MANAGEMENT COMMENTARY
The most difficult year in the group’s history is over. We have been attacked on three fronts: on the one hand, the corona crises have caused a situation of drastic fall in prices and demand for fishery products, causing a drop in gross margin and sales. Second, we entered the crisis with very high leverage due to recent acquisitions and were forced by the banks to aggressively reduce our loan portfolio. Thirdly, our former leadership of the Finnish unity was unwilling and unable to react to changes in the market, which caused us to accumulate problems there with a long-term effect. Dealing with the three crises simultaneously greatly increased our loss, as we were forced to make decisions, which would not have happened under normal circumstances.
As a result, this group’s sales decreased 25% to 58.7 million euros (78.7 million euros year-on-year).
As a final result, we had our first historic EBITDA loss of -1.24 million euros (2.75 million euros year-on-year) and a net loss of -5.1 million euros (- 1.9 million euros year-on-year).
The fourth quarter EBITDA was largely impacted by the fact that commodity prices suddenly increased due to the relaxation of Coroan restrictions, while the final prices of our products in the Finnish market were set in winter, when commodity prices were significantly lower. This caused a situation in the last quarter, where we sold some of our products below the COGS. In order to put an end to such a practice, we had to terminate our local CEO and notify customers of the termination of these contracts.
If something positive is found, then the group’s operating cash flow was positive by 2 million euros and the total cash flow over the period improved by 0.51 million euros. We also reduced our net debt and significantly reduced the Company’s current liabilities. Our fish farming unit also performed better and was the backbone of our Scandinavian operations. Our biggest problem is that the Estonian government is delaying the decision to allow marine farming in Estonia, due to which we have not been able to earn significant additional income in the last period.
Our Scottish division was very courageous, and even though their sales and net profit fell by 30%, John Ross Jr still managed to post € 1.4 million in EBITDA. I would also like to thank our Estonian unit, which despite not knowing HoReCa, has managed to significantly increase retail sales every month.
The number of employees has decreased by around 10% on an annual basis, but it is evident that the cost base of the Finnish unit has not responded to the decline in sales and margins. In summary, we can say that the root cause of our problems is the Finnish trade division.
PRFoodsi’s action plan to get out of the crisis is:
- Decrease the level of overall indebtedness thanks to a positive EBITDA and a strengthening of shareholders’ equity.
- Complete restructuring of the Finnish division, either through the sale or closure of loss-making business units. Completely eliminate all low-margin products from Finnish sales.
- Increase retail sales in UK and EU markets, including Estonia’s domestic market.
- The Group’s strategic orientation is fish farming, a division that is profitable each year. The objective is to achieve by 2023 a fish farming volume of 10,000 tonnes, ie an additional turnover of 45 to 50 million euros.
The Group’s financial situation is not easy. At the same time, it should be remembered that 11 million euros of bonds were issued solely for the refinancing of John Ross Jr. The acquisition and the results of John Ross Jr were not so strongly impacted, their cash -operational flow is very solid and they regularly pay dividends to parent company, so we find their leverage to be acceptable. Fish farming requires long term capital to feed fish and it is under construction.
Last year, we were forced to significantly reduce working capital funding by banks, which put a strain on the company’s finances. We have significantly reduced working capital requirements in operations, also through lower inventory. The most important thing is to restore profitability in an environment of declining sales and to restructure loss-making business units.
Having cut our teeth now for the second year of the corona crisis, we know that relying on outside help is not sustainable and that all the tough decisions need to be made as soon as possible. To our advantage, the fish market has started much stronger this year and is more predictable and the demand for our products is increasing. The only goal of the new fiscal year is profit and anything blocking our road to profitability must be eliminated.
