CEO’s review H1/2022

CEO’s review H1/2022

Esa Mäki, CEO:

“The net sales of Apetit Group’s continuing operations increased significantly, but profitability was lower than in the comparison period. In Food Solutions, the main challenge from profitability’s perspective was inflation that affects production inputs. In Oilseed Products, significantly increased raw material and logistics costs reduced profitability. However, demand for products in both businesses remained high.

The increase in costs continued during the second quarter, and the sales price increases to be made are a response to cost inflation that has already been realised. In Food Solutions, customer price increases will enter into force gradually in late summer and in the autumn.

In Oilseed Products, the introduction of higher sales prices will be slower due to agreement structures and the more extensive customer base. There is very good demand for domestic rapeseed oil in all sales channels. The successfulness of the current cultivation when it comes to the availability and price of oilseed plant raw material is significant for our profitability.

According to recent surveys, an increasing number of consumers has changed their purchasing behaviour as the price of food has increased. Apetit’s products have a strong position in retail trade as the only Finnish option and market leader of frozen vegetable products, which contributes to safeguarding demand for our products also in the changed circumstances. Apetit’s products are of high quality and have competitive prices. They are also a good match with the prevailing food trends of easier daily life, domestic origin, well-being, plant-based food, and sustainability.

The construction of the pizza production line in Pudasjärvi started in May and proceeded as planned during the summer. The approximately EUR 2 million investment was completed in July, and commercial production on the new line started at the beginning of August. New pizzas will be available in shops’ frozen food sections in October. Our goal is to challenge our foreign competitors by baking pizzas with sourdough, using domestic raw materials as much as possible and ensuring the deliciousness with stonebaking.

In Säkylä, we have continued investments in production efficiency improvements. The reception of peas at the start of the production line started during the summer. For its part, this eliminates production bottlenecks and improves our opportunities to increase pea production capacity in the future.

The harvest expectations for field vegetables are hopeful. The hot weather in early summer did not continue too long for plants, and rainfall has been mainly even throughout the growing season in our cultivation areas. After a couple of weaker years, the pea harvest is also expected to be good. Cooler weather has also contributed to the more even development of peas, which is good for pea quality and the smoothness of production.

For oilseed plants, the conditions during the summer growing season have been generally favourable so far. In the Baltic countries, harvesting started on time, and in Finland, main harvesting will probably begin in September a little later than normally. The total cultivation area of rapeseed in Finland increased by approximately 12,000 hectares from the previous year, which contributes to improving the harvest volume forecast. 

The divestment of Apetit’s Grain Trade business to Berner was completed at the end of May, and it allows us to focus on growing and developing our processing businesses, meaning the Food Solutions and Oilseed Products businesses. Apetit will continue to cooperate intensively with Berner in purchasing oilseed plant raw material and in increasing the oilseed plant cultivation area and harvest level together with farmers.

Apetit’s products promote sustainable eating in many ways. Baltic Sea Fish Patties, to be launched to professional kitchens in August, complement our local fish product selection. Like Baltic Sea Fish Fingers, the product is made of Finnish skinless Baltic herring fillet. The fishing of Baltic herring removes eutrophicating nutrients and algae from waterways. Sustainable food choices do matter!”

