Altia Plc’s Financial Statements Bulletin 2020: Exceptionally strong performance in a COVID-19 year

Altia Plc  Stock Exchange Release  25 February 2021 at 8:30 am EET

Altia Plc’s Financial Statements Bulletin 2020: Exceptionally strong performance in a COVID-19 year

This release is a summary of Altia Plc's Financial Statements Bulletin 2020. The complete report is attached to this release and is also available on the company website at www.altiagroup.com/investors.

January–December 2020 compared to January–December 2019

• Reported net sales decreased by 4.8% to EUR 342.4 (359.6) million
• In constant currencies, net sales decreased by 4.4%
• The Finland & Exports segment’s net sales were EUR 117.2 (128.6) million
• The Scandinavia segment’s net sales were EUR 123.9 (120.7) million; in constant currencies net sales grew by 3.9% 
• Altia Industrial’s net sales were EUR 101.2 (110.2) million
• Comparable EBITDA was EUR 52.4 (44.8) million, 15.3% (12.4%) of net sales
• Items affecting comparability were EUR -12.1 (-1.7) million mainly relating to the merger plan of Altia and Arcus
• Reported EBITDA was EUR 40.3 (43.1) million, 11.8% (12.0%) of net sales
• Net cash flow from operating activities was EUR 56.1 (52.6) million
• Net debt / comparable EBITDA was -0.1 (0.6)

October–December 2020 compared to October–December 2019

• Reported net sales decreased by 3.2% to EUR 106.5 (110.1) million
• In constant currencies, net sales decreased by 3.5%
• Comparable EBITDA was EUR 19.0 (19.7) million, 17.9% (17.9%) of net sales
• Items affecting comparability were EUR -5.5 (0.2) million relating to the merger plan of Altia and Arcus
• Reported EBITDA was EUR 13.5 (19.8) million, 12.7% (18.0%) of net sales

Short-term outlook 2021

Altia has decided to provide a short-term outlook but no guidance for 2021, due to the uncertainties caused by COVID-19 and the low predictability for the full year 2021.

Dividend proposal by the Board of Directors

In line with Altia’s dividend policy, Altia’s Board of Directors proposes to the Annual General Meeting that an annual dividend of EUR 0.35 per share be paid for the financial year 2020.

Arcus’ Board of Directors have similarly proposed to the Annual General Meeting of Arcus that an annual dividend of NOK 1.66 per share be paid for the financial year 2020, reflecting the relative value of Altia and Arcus agreed upon in the merger plan, meaning that dividends for the financial year 2020 to be paid by Altia and Arcus, respectively, will not have an impact on the agreed valuation of the companies for the purpose of the Altia and Arcus merger.

Altia’s Board of Directors also proposes to the Annual General Meeting that the dividend authorisation decided by the Extraordinary General Meeting 2020 to pay an extra dividend of EUR 0.40 per share to Altia's shareholders in connection with and prior to the closing of the Altia and Arcus merger be renewed.

This financial statements bulletin has been prepared in accordance with the International Financial Reporting Standards (IFRS) and IAS 34 Interim Financial Reporting as approved by the EU. The figures in the report are unaudited. A reconciliation of alternative key ratios to IFRS figures is presented in the appendix on page 35.

For important information for U.S. shareholders, please see “Important Information” on page 22.

Key figures

CEO Pekka Tennilä:

“I want to thank all employees for delivering such strong results for 2020. Last year was exceptional for us, with the outbreak of COVID-19 into a global pandemic and the challenges it brought to our business and to the health and safety of our employees. We have managed the situation very well and I am proud of the great achievements our employees have reached and for the strong commitment they have shown during this difficult year.

We ended the year with a fourth quarter largely in line with our own expectations with the COVID-19 restrictions still impacting travel retail and on-trade. In the important Christmas season, our sales of both Blossa and traditional Finnish glöggs developed well, while the sales of aquavits in Sweden were impacted by the lack of festivities and the restrictions in on-trade.