KEY REPORTS
REVENUE STATEMENT
| millions of euros | 2Q 2021 | 1Q 2021 | 4Q 2020 | 3Q 2020 | 2Q 2020 | 1Q 2020 | 4Q 2019 | 3rd quarter 2019 |
| Sales | 14.7 | 14.2 | 17.0 | 12.7 | 15.1 | 18.5 | 25.4 | 19.3 |
| Gross profit | 0.3 | 0.9 | 2.5 | 1.2 | 0.7 | 2.0 | 4.3 | 2.6 |
| Operating EBITDA | -1.0 | -0.5 | 0.6 | -0.3 | -0.4 | 0.0 | 2.1 | 0.7 |
| EBITDA | -0.7 | -0.7 | 0.7 | -0.5 | -0.4 | -0.9 | 1.4 | 1.5 |
| BAII | -1.4 | -1.4 | 0.0 | -1.1 | -1.0 | -1.4 | 0.7 | 1.0 |
| EBT | -1.6 | -1.8 | -0.1 | -1.4 | -1.2 | -1.8 | 0.6 | 0.8 |
| Net profit (-loss) | -1.7 | -1.8 | -0.2 | -1.4 | -1.3 | -1.7 | 0.5 | 0.6 |
| Gross margin | 2.1% | 6.6% | 14.9% | 9.4% | 4.6% | 10.8% | 17.0% | 13.4% |
| Operating EBITDA margin | -7.0% | -3.5% | 3.4% | -2.6% | -2.6% | 0.1% | 8.4% | 3.8% |
| EBITDA margin | -4.8% | -5.3% | 4.1% | -3.8% | -2.6% | -4.6% | 5.3% | 7.6% |
| EBIT margin | -9.3% | -9.9% | 0.2% | -8.8% | -6.4% | -7.8% | 2.9% | 5.0% |
| EBT margin | -10.8% | -12.5% | -0.6% | -11.3% | -8.1% | -9.8% | 2.2% | 3.9% |
| The net margin | -11.6% | -12.5% | -1.2% | -11.3% | -8.4% | -9.2% | 2.0% | 2.9% |
| Operating expense ratio | 15.4% | 15.6% | 15.6% | 18.2% | 13.9% | 14.3% | 12.5% | 13.4% |
BALANCE SHEET
| millions of euros | 06/30/2021 | 03.31.2021 | 31.12.2020 | 30.09.2020 | 06/30/2020 | 03.31.2020 | 12/31/2019 |
| Net debt | 20.9 | 21.4 | 21.9 | 21.5 | 20.7 | 17.0 | 17.8 |
| Equity | 15.8 | 17.6 | 18.6 | 18.5 | 19.8 | 21.6 | 23.3 |
| Working capital | -2.9 | -5.0 | -3.9 | -4.4 | -4.0 | -2.5 | -3.5 |
| Assets | 55.3 | 54.5 | 57.5 | 57.4 | 57.1 | 56.9 | 60.5 |
| Liquidity rate | 0.9x | 0.8x | 0.8x | 0.8x | 0.8x | 0.9x | 0.9x |
| Capital ratio | 28.6% | 32.4% | 32.4% | 32.3% | 34.7% | 37.9% | 38.5% |
| Gear ratio | 56.9% | 54.9% | 54.0% | 53.7% | 51.1% | 44.0% | 43.3% |
| Debt on total assets | 0.7x | 0.7x | 0.7x | 0.7x | 0.7x | 0.6x | 0.6x |
| Net debt on op EBITDA | -16.9x | -55.3x | 160.0x | 12.8x | 7.5x | 5.3x | 5.3x |
| DEER | -28.7% | -23.8% | -21.9% | -7.0% | -9.1% | -5.7% | -3.2% |
| ROA | -9.1% | -8.4% | -7.8% | -2.4% | -3.2% | -2.1% | -1.2% |
Consolidated statement of financial position
| Thousands of euros | 06/30/2021 | 06/30/2020 |
| ASSETS | ||
| Cash and cash equivalents | 2500 | 2 276 |
| Receivables and down payments | 3 295 | 3,578 |
| Inventories | 5 691 | 7 884 |
| Biological assets | 4 795 | 4,249 |
| Total current assets | 16 281 | 17,987 |
| Deferred tax | 21 | 54 |
| Long-term financial investments | 302 | 232 |
| Tangible fixed assets | 15 236 | 16,179 |
| Intangible assets | 23,457 | 22,672 |
| Total non-current assets | 39,016 | 39,137 |
| TOTAL ASSETS | 55,297 | 57,124 |
| LIABILITIES AND EQUITY | ||
| Loans and borrowing | 6,396 | 10 611 |
