Overview

The demand for consumer packaging remained stable in 2008 despite general economic uncertainty experienced in the majority of the markets towards year-end. At EUR 2,260 million (EUR 2,311 million in 2007), the Group’s reported net sales declined due to adverse currency translation impact. In constant currencies sales growth was achieved during the year.

At EUR 91 million (EUR 136 million), the full year Group earnings before interest and taxes (EBIT) excluding non-recurring charges were below the previous year. This development reflects weak performance especially in Flexibles and Films Global. Profitability excluding non-recurring charges was on a good level in Rigid and Molded Fiber Americas as well as in Molded Fiber Europe. Margin pressure was experienced during most of the year as raw material costs in 2008 remained on a high level compared to 2007.

Cash flow generation was good due to clearly improved working capital management as well as lower capital expenditure. The inventory reduction achieved at year-end resulted in strong cash flow but depressed earnings due to unabsorbed manufacturing costs. Net debt reduced strongly by year-end.

The Group’s strategic direction was decided to be updated in September 2008. Focus will be put on businesses with a strong market position and good growth potential. The smooth and rough molded fiber products, release films, flexible packaging, foodservice paper cups and other products based on paper forming technology were identified as stronghold areas. Rigid plastic Consumer Goods operations were resolved to be reorganized as a separate business under strategic review. As a continuum to the strategy update, a revised organizational layout and a new reporting structure for 2009, a number of changes took place in the Group Executive Team during the year.

Following the annual impairment testing that was conducted based on the updated strategic direction and the new reporting segments, significant non-recurring charges were recorded in the fourth quarter. The Group’s 2008 EBIT was EUR -75 million (EUR 28 million) including restructuring, goodwill impairment and tangible asset impairment charges, total amount EUR 166 million (EUR 108 million).

Mr. Jukka Moisio was appointed as Huhtamäki Oyj’s Chief Executive Officer on February 28, 2008 and effective from April 1, 2008.


Business review by segment

The sales distribution in 2008 was the following: Flexibles and Films Global 30% (31%), Rigid Europe 28% (27%), Molded Fiber Europe 6% (6%), Rigid and Molded Fiber Americas 27% (26%) as well as Rigid and Molded Fiber Asia-Oceania-Africa 9% (10%).


Financial review

The Group EBIT in 2008 was EUR -75 million (EUR 28 million), corresponding to an EBIT margin of -3.3% (1.2%).

The full year Group EBIT includes tangible asset impairment charges EUR 77 million (EUR 58 million), goodwill impairment charges EUR 72 million (EUR 47 million) and restructuring charges EUR 16 million (EUR 4 million), total amount EUR 166 million (EUR 108 million). Of the total amount, EUR 149 million were non-cash impairment charges. These were mainly related to rigid plastics Consumer Goods businesses in Europe and Oceania following the adjustment of book values to lower future cash flow expectations as annual impairment testing was conducted in accordance with the updated strategic direction and the new reporting segments. Additionally, the non-cash impairment charges were related to the processes to discontinue operations in Phoenix and Malvern.

The distribution of the non-recurring charges by segment was the following: Flexibles and Films segment EBIT includes tangible asset impairment charges EUR 9 million, goodwill impairment charges EUR 7 million (EUR 8 million) and restructuring charges EUR 2 million, total amount EUR 18 million (EUR 8 million).

Rigid Europe segment EBIT includes tangible asset impairment charges EUR 62 million (EUR 46 million), goodwill impairment charges EUR 35 million (EUR 32 million) and restructuring charges EUR 11 million (EUR 1 million), total amount EUR 108 million (EUR 79 million).

Rigid and Molded Fiber Americas segment EBIT includes tangible asset impairment charges EUR 3 million (EUR 12 million) and restructuring charges EUR 2 million, additionally Q4 2007 included goodwill impairment charges EUR 5 million, total amount EUR 5 million (EUR 17 million).

Rigid and Molded Fiber Asia-Oceania-Africa EBIT includes tangible asset impairment charges EUR 3 million, goodwill impairment charges EUR 30 million (EUR 2 million) and restructuring charges EUR 1 million (EUR 2 million), total amount EUR 35 million (EUR 4 million).

The full year Group EBIT excluding non-recurring charges was EUR 91 million (EUR 136 million), corresponding to an EBIT margin of 4.0% (5.9%).

The net financial items were EUR -46 million (EUR -43 million). Tax income was EUR 10 million (EUR -6 million).

The 2008 result was EUR -110 million (EUR -20 million) and the earnings per share (EPS) were EUR -1.12 (EUR -0.22). The average number of outstanding shares used in the EPS calculations was 100,426,461 (unchanged) excluding 5,061,089 (unchanged) of the Company’s own shares.

On a rolling 12-month basis, the return on investment (ROI) was -5% (2%) and return on equity (ROE) was -15% (-2%).