which short-term liabilities in the amount of 9 million EUR became long-term ones, releasing cash flows of about 2 million EUR per year. The change in the debt structure also has an impact on the company’s financial results, the impact of financial expenses on PRFoods’ net profit is negative by 0.35 million EUR per year.

Impact of the coronavirus (Covid-19) pandemic

Due to the imposition of special situation restrictions because of the Covid-19 pandemic, the company’s turnover has significantly decreased in the HoReCa segment which accounts for approximately 30 percent of the Group’s turnover since mid-March. The decline in sales in this segment in the last quarter of the financial year was about 70 percent, which was unfortunately not covered by the 7 percent growth in retail sales, but rather the share of raw fish and fish fillets with significantly lower profit margins increased instead of hot and cold smoked products. Taking into account the average gross margin for the first 9 months of the year (13.9 percent), we estimate the direct negative impact of Covid-19 on Ebitda of 0.6 million EUR. The Group’s results were negatively affected primarily by the Finnish unit, while the British unit’s result remained at the same level as last year, despite the situation caused by the coronavirus.

In line with the decline in production, the Group’s companies have reduced the working hours and salaries of both production and office employees by 10-30 percent. The Group’s companies in Estonia and the United Kingdom have used the salary compensation subsidies offered by the states.

The Group is focused on cost and cash flow management to ensure the sustainability of its operations in the future. Certainly, larger industries such as PRFoods are better able to cope with such crises, and the company’s activities are spread across several markets. In some markets, we expect our positions to strengthen due to reduced competition.

In March 2020, PRFoods conducted a public offering of bond issues amidst the period of crisis which could not have been foreseen when planning the issue, resulting in the subscription of bonds significantly below expectations – 0.9 million or 47 percent of the 1.9 million was subscribed, including 0.5 million bonds subscribed by PRFoods to sell them after the end of the crisis.

Events and future plans for the financial year

This financial year will continue to be affected by Covid-19, and we will certainly see the effects of the ongoing economic crisis materialize in the next financial year. We assume the recovery of the HoReCa sector will not be seen until 2021. Considering that the share of total global HoReCa in salmon and trout is about 30 percent, there is an oversupply in the market due to the corona epidemic. The trend of declining consumption can also be seen in other foods, such as meat and milk, as both travel and domestic restrictions apply. However, in countries where the coronavirus has been successfully combated so far, including Estonia, rapid recovery of HoReCa can be seen. As the situation changes quickly, it is difficult to make long-term predictions.

According to analysts and Fishpool’s salmon futures prices, price growth and demand growth of up to 9 percent can be expected only in 2021. The average futures price of salmon for 2021 at the date of the report is 5.55 EUR/kg compared to 4.40 EUR/kg in August 2020.

For PRFoods, the market price of fish has the biggest impact. This is due to two main reasons: a) the impact on fish farming, b) the change in Finnish retail prices, where the prices of final products also react immediately to the fall in raw material prices due to the large share of the private label in the market. During the reporting period, the market price of fish fluctuated significantly, for example in March 2020 the market price of salmon had decreased by 31.1 percent and the price of rainbow trout by 32.0 percent compared to a year ago. Compared to the price two years ago, the price of salmon had fallen by 43.2 percent and trout by 31.7 percent. Due to the decrease in demand for HoReCa, we see low fish prices for 2020 as a whole. This is definitely good news for consumers. Despite the increased production volumes and demand for some products, lower prices do not allow such a large profit to be made in absolute terms. At the same time, lower prices allow to significantly increase export volumes.

