Flora - comment

We expect the bonds to trade modestly lower as the numbers behind the headlines point to a concerning trend for Flora. Flat EBITDA conceals a sustained volume decline across developed markets. At group level, pricing rose by 3.9% while volumes fell by 3.5%, delivering net sales growth of just 0.4%. In the developed markets of Europe and the Americas, volumes fell by 6.5% and 4.5% respectively, with higher pricing of 2.8% and 3.8% only partly offsetting the decline. Flora continues to rely heavily on the AMEA region, where 10% volume growth and 8.5% pricing growth supported overall sales.

Leverage increased as expected due to seasonal working capital movements and interest payments. The more significant concern remains the ongoing contraction in volumes across Europe and the Americas, which shows little sign of stabilising.

The overall tone of the call disappointed. Management remain focused on operations and show little appetite for asset sales to accelerate deleveraging. The company reiterated full year guidance, which sits slightly ahead of our projections. However, the sharp decline in butter prices across Central Europe, particularly in Germany and Poland, will likely keep volumes under pressure for the remainder of the year.