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Sunday 28 November, 2021

PRFoods

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

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

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

[email protected]

www.prfoods.ee


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