Considering the situation, we are more optimistic about the future than at the end of the 4th quarter, for the following reasons:

  • John Ross Jr. and Coln Valley have been able to maintain their profitability in absolute terms despite a nearly 30 percent drop in turnover due to higher profitability of branded products;
  • In the Estonian market, we have been able to sell our products significantly better and we see that during the financial year of 2020/2021 we will significantly increase our product portfolio of retail products for the Estonian market;
  • We have completed the centralization of the management of the Finnish and Estonian production units, which started in 2019, including the change of management. The merger of Trio Trading and Heimon Kala in Finland has been completed. In addition, we built up a new sales team, which had a temporary negative impact on sales revenue due to turnover of personnel;
  • We will increase the level of automation in the Estonian and Finnish production units, as a result of which we will be able to organize production much more efficiently and with fewer people in the future;
  • A larger investment program has taken place in production. We will continue the fish farming investment program;
  • Positive news from Estonia and Sweden regarding the increase in fish farming volumes will enable us to grow fish more efficiently and profitably and become one of the largest and most environmentally friendly fish farmers in Estonia and Finland;
  • We assume that the direct damage caused by the coronavirus has passed. At the same time, the long-term effects of the accompanying economic crisis on consumer behaviour as well as on competition are unpredictable.

We have implemented a cost-saving program since the 4th quarter, resulting in costs decreasing by approximately 0.4 million EUR per year. The one-million-euro savings program launched in 2019 has thus been completed. The main theme of the financial year of 2020/2021 is maintaining profitability and growth in the conditions of a strong market oversupply. Considering the regional position of the Group’s companies, we believe that we will be able to cope better with the situation than our competitors.

Covid-19 created a new situation, but despite it, PRFoods never had to stop its production. We continue to develop PRFoods as an environmentally friendly and high-quality fish farming and processing company.

Key Ratios

Income Statement
mln EUR 2Q 2020 1Q 2020 4Q 2019 3Q 2019 2Q 2019 1Q 2019 4Q 2018 3Q 2018
Sales 15,1 18,5 25.4 19,3 21.5 18.1 26.7 19.4
Gross profit 0,7 2,0 4.3 2,6 2.1 2.1 4.7 3.0
Ebitda from operations -0,4 0,0 2.1 0,7 0.3 0.2 2.4 1.1
Ebitda -0,4 -0,9 1.4 1,5 0.3 -0.5 0.8 1.1
Ebit -1,0 -1,4 0.7 1,0 -0.3 -1.0 0.2 0.6
EBT -1,2 -1,8 0.6 0,8 -0.4 -1.2 0.0 0.4
Net profit (-loss) -1,3 -1,7 0.5 0,6 -0.6 -1.2 0.2 0.1
Gross margin 4,6% 10,8% 17.0% 13,4% 9.8% 11.7% 17.7% 15.2%
Operational Ebitda margin -2,6% 0,1% 8.4% 3,8% 1.4% 1.1% 9.1% 5.4%
Ebitda margin -2,6% -4,6% 5.3% 7,6% 1.4% -2.5% 2.9% 5.8%
Ebit margin -6,4% -7,8% 2.9% 5,0% -1.2% -5.6% 0.9% 3.0%
EBT margin -8,1% -9,8% 2.2% 3,9% -2.0% -6.5% 0.1% 1.8%
Net margin -8,4% -9,2% 2.0% 2,9% -3.0% -6.6% 0.8% 0.7%
Operating expense ratio 13,9% 14,3% 12.5% 13,4% 11.7% 14.1% 11.2% 13.5%


Balance Sheet
mio.EUR 30.06.2020 31.03.2020 31.12.2019 30.09.2019 30.06.2019 31.03.2019 31.12.2018
Net debt 19,4 17,0 17.8 19,9 20.5 18.7 20.0
Equity 19,8 21,6 23.3 22,8 21.9 23.3 24.2
Working capital -3,8 -2,5 -3.5 -3,0 -3.1 -1.6 1.0
Assets 55,9 56,9 60.5 62,4 62.5 63.5 65.5
Liquidity ratio 0,8x 0,9x 0.9x 0,9x 0.9x 0.9x 1.0x
Equity ratio 35,4% 37,9% 38.5% 36,5% 35.0% 36.7% 37.0%
Gearing ratio 49,9% 44,0% 43.3% 46,6% 48.3% 44.5% 45.2%
Debt to total assets 0,6x 0,6x 0.6x 0,6x 0.7x 0.6x 0.6x
Net debt to Ebitda op 7,8x 5,3x 5.3x 5,4x 5.1x 5.4x 5.1x
ROE -9,1% -5,7% -3.2% -4,5% -6.5% -8.2% -4.0%
ROA -3,2% -2,1% -1.2% -1,6% -2.3% -3.0% -1.5%