In 2020, Altia’s net sales decreased by 4.4% in constant currencies. The decline was largely driven by the negative impacts of COVID-19 restrictions on travel retail, exports and on-trade sales channels and contract manufacturing volumes. Following these restrictions, consumers have shifted purchases to the monopolies. In the Finland & Exports segment, net sales declined from the previous year due to the sales drop in travel retail and exports, while Altia’s net sales in the monopoly channel grew, driven by strong spirits sales. In the Scandinavia segment, net sales grew from the previous year driven by strong sales in the monopolies offsetting the decline in on-trade. In Altia Industrial, net sales declined due to lower contract manufacturing volumes, while we saw demand-driven growth of ethanol sales.

In 2020, our profitability improved from the previous year with comparable EBITDA increasing by 17.1% or EUR 7.6 million to EUR 52.4 million. As a result of this positive development, we have reached our long-term financial target with a comparable EBITDA margin of 15.3%. The drivers for the exceptionally strong profitability development were the Altia Industrial segment, the positive channel mix, and Group-wide cost savings measures. The reported result for the period was impacted by costs related to the Altia and Arcus merger plan booked as items affecting comparability.

Our financial position has been solid throughout the whole year with good cash flow development and strong liquidity. Net cash flow from operations improved to EUR 56.1 (52.6), driven by the positive development of working capital.

In line with Altia’s dividend policy, Altia’s Board of Directors has proposed to the Annual General Meeting that a dividend of EUR 0.35 per share be paid for the financial year 2020. The dividend will be paid in addition to the planned extra dividend of EUR 0.40 per share, which is to be paid just before the completion of the merger between Altia and Arcus.

During the year, our key priorities have been the health and safety of our employees and business continuity. My sincere thanks goes to our production teams, and also to our partners and suppliers who have supported us in keeping our operations running without major disruptions. During the pandemic our important contribution to society was to meet the increased demand of technical ethanol for hand sanitiser end-use. When the demand peaked during the first quarter, the daily amounts of denatured alcohol delivered to our customers was enough to produce around 200 000 half-litre hand sanitiser bottles.

For us, sustainability is both a strategic priority and a key success factor in our business. From the beginning of 2020, we have been implementing our Sustainability Roadmap 2030 with the key goal to have carbon neutral production in 2025. The investment in a new fuel silo at the Koskenkorva plant takes us one step closer to that target. At the Rajamäki plant, we have strengthened our own capabilities in low-alc and non-alc production, which places us in an excellent position to pursue innovations in this growing category. Thanks to our commitment to further develop occupational health and safety, we have made good progress towards our long-term target of zero absences due to injuries with the injury frequence continuing to decrease also in 2020 compared to the previous year.  

In 2021, we look forward to reaching an important strategic milestone with the planned merger of Altia and Arcus to form a leading Nordic wine and spirits brand house: Anora Group. We announced the merger plan in September which was approved by the shareholders at the Extraordinary General Meetings of Altia and Arcus, respectively, in November. The competition authority process is proceeding according to our expectations and in good dialogue with the competition authorities in Finland, Sweden and Norway. We continue to expect to complete the merger in H1 2021. 

Looking ahead, we expect significant uncertainties in our operating environment due to continuing COVID-19 restrictions. Forecasting the recovery of the operating environment is difficult as it depends largely on the development of COVID-19, the progress of vaccinations, and changes in consumer behaviour. Due to these uncertainties the predictability is weak for the full year 2021, and we have decided to provide a short-term outlook but no guidance for 2021.”

Outlook for 2021

Market outlook

The development of the Group’s business operations and profitability are affected by the competitive environment, the overall economic outlook and changes in alcohol taxation and regulation. Uncertainty related to changes in consumer buying behaviour and consumer demand continues. In addition, overall fluctuations of direct product costs affect the Group’s profitability. 

