Hartmann retained market share in difficult Q3 2021

Hartmann delivered decent revenue and retained its market share in the third quarter of 2021 in the face of sharp increases in prices of energy and recycled paper and continued low off-season demand. The group initiated price adjustments and generated a small operating profit despite the extraordinary volatility, continuing its ongoing capacity expansion investments with a view to accommodating positive long-term market trends. Hartmann maintains its guidance, which was revised on 28 October.

Overall revenue grew moderately in Q3 2021, supported by the addition of activities in India and Russia. Demand for egg packaging remained low in the wake of COVID-19 restrictions being phased out and supermarkets running fewer special offers on eggs in Hartmann’s markets.

Earnings and profitability fell sharply in Q3 2021, driven by historically steep increases in energy and recycled paper prices and low demand for eggs and egg packaging, which led to reduced production efficiency at the group’s factories.

The level of investments remained high in Q3 2021, driven by continued efforts to expand and optimise production capacity in the USA and Europe.

Q3 2021

• Group revenue increased to DKK 630 million (2020: DKK 608 million).
• Operating profit* was DKK 12 million (2020: DKK 98 million) corresponding to a profit margin of 1.9% (2020: 16.0%).
• Investments increased to DKK 131 million (2020: DKK 58 million).

CEO Torben Rosenkrantz-Theil says: ”Our performance in the third quarter was affected by historically steep increases in the prices of energy and recycled paper and persistently weak demand and campaign activity in supermarkets. We’re focused on lifting selling prices and continue to invest in the ongoing production capacity expansion based on the positive trends that will drive market growth in the years ahead.”

2021 outlook

Hartmann maintains its 2021 guidance of revenue in the range of DKK 2.6-2.8 billion and a profit margin of 7-10%, as revised by company announcement no. 14/2021 of 28 October 2021 and set out in the section on events after the balance sheet date.

The group’s profit margin guidance is significantly affected by persistently high prices of Hartmann’s most important raw materials – recycled paper and energy – which continued to rise in the third quarter across the group's markets. Revenue guidance is affected by persistently low demand for egg packaging in the Q2-Q3 off season as a result of restrictions being phased out and the gradual reopening of the restaurant and catering industries combined with fewer special offers on eggs in supermarkets. The temporarily weak demand is expected to impact on the Q4 performance as well.

Increasing raw materials prices, the temporary decline in demand and reduced capacity utilisation combine to drive production costs significantly higher. These negative effects are partially offset by targeted efforts to adjust selling prices and improve the overall price and product mix. However, due to the duration of existing customer agreements, the expected price adjustment will be implemented at a certain time lag.

Guidance includes licence income of DKK 78 million resulting from the settlement in the first quarter of an intellectual property rights dispute concerning Hartmann’s imagic^® products.

Due to the historically high volatility of raw materials prices, visibility in the upcoming period will be significantly reduced, while at the same time developments in the group’s costs are subject to increased uncertainty.

Investments are still expected at about DKK 550 million in 2021, including the DKK 113 million acquisition of Gotek-Litar in Russia.

* Operating profit and profit margin are stated before restatement for special items and hyperinflation.