Consolidated Statement of Financial Position

Thousand EUR 30.06.2020 30.06.2019
Cash and cash equivalents 2,276 2,583
Receivables and prepayments 3,711 5,300
Inventories 7,884 11,980
Biological assets 4,249 4,924
Total current assets 18,120 24,787
Deferred income tax 67 41
Long-term financial investments 232 202
Tangible fixed assets 14,856 14,535
Intangible assets 22,672 22,969
Total non-current assets 37,827 37,747
TOTAL ASSETS 55,947 62,534
Loans and borrowings 10,382 13,502
Payables 11,291 14,105
Government grants 211 234
Total current liabilities 21,884 27,841
Loans and borrowings 11,259 9,540
Payables 190 190
Deferred tax liabilities 1,913 2,010
Government grants 873 1,087
Total non-current liabilities 14,235 12,827
Share capital 7,737 7,737
Share premium 14,007 14,007
Treasury shares -390 -390
Statutory capital reserve 51 51
Currency translation reserve 30 -214
Retained profit (-loss) -2,186 66
Equity attributable to parent 19,249 21,257
Non-controlling interest 579 609
TOTAL EQUITY 19,828 21,866

Consolidated Statement of Profit or Loss And Other Comprehensive Income

Thousand EUR 4Q 2019/2020 4Q 2018/2019 12m 2019/2020 12m 2018/2019
Sales 15,101 21,485 78,292 85,727
Cost of goods sold -14,412 -19,383 -68,705 -73,830
Gross profit 689 2,102 9,587 11,897
Operating expenses -2,107 -2,522 -10,509 -10,702
Selling and distribution expenses -1,387 -1,797 -7,060 -7,499
Administrative expenses -720 -725 -3,449 -3,203
Other income / expense 211 -106 510 83
Fair value adjustment on biological assets 239 268 -291 -1,744
Operating profit (loss) -968 -258 -703 -466
Financial income/-expenses -254 -169 -1,031 -776
Profit (loss) before tax -1,222 -427 -1,734 -1,242
Income tax -47 -213 -166 -230
Net profit (loss) for the period -1,269 -640 -1,900 -1,472
Net profit (loss) attributable to:
Owners of the company -1,254 -621 -1,870 -1,458
Non-controlling interests -15 -19 -30 -14
Total net profit (loss) -1,269 -640 -1,900 -1,472
Other omprehensive income (loss) that may subsequently be classified to profit or loss:
Foreign currency translation differences -117 -770 244 -221
Total comprehensive income (expense) -1,386 -1,410 -1,656 -1,693
Total comprehensive income (expense) attributable to:
Owners of the Company -1,371 -1,391 -1,626 -1,679
Non-controlling interests -15 -19 -30 -14
Total comprehensive income (expense) for the period -1,386 -1,410 -1,656 -1,693
Profit (loss) per share (EUR) -0.03 -0.02 -0.05 -0.04
Diluted profit (loss) per share (EUR) -0,03 -0,02 -0,05 -004


About PRFood LLC: PRFoods’ key market is Finland, where the company is amongst the three largest fish production companies. Since the acquisition of John Ross Jr. and Coln Valley Smokery in the summer of 2017, the Group has expanded its sales to 37 countries in Europe, North and South America, and Asia. Main activity of the Group is fish manufacturing in four contemporary production buildings in Renko and Kokkola (Finland), in Saaremaa (Estonia), and in Aberdeen (Great Britain). The main products are salmon and rainbow trout products. Approximately 2/3 of the raw fish used in the Group’s rainbow trout production is harvested from the Group’s fish farms in Swedish lakes and Turku Archipelago area in Finland, assuring the highest quality and reliable deliveries. Salmon is purchased mainly from Norway, Denmark, Sweden and also from Scotland. On a smaller scale European whitefish and Baltic herring are used in production. In addition, a notable volume of red caviar is made from fish harvested in the Group’s own fish farms. The Group’s products are sold as leading brands in their respective operating markets and the primary focus is on higher added value premium products.