Estonia, EU – Baltic States, Foodstuff, Markets and Companies

The financial results of AS PRFoods for the last quarter of the financial year, that is the second quarter of this year, were strongly affected by the states of emergencies declared due to the COVID-19 pandemic in all countries where the group companies operate -- Estonia, Finland, the United Kingdom and Sweden. Considering the situation in the market and comparing the results of its competitors, the company can be satisfied with the year, PRFoods told the stock exchange.

"Based on the results of the first half of the financial year, we expected a much stronger result. Given that the impact of the outspread of 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," the management said.

The Hotels-Restaurants-Cafes (HoReCa) sector’s restrictions and the drastic decrease 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.

The total decrease in turnover compared to the same period last year was 8.7%, mostly affected by the decline of 29.5% in the financial year’s last quarter. During 2019/2020, there was also a change in the product portfolio, the share of raw fish and fillets product group increased by 4%age points and the share of smoked products decreased accordingly. 

The sales price of fresh 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. According to analysts and Fishpool’s salmon futures prices, price growth and demand growth of up to 9% can be expected only in 2021.

The group's consolidated EBITDA was 1.9 million euros, a decrease of 8% compared to the previous year. 

The company's net debt was 20.7 million euros as of June 30, 2020. The group's working capital as of June 30 was minus 3.967 million euros as current liabilities include liabilities to related parties in the amount of 4.046 million euros, which are long-term in nature, but due to accounting principles must be categorized as short-term liabilities. By eliminating short-term liabilities to related parties, with whom the group has the opportunity to agree on payment terms longer than 12 months, the group's working capital is positive.

Taking into account the 13.9% average gross margin for the first nine months of the year, the management estimates the direct negative impact of COVID-19 on EBITDA of 0.6 million euros. 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%. The group's companies in Estonia and the United Kingdom have used the salary compensation subsidies offered by the states.

The company has implemented a cost-saving program since the fourth quarter of the financial year, resulting in costs decreasing by approximately 0.4 million euros per year. The main focus 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," the management said.