Interim report january 1 - june 30, 2003

HUHTAMÄKI OYJ STOCK EXCHANGE RELEASE JULY 25, 2003 AT 13.10 1/9 ENCOURAGING VOLUME DEVELOPMENT, MARGINS STILL UNDER PRESSURE Interim Report January 1 - June 30, 2003 Huhtamaki, the consumer packaging specialist, continued to see an encouraging volume development in the second quarter of 2003. The reported net sales amounted to EUR 556 million, 9% below prior. Sales volumes were up by 3% while currency translations depressed the sales figure by 9% and price/mix by a further 3%. The operating profit before amortization (EBITA) of EUR 42 million (-39%) was impacted by continued margin pressure from higher raw material costs year-on-year and lower sales prices. Key figures Q2 Change H1 Change EUR million 2003 y-o-y,% 2003 y-o-y,% Net sales 556 -9 1,074 -8 EBITA 42 -39 81 -32 EBITA margin % 7.5 - 7.5 - Profit before 22 -54 39 -48 taxes Net income 14 -58 26 -50 EPS*, EUR 0.25 -43 0.47 -35 ROI*, % - - 10.3 -18 * Before amortization of goodwill and other intangible assets Regional sales Q2 Change* H1 Change* EUR million 2003 % 2003 % Europe 315 0 615 +2 Americas 163 0 306 -1 A-O-A 78 +3 154 +4 Total 556 +1 1,074 +1 * Change reported at constant exchangerates (comparable sales) Sales* - Europe saw a solid 3% comparable sales growth in the second quarter, but reported a flat number due to sales fluctuations in waste paper trading. Both Food Service and Consumer Goods business segments increased their comparable sales. - In the Americas a 1% sales volumes growth was offset by a 1% decline in price/mix. Food Service returned to positive growth in the quarter. - Asia, Oceania and Africa reported a 3% sales growth driven by continued progress in Asia. * Comments based on constant exchange rates Profitability - Earnings before interest, tax and amortization (EBITA) amounted to EUR 42 million in the second quarter compared to EUR 69 million in 2002 (- 39%). The six-month EBITA was 81 million compared to 118 million in 2002 (-32%). The EBITA margin was 7.5 % of net sales in the second quarter compared to 11.3% in 2002. The six-month EBITA margin was 7.5% compared to 10.1% in the corresponding period in 2002. - Unrecovered plastic raw materials prices and price/mix changes were the two main reasons behind the margin shortfall compared to 2002. Outlook A combination of factors continued to hamper the restoring of margins during the seasonally important second quarter. The raw materials price pressure is easing in the third quarter, particularly in Europe, and the volume growth momentum is expected to continue during the second half. This, however, will not compensate for the margin shortfall experienced in the first half. The full year 2003 results are expected to be clearly below 2002. Espoo, Finland, July 25, 2003 Huhtamaki Oyj Board of Directors Financial Review In Europe the reported net sales declined by 2% to EUR 315 million in the second quarter. Six-month net sales were flat at EUR 615 million. Second quarter sales volumes grew a healthy 5%, but currency translations (-2%), price/mix changes (-2%) and sales fluctuations in waste paper trading (-3%) depressed the reported number. Both business segments saw an increase in sales compared to previous year. In the Consumer Goods business segment, Flexibles and Films grew strongly while ice cream declined. In Food Service, catering and sales to quick service restaurants increased somewhat while retail declined slightly. Russia and Poland saw a significant sales increase in both business segments. The region's operating profit before amortization (EBITA) amounted to EUR 24 million in the second quarter (-27%) and EUR 48 million (-16%) in January-June. The EBITA margin was 7.6% in the second quarter, 2.5 percentage points below prior, mainly due to unrecovered raw materials price increases. Also manufacturing problems in Germany and UK affected margins. The corresponding six-month margin was 7.8%, 1.5 percentage points below prior. RONA (return on net assets), declined to 13.2% from 15.2% a year ago. In the Americas net sales declined by 20% to EUR 163 million in the second quarter. Six month net sales were EUR 306 million (-21%). The decline in the second quarter was solely due to currency translations. A small growth in sales volumes (1%) was fully offset by an equal decline in price/mix (-1%). North American Food Service improved, mainly driven by strong progress in retail, while Consumer Goods declined due to delays in orders and lack of customer promotions. The region's EBITA amounted to EUR 10 million (-56%) in the second quarter and EUR 15 million (-59%) in January-June. The EBITA margin was 6.3% in the second quarter, 5 percentage points below prior. Of the margin shortfall, price/mix accounts for approximately 2.5 percentage points and unrecovered plastic raw materials price increases for 1.5 percentage points. The six month margin was 5.0%, 4.5 percentage points below prior. RONA declined to 10.6% from 16.4% a year ago. Asia-Oceania-Africa reported net sales in the second quarter of EUR 78 million, 6% below prior. Currency translations depressed the number by 9%, sales volumes grew by 2% and price/mix/other added another 1%. Asia performed again strongly on the back of flexibles. Also Food Service sales grew. In Oceania, the Food Service segment was soft, while Consumer Goods suffered from low ice cream sales. Africa showed good progress. Six-month net sales were EUR 154 million (-5%). The region's