AS PRFoods unaudited consolidated interim report for the

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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:

  1. Decrease the level of overall indebtedness thanks to a positive EBITDA and a strengthening of shareholders’ equity.
  2. 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.
  3. Increase retail sales in UK and EU markets, including Estonia’s domestic market.
  4. 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

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