Growth through global development

The year 2006 was a period of intense development for us. In line with our strategic framework we focused on improving our operational efficiency by continuing the execution of change programs. Having completed most of the second phase restructuring activities, we turned the focus, at end of the year, towards developing attractive growth platforms.

Geographically, the sales growth was fastest in the emerging markets, which together accounted for approximately 17 percent of the Group’s net sales. The demand for consumer packages in mature markets remained at the previous year’s level. In the Americas, net sales stayed at a good level while profitability improved markedly. In Europe and Oceania, Rigid businesses suffered from margin erosion due to high raw material and energy costs, whereas Flexibles and Films had strong growth. Net sales amounted to EUR 2,276 million, an increase of 2 percent on the previous year - despite the divestments made during the year.

Continued investments in growth markets

Europe is an important market for Huhtamaki, where growth was most promising in Poland and Russia. In the traditional markets, we focused on securing the long-term competitiveness of our core businesses. In Germany, part of the production of the Göttingen rigid packaging unit was transferred to Spain in the beginning of the year, and the rest to Poland in the mid-year. In the UK, the operations of the Portadown production unit were downsized.

Emerging markets are receiving an increasingly pronounced emphasis in Huhtamaki’s operations. To ensure profitable growth, investments were continued in emerging markets, focusing on areas that are expected to deliver competitive advantage and enable achieving the best leverage from Group synergies. The construction of a new production facility was started in Guangzhou, China, and the production of rigid packages will be transferred from the Hong Kong unit to the new facility by the end of 2007. A new flexibles plant was constructed in Rudrapur, India, and the existing flexibles unit in Vietnam was expanded.

Innovative packaging for demanding consumers

Huhtamaki’s mission is to create value for its stakeholders through efficient and innovative packaging solutions that bring convenience and safety to consumers’ everyday lives. A busy lifestyle and urbanization also require constant renewal from packaging solutions. Today, the packaging’s preservation properties are supplemented with convenience and safety features and packaging is becoming an increasingly important branding tool. We are continuously seeking new ways to improve the durability, convenience and recyclability of the packaging.

The packaging market is to a significant extent driven by local preferences and consumer behavior in different countries. Huhtamaki’s versatile packaging expertise, as well as the broad range of raw materials, enables us to provide all of our customers with a wide range of packaging solutions. Our customers include the world’s most renowned brand houses for which we provide services both locally and internationally. It is both cost-efficient and environmentally sustainable to manufacture most packaging types close to the customer. With operations in 36 countries on all continents, we are one of the most international companies headquartered in Finland.

Shifting focus to profitable growth

During the course of 2006, Huhtamaki proved its willingness and ability to change. Our targets are set even higher: our aim is to become a highly efficient and innovative packaging company with whom customers around the world choose to do business. We want to be able to address the packaging needs arising from new consumer habits and trends as well as the challenges of sustainable development.

During the year under review, we updated the Group’s long-term financial targets. The EBIT target was set at 9 percent and the ROI target at 15 percent, while gearing is targeted to be around 100 percent. We intend to maintain an average dividend payout ratio of 40 percent of the profit for the period. The targets are ambitious, but we believe that they can be achieved through consistent work.

I would like to thank all of our customers, suppliers and stakeholders for rewarding cooperation. I would also like to thank Huhtamaki employees for their commitment and open-mindedness in addressing the challenges arising from the company’s renewal. In closing, I would like to express my appreciation to our shareholders for the trust they have placed in us now and for the future.


Heikki Takanen
CEO