COVID-19 update: Of Altia’s beverage sales channels, travel retail, exports and on-trade are restricted or closed due to COVID-19 restrictions. The recovery of these channels depend on the level and extent of government restrictions and recommendations and how consumer behaviour changes. The pace of recovery is difficult to estimate and is expected to vary across sales channels. Uncertainty in the economy and operating environment is high, and the risk of an economic slowdown is high.

Seasonality

There are substantial seasonal fluctuations in the consumption of alcoholic beverages impacting the net sales and cash flow of Altia. The company typically generates large amounts of its revenue and cash flow during the fourth quarter of the year, whereas the first quarter of the year is significantly lower. In addition, excise taxes related to the high season at the end of the year are paid in January, resulting in large cash outflows at the beginning of the year.

Short-term outlook

Altia has decided to provide a short-term outlook but no guidance for 2021, due to the uncertainties caused by COVID-19 and the low predictability for the full year 2021.

In the first half of 2021, COVID-19 is expected to impact travel retail, exports and on-trade. The channel shift in the monopoly markets is expected to continue for as long as travel retail and on-trade continue to be restricted. The situation is expected to stabilise earliest after the summer period.

In Altia Industrial, for the first half of 2021, COVID-19 is expected to continue to impact contract manufacturing and industrial products in a significant way. The increased prices of imported ethanol puts pressure on technical ethanol margins. The barley prices have increased at the beginning of this year and the price level is expected to be higher than in 2020 until the new crop.

The recovery of the operating environment depends largely on the development of COVID-19, the progress of vaccinations, and changes in consumer behaviour.

Financial calendar for 2021

The Annual Report 2020 including the financial statements, Board of Directors' report, Auditor's report, the Corporate Governance statement and the remuneration report will be published in English and Finnish on Altia’s website at the end of week 8. The Annual Report includes also the Sustainability Report.

Altia Plc will publish financial reports in 2021 as follows:

• 28 April: Business Review for January-March 2021
• 18 August: Half-Year Report for January-June 2021
• 3 November: Business Review for January-September 2021

Annual General Meeting 2021

Altia Plc’s Annual General Meeting (AGM) 2021 is planned to be held on 19 March 2021 in Helsinki. The notice to the AGM will be available on Altia’s website.

Additional information: 

Pekka Tennilä, CEO  

Juhana Jokinen, Interim CFO 

Contacts: 

Analysts and investors: Tua Stenius-Örnhjelm, Investor Relations, tel. +358 40 748 8864 

Media: Petra Gräsbeck, Corporate Communications, tel. +358 40 767 0867 

Results presentation:

CEO Pekka Tennilä and interim CFO Juhana Jokinen will present the report on the same day at 11:00 am EET. The presentation will be held as a Microsoft Teams Meeting. We recommend that participants join the event using the online meeting option: Join meeting here

It is also possible to dial-in to the meeting about 5 minutes earlier at the following numbers:

FI: +358 9 2310 6678

SE: +46 8 502 428 54

UK: +44 20 3443 9579

US: +1 917-781-4622

Conference ID: 988 958 12#

Q&A: We recommend that questions to the management are sent through the Teams chat.

Presentation material: The presentation material will be shared in the online meeting and it can be downloaded on the same day on Altia’s website at: www.altiagroup.com/investors               

On-demand recording: A recording of the event will be available later on Altia’s website. 

Distribution: 

Nasdaq Helsinki Ltd 

Principal media 

www.altiagroup.com

Altia is a leading Nordic alcoholic beverage brand company operating in the wines and spirits markets in the Nordic and Baltic countries. Altia wants to support a development of a modern, responsible Nordic drinking culture. Altia’s flagship brands are Koskenkorva, O.P. Anderson and Larsen. Other iconic Nordic brands are Chill Out, Blossa, Xanté, Jaloviina, Leijona, Explorer and Grönstedts. Altia’s net sales in 2020 were EUR 342.4 million and the company employs about 650 professionals. Altia’s shares are listed on Nasdaq Helsinki.  www.altiagroup.com.