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CEO's Review Q3/2023

Esa Mäki, CEO: “In the third quarter, Apetit’s operating profit improved year-on-year. Both businesses improved their results. In Oilseed Products, positive profit performance was boosted by successful raw material sourcing. The operational efficiency of the bioenergy plant at the Kantvik vegetable oil milling plant has improved. In Food Solutions, positive profit performance resulted from good development in sales and price adjustments made in order to respond to the general rise in costs. We upgraded our profit guidance for 2023 for operating profit from continuing operations. Apetit expects the full-year operating profit from continuing operations to clearly improve year-on-year. In Oilseed Products, raw material sourcing has been successful throughout the year. International crush margins have been at an elevated level during the entire calendar year, and stabilisation of margins is not expected to happen during the remaining financial year. In Food Solutions, the sales have developed favourably. The impact of inflation, which has limited profit development, has successfully been moderated. The harvesting season, which is a key profit driver for Food Solutions, has progressed in a way that limits the risk during the current financial year from previous estimate. In October, we announced that we are building the new bottling line in the Kantvik vegetable oil milling plant. With this approximately EUR 4.5 million investment, we take the supply chain more firmly into our own hands. Investing in a new bottling line follows Apetit’s strategy of speeding up growth and provides opportunities for the development of products with a higher degree of processing in the vegetable oil business. On the new line, vegetable oils can be bottled in plastic and glass bottles. It is estimated that the new line will become operational during the second half of 2024. The abundant rainfall in August and September posed challenges for harvesting. Weather in the autumn can have a negative impact on the quality of root vegetable crops. Regardless, the harvest-time production of root vegetables has been fairly good as a whole. The processing of root vegetable crops will continue to the next calendar year. The volume and quality of autumn spinach crops were impaired by the abundant rainfall. We have launched several delicious new products during the autumn. Our new soup ingredients for traditional salmon soup and borsch soup introduced the Apetit brand in a new product category. These products contain soup ingredients for making a filling soup easily. Another new product of this autumn, Mashed potato with carrots, makes daily life much easier. The frozen pizza product family expanded to family-size pizzas when Superior Grande pizzas were introduced to the market. These new pizzas increase the range of Apetit’s frozen pizzas, which was renewed a year ago and received a warm welcome among consumers. The new products introduced this autumn are an excellent complement to our range of products. Apetit’s product selection is a good match for the current situation, in which consumers prefer affordably priced products. Important steps forward have been taken in the work to commercialise the rapeseed protein ingredient BlackGrain. This year’s efforts have been associated with the development of the production process. During the summer and the autumn, we have achieved desired results in process-related details, contributing to starting the commercial scale production. “More domestic plant proteins” is one of Apetit’s strategic focus areas. We have launched a project to produce Finnish pea protein. In this strategically important project, we explore, in the entire value chain, the opportunities to produce Finnish pea protein. We have many advantages here: strong value chain insight, expertise in plant-based raw materials and long-term cooperation with domestic primary production. The pea is one of our most used plant proteins worldwide, but thus far we have relied on imported raw materials. During the review period, Apetit decided to establish its own sales organisation in Sweden. The decision strengthens our position and promotes exports. Apetit’s product selection has achieved a strong foothold in the Swedish retail trade and it has grown even stronger with the expansion of the distribution channels. Export demand for peas continues to be strong. Apetit’s production facilities have gone through an energy transition and, as a result, the share of renewable energy of all energy used by the Group has grown approximately eight-fold. Wind power is now used in all production facilities. The Kantvik bioenergy plant and the Säkylä plant’s new energy solution have increased the use of domestic renewable energy. Apetit’s emission targets will be reached ahead of the planned schedule. The target set by Apetit is to reduce energy-related emissions by 75 per cent by 2025.”

CEO’s Review H1/2023

Esa Mäki, CEO: “Apetit’s result continued to develop positively. In the second quarter, the Group’s operating profit improved year-on-year. Both businesses improved their results. In Oilseed Products, the result has been improved by successful raw material sourcing. In Food Solutions, the improvement in result was influenced by successful product launches and by the price increases, made as a response to the general increase in costs. Result for the first half of the year improved clearly year-on-year. In the second quarter, Apetit Group’s net sales decreased slightly from the comparison period. The prices of oilseed products were exceptionally high in the comparison period, and the stabilisation of market prices could be seen as a decrease in net sales. However, sales volumes increased year-on-year. In Food Solutions, sales volumes and net sales have increased in all channels. The effects of cost inflation can be seen in consumer purchasing behavior. When buying food, consumers prefer more affordable products. At the same time, traditional, easy-to-prepare dishes, such as casseroles, have again become more popular. This can also be seen as changes in the demand for Apetit’s products as demand varies between different product groups. Our product range meet the consumers’ needs well. Frozen vegetables are an easy way to eat healthy and at the same time reduce food waste. The harvest season has proceeded fairly well. The hot and dry weather in the early summer reduced the first batch of the frozen pea harvest. The pea fields harvested later have yielded a harvest that is in line with expectations, in terms of both quality and quantity. For root vegetables, the growing season is still ongoing. The outlook is good, thanks to rains that came at a good time in July. For domestic spring oilseed plants, the growing season has been hampered by the hot and dry early summer. The rapeseed cultivation area has decreased year-on-year, which is not in line with our targets. As Finland is not entirely self-sufficient in oilseed plants, there is a genuine need to increase the cultivation area. In June, we announced a significant step in promoting the cultivation of domestic oilseed plants. Apetit was the driving force in the establishment of the new oilseed plant production development group, RypsiRapsi-foorumi. The forum brings together different stakeholders in the oilseed plant sector. It compiles the results of earlier research activities and produces new farming knowledge. Through this forum, we want to provide farmers with practical information and efficient methods for the cultivation of oilseed plants. The goal is to promote the cultivation of rapeseed and its profitability in Finland. The work to commercialize the rapeseed ingredient BlackGrain continues. During the first half of the year, we have focused on developing the production process. Measures to start commercial scale production are underway. BlackGrain offers the food industry a new domestic plant protein alternative that supports the implementation of the circular economy and the development of sustainable and high-quality food solutions. The use of steam produced with biogas was started in harvest-time production at the Säkylä frozen foods plant as part of the plant’s new energy solution. The new energy solution, based on renewable energy sources and heat recovery, will reduce the plant’s CO2 emissions by approximately 80 per cent. From now on, steam used at the Säkylä frozen foods plant is mainly produced with bioenergy. At the same time, the amount of primary energy needed decreases by approximately one third. As a result of the deployment of the new energy solution, the Group now uses mainly renewable energy sources. Already in 2022, a total of 76 per cent of the energy used by Apetit came from renewable sources. During the review period, we made a lot of progress towards our corporate responsibility programme’s goal of increasing the recyclability of packaging. Early this year, the use of recyclable plastic started in the Apetit Potato Onion product family, accounting for high sales volumes. The first frozen soups packaged in PECF-certified paperboard will be available in shops in the autumn. All frozen soups will be packaged in PEFC-certified paperboard by the end of 2024.”