| Debts | 12,530 | 11 132 |
| Government grants | 207 | 211 |
| Total current liabilities | 19,133 | 21 954 |
| Loans and borrowing | 16 988 | 12,368 |
| Debts | 723 | 190 |
| Deferred tax liabilities | 1,868 | 1,920 |
| Government grants | 746 | 873 |
| Total non-current liabilities | 20,325 | 15 351 |
| TOTAL RESPONSIBILITIES | 39,458 | 37 305 |
| Share the capital | 7 737 | 7 737 |
| Sharing bonus | 14,198 | 14,007 |
| Own shares | -390 | -390 |
| Statutory capital reserve | 51 | 51 |
| Currency translation reserve | 583 | -366 |
| Retained profit (-loss) | -6.682 | -1 654 |
| Equity attributable to the parent company | 15,497 | 19,385 |
| Non-controlling interest | 342 | 434 |
| EQUITY | 15 839 | 19 819 |
| EQUITY AND TOTAL LIABILITIES | 55,297 | 57,124 |
Consolidated income statement and other comprehensive income
| Thousands of euros | 4Q 2020/2021 | 4Q 2019/2020 | 12 months 2020/2021 | 12 months 2019/2020 |
| Sales | 14,740 | 15 101 | 58,692 | 78,292 |
| Cost of goods sold | -14,437 | -14,412 | -53 717 | -68 710 |
| Gross profit | 303 | 689 | 4 975 | 9,582 |
| Operating Expenses | -2.264 | -2 107 | -9,468 | -10 509 |
| Selling and distribution costs | -1 499 | -1 387 | -6.389 | -7,060 |
| Administrative expenses | -765 | -720 | -3,079 | -3 449 |
| Other income / expenses | 146 | 211 | 309 | 519 |
| Fair value adjustment on biological assets | 441 | 239 | 311 | -291 |
| Operating profit (loss) | -1 374 | -968 | -3 873 | -699 |
| Financial income / expenses | -223 | -254 | -1,031 | -1,062 |
| Profit (loss) before tax | -1 597 | -1 222 | -4.904 | -1 761 |
| Income tax | -110 | -47 | -216 | -134 |
| Net profit (loss) for the period | -1707 | -1 269 | -5 120 | -1,895 |
| Net profit (loss) attributable to: | ||||
| Company owners | -1 697 | -1 254 | -5.028 | -1 718 |
| Non-majority interests | -ten | -15 | -92 | -177 |
| Total net profit (loss) | -1707 | -1 269 | -5 120 | -1,895 |
| Other excess income (losses) that may subsequently be classified in profit or loss: | ||||
| Foreign currency translation differences | -100 | -117 | 949 | -152 |
| Total comprehensive income (expense) | -1807 | -1 386 | -4,171 | -2,047 |
| Total comprehensive income (expense) attributable to: | ||||
| Company owners | -1 797 | -1 371 | -4079 | -1 870 |
| Non-majority interests | -ten | -15 | -92 | -177 |
| Total comprehensive income (expense) for the period | -1807 | -1 386 | -4,171 | -2,047 |
| Earnings (loss) per share (EUR) | -0.04 | -0.03 | -0.13 | -0.04 |
| Diluted earnings (loss) per share (EUR) | -0.04 | -0.03 | -0.13 | -0.04 |
Indrek Kasela
AS PRFoods
Member of the Management Board
Telephone: +372 452 1470
[email protected]
www.prfoods.ee
Comments are closed.