Apetit Q2'25: Headwinds in the operating environment are easing

Translation: Original published in Finnish on 8/25/2025 at 7:42 am EEST.

The soft earnings performance in Q2 was mainly due to temporary factors. We expect the earnings level to develop more steadily towards the end of the year, thanks to, e.g., volume growth in Food Solutions and improved raw material availability for Oilseed Products. In our view, the company is well-positioned to continue its moderate growth, supported by the increasing domestic consumption of frozen vegetables and exports. The valuation is close to a fair level based on this year’s abnormally weak result, but we expect earnings to turn to growth next year, at which point the expected return with the dividend will become sufficiently attractive. We reiterate our Accumulate recommendation and a target price of EUR 15.0.

Temporary factors burdened Q2 earnings performance

Revenue grew by 6% year-on-year in Q2 and was distributed fairly evenly across both segments (almost in line with our estimates). The 5% volume-driven growth in Food Solutions was a qualitatively good performance, also considering the industrial action around the beginning of Q2 that hampered production and delivery reliability. EBIT for the seasonally weak quarter was -0.8 MEUR, down from the comparison period (-0.1 MEUR), while we expected flat earnings development. Profitability was mainly affected by temporary factors, such as the impact of industrial action on production in both segments and the increased price of raw materials in Oilseed Products. The result of the volatile associate company Sucros was clearly weaker than in the comparison period, as a result of which the net result remained at -1.4 MEUR (we estimated 0.1 MEUR). Operating cash flow improved significantly, supported by the release of working capital.

H2 outlook is more stable, next year trending upwards

Apetit reiterated its guidance for 2025, according to which the Group's operating profit is expected to decrease slightly from the comparison year (2024: 9.3 MEUR). The company expects the availability of oilseed raw material to improve with the 2025 harvest, and rapeseed prices have also fallen in commodity exchanges, which signals an upturn in the profitability of Oilseed Products. Food Solutions, in turn, continues its volume growth, influenced by a moderate tailwind from consumption habits, export efforts, and new higher value-added products that Apetit occasionally brings to market. The company is making a 2 MEUR investment this year in the production of the Black Grain ingredient at its Kantvik plant, which will accelerate the commercialization of the ingredient. However, we have not yet factored in the revenue potential of the ingredient in our forecasts for the coming years.

If earnings development turns around, the expected return would again become attractive

Apetit is a defensive and capital-intensive company in terms of its investment profile, and its profitability fluctuates occasionally with harvest seasons and changes in the cost environment. The company is capable of growing its earnings in the long term, but due to its capital-intensive nature, we estimate that value creation will be moderate. The stock is currently valued at an EV/EBIT multiple of 10x on 2025 earnings, which we estimate will be slightly weaker than usual due to early-year strikes and raw material challenges. We are already partly looking ahead to next year (EV/EBIT 9x), when we expect earnings to strengthen, for example, through the removal of raw material-related headwinds and consistent volume growth in Food Solutions. While the current year's earnings do not offer further upside, we believe the 12-month expected return is sufficiently good, including approximately 10% earnings growth in 2026e and a 5% dividend yield. From a balance sheet perspective, P/B 0.8x is relatively inexpensive compared to our forecast normalized ROI level (2026e: ~8%).