CEO's Review Q1/2023

Esa Mäki, CEO: “The net sales and operating profit of Apetit’s continuing operations clearly grew year-on-year. In the Oilseed Products business the result rose to profitable. The result of Food Solutions also improved year-on-year. Net sales and sales volumes increased year-on-year in both businesses. In Food Solutions, sales volumes increased particularly in the Food service channel and exports. In the retail segment, volumes were slightly below than the high level seen in the comparison period. In the Oilseed Products business, market prices have levelled off from the highs seen last year. Investments in product development make sure that Apetit’s product range keeps aligned with the needs of consumers. In March, we launched new snack products in the retail channel, consisting of delicious combinations of vegetables and cheese. We also expanded our range of oven and grill vegetables by introducing a new flavour. Taste and competitive pricing remain key factors in consumers’ purchasing decisions, and we are able to respond to these expectations in our product categories. We strengthen the Apetit brand and have added our Finnish Apetit rapeseed oil to our selection in the Food service channel. Sales volumes increased year-on-year. The food service channel has continued its growth following the decline in sales caused by the COVID-19 pandemic. In the export, we have achieved strong growth in sales volumes thanks to our deliveries of peas. We have maintained our stable position among the preferred food choices of Finnish consumers. Cost inflation and the sharp increase in food prices reflect in consumer behaviour. Consumers are trying to decrease food waste and are opting for products in more affordable price categories. We will increase our cultivation area for field vegetables in the upcoming growing season. The number of hectares used for the cultivation of field vegetables by our contract growers will increase particularly for peas, potatoes and carrots. Our contract growing volume for Finnish field vegetables during the upcoming harvest season will be well over 30 million kilograms, using the Responsible Farming method we have developed at Apetit. Our Räpi experimental farm is continuing to develop cultivation methods. In accordance with our strategy, we will focus on promoting the cultivation of domestic pulses during the upcoming harvest season. In addition to peas, the Räpi farm grows chickpeas, among other crops, and the area under cultivation will again grow substantially when compared to the previous year. We were among the signatories to the Carbon Action cooperation network’s statement published in April with the aim of supporting sustainable cultivation methods and promoting regenerative agriculture. Promoting regenerative agriculture can produce benefits for waterways, the environment and farmers. The Räpi experimental farm will cultivate rapeseed in the upcoming harvest season. During this spring, we have made highly visible efforts to promote domestic rapeseed cultivation. In our campaign, which is known as Kaikki kotiinpäin in Finnish, we have sought to remind audiences of the significance of rapeseed with regard to self-sufficiency, as well as their favourable characteristics in crop rotation. The concerns about the declining cultivation areas of domestic rapeseed are real: according to the 2023 cultivation area forecast* of the Finnish Cereal Committee VYR, the area under cultivation for spring rapeseed – which is the most popular oilseed plant in Finland – will decline substantially this season. We hope that farmers will include rapeseed in their cultivation plans. Apetit is a stable buyer of domestic oilseed plants and we want to significantly increase the number of Finnish oilseed products. The new energy solution at the Säkylä frozen foods plant will be deployed during the summer. The energy solution is primarily based on renewable energy sources and heat recovery, and it represents an important step in reducing the climate impacts arising from our energy consumption. During the first months of the year, we conducted a survey** on Finnish consumers’ habits and perceptions concerning frozen vegetables. The results indicate that we are on the right path in many respects. A majority of the respondents felt that frozen foods make it easier to include vegetables in their diet. According to the survey, frozen vegetables are perceived as a very sustainable choice. Frozen vegetables enable anyone to reduce food waste and increase the share of domestic vegetables on their plate all year round.” *VYR: ** The survey sample consisted of 1,000 Finnish consumers between the ages of 18 and 75 who buy frozen vegetables at least a few times a year. Further information and more detailed results are available on Apetit’s website (in Finnish).