EBITA amounted to EUR 5 million (-41%) in the second quarter and EUR 11 million (-32%) in January-June. The EBITA margin was 6.5% in the quarter, 3.7 percentage points below prior. The main reasons for the decline are higher manufacturing/conversion costs and unrecovered plastic raw materials price increases. The corresponding six- month margin was 7.0%, 2.8 percentage points below prior. RONA declined to 13.8% from 15.0% a year ago. The Group EBITA from operations was EUR 39 million (-39%) in the second quarter and EUR 74 million (-33%) in January-June. Group income and unallocated expense showed a net income of EUR 3 million, resulting in a total EBITA of EUR 42 million (-39%). The six-month EBITA was EUR 81 million (-32%). The corresponding figure after amortization (EBIT) amounted to EUR 32 million (-45%) in the second quarter and EUR 61 million (-37%) in January-June. The adverse currency impact on EBITA, mainly from USD, is EUR 4 million in the second quarter and EUR 7 million in the first half. Net financial expenses were unchanged at EUR 11 million in the second quarter and 23 million in the six-month period. The profit before minority interest and taxes in the second quarter amounted to EUR 22 million (-54%) and the corresponding six-month profit to EUR 39 million (-48%). Taxes declined by EUR 5 million to EUR 7 million due to lower profits and minority interest also declined by EUR 1 million, due to the purchase of a minority position in a German subsidiary at the end of 2002, resulting in a net income of EUR 14 million (-58%). The six-month net income was 26 million (-50%). The average number of shares declined from 101.2 million to 96.4 million, due to share repurchases in 2002/early 2003. The earnings per share was EUR 0.25 before amortization, compared to EUR 0.44 in 2002, and EUR 0.15 after amortization, compared to EUR 0.34 in 2002. The respective six-month figures were EUR 0.47 (EUR 0.72 in 2002) and EUR 0.27 (EUR 0.51 in 2002). The adverse currency impact on the decline before amortization was 2 cents in the second quarter and 4 cents in the first half. On a rolling 12-month basis, return on investment (ROI) was 10.3% compared to 12.6% a year ago. Return on equity (ROE) declined to 12.5% from 14.8% a year ago. The figures are before amortization. Financial position A dividend of EUR 36.5 million was paid during the quarter. Net debt was EUR 836 million, down by 14 million since the end of 2002. Gearing was 99% compared with 97% at year-end. Capital expenditure for the second quarter amounted to EUR 24 million, bringing the half-year total to EUR 41. Major projects underway are a new films plant in Malvern, U.S., the flexibles joint venture in Brazil, a capacity expansion for the flexibles plant in Ronsberg, Germany, a new flexibles plant in Vietnam and a new molded fiber egg packaging factory in Moscow, Russia. All projects are progressing according to plan. The full-year estimate for capital expenditure is approx. EUR 120 million. Share Developments Share prices * January 2 EUR 9.69 January 8 EUR 9.80 high March 8 EUR 8.00 low June 30 EUR 8.85 * closing prices After the low of EUR 8.00 in March the share price climbed by 20% to reach EUR 9.60 in early June. On June 12, the company announced that it will not meet its original profit target for the year. Following the pre- announcement the share has traded in a range of EUR 8.65 to EUR 9.25. The average daily turn-over of the share on the Helsinki Exchanges (HEX) was EUR 1.8 million in January-June. The share buyback program, whereby the company repurchased 5,061,089 own shares or 5% of the shares issue, was completed by the end of February. These shares were repurchased at an average price of EUR 9.19 per share. The U.S. fund management company Grantham, Mayo, Van Otterloo & Co. LLC announced on July 10 that it has increased its holding to 5.04% of the outstanding shares of Huhtamaki Oyj. At the end of July, foreign ownership amounted to 28% of the outstanding shares. Actions and development in the second half of 2003 The plastic raw materials price pressure is easing in the third quarter. On the operational side, a series of actions is underway to address manufacturing and cost base issues. The positive volume growth momentum is expected to continue in the second half. Management changes Upon the departure of Mr. Jan Lång, Mr. Joel Portnoj returned from Africa to head the European Food Service division. Personnel Huhtamaki had 16,193 employees at the end of June, 153 less than a year earlier. As full-time equivalents the reduction was approx. 450 people, mainly in Europe. Teleconference Huhtamaki's second quarter 2003 results will be presented and discussed by CEO Timo Peltola and CFO Timo Salonen in a conference call on Friday July 25 at 15:30 Helsinki / 13:30 London / 08:30 New York time. All the details for accessing the conference call are available via the internet, on www.Huhtamaki.com front page, under link "2nd Quarter Results". After the conference call, a replay in a form of an audio webcast will be available under the same link. Inquiries: Mr. Timo Salonen, CFO Tel. +358-9-6868 8401 Mr. Markus Holm, Investor Relations Manager Tel. +358-9-6868 8519 HUHTAMÄKI OYJ Timo Salonen CFO Juha Salonen Group General Councel ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2003/07/25/20030725BIT00150/wkr0001.doc The full report http://www.waymaker.net/bitonline/2003/07/25/20030725BIT00150/wkr0002.pdf The full report