Translation: Original published in Finnish on 12/17/2025 at 10:46 pm EET.

In principle, returning an additional installment to shareholders could be a favorable signal of the board's confidence in the company's earnings performance. On the other hand, the distribution of funds weakens the company's balance sheet buffers and slightly increases uncertainty regarding the reduction of financing costs. We do not believe that the payment of the additional installment has a significant impact on the fair value of the share.

The company will distribute an additional installment of EUR 0.05 per share

HKFoods announced on Wednesday that the company's Board of Directors has decided to pay a second return of capital installment (EUR 0.05/share) to shareholders during 2025. The Annual General Meeting decided in the spring on a capital repayment of EUR 0.09 (paid in May) and also authorized the Board of Directors to decide on an additional installment of EUR 0.05 (decided now and to be paid at the end of December).

The decision to pay a second installment could, in principle, be seen as a positive sign of the Board's confidence in the company's earnings development, as the company's balance sheet is still somewhat strained and it needs to refinance its 90 MEUR bond in around one year (maturing on June 17, 2027). On the other hand, the company has historically distributed funds to shareholders even in weak financial situations, which has later resulted in, for example, high financing costs. Therefore, we do not want to draw major conclusions from the capital distribution decision in either direction.

The distribution of funds weakens the balance sheet buffers

HKFoods' operational earnings development has been very positive in 2024-25, which has also helped strengthen the balance sheet. We believe that due to the earnings turnaround, the company would have good opportunities to reduce high financing costs in the coming years, which we have also taken into account in our forecasts (in addition to the refinancing of the bond, redemption of the hybrid is possible in 2028). However, in our view, the rather high distribution of funds to shareholders weakens the balance sheet buffers and increases uncertainty regarding the reduction of financing costs.

Our current forecasts have not included the payment of an additional capital return. If the payment is taken into account, our forecast for 2025e net debt would be 152 MEUR (2.4x EBITDA), net gearing 78%, and equity ratio 38%. The balance sheet is clearly on the better side of the covenant limits, but in our assessment, it does not yet have sufficient buffers to redeem the 20 MEUR hybrid bond.