HKFoods: New hybrid's interest rate clearly lower than old one
By Pauli Lohi
Translation: Original published in Finnish on 08/14/2025 at 08:00 am EEST
The interest rate level for the new hybrid bond was confirmed, and as we expected, it is even slightly more favorable compared to the company's senior bond. The new hybrid and redemption of the old one decrease the company's total financing costs. We do not see the refinancing operation causing significant revision pressure to EPS estimates.
The interest rate for the new hybrid is in line with our expectations
In a comment published on August 11, we discussed HKFoods' intention to issue a new 20 MEUR hybrid bond, with which the company could redeem its current expensive 26 MEUR hybrid bond (interest rate 16%). On Wednesday, August 13, HKFoods announced that it will issue the 20 MEUR hybrid in line with the previous announcement. The new hybrid bond's annual interest rate is a fixed 8.75%, which roughly corresponds to our estimate mentioned in the previous comment (around 9%). As such, the hybrid bond is currently more advantageous than the company's senior bond (7.5% + 3-month Euribor = ~9.5%). This dynamic and the bond's secondary market pricing, we believe, anticipate that the company will likely be able to refinance the senior bond as well on more favorable terms in connection with the next refinancing (maturing on June 17, 2027).
Total financing costs will decrease
HKFoods mentioned in its release that it intends to redeem the old expensive hybrid bond in late September. Net, we estimate the company's hybrid bond-related costs will decrease annually by around 2.4 MEUR, whereas our latest estimate assumed the hybrid cost would be completely removed (the old cost was 4.1 MEUR/year). That said, we do not expect significant net changes to current total financing costs, as the new hybrid is priced similarly to HKFoods' other loans. The refinancing operation may generate one-off financing costs for Q3, estimated at just under 1 MEUR, which we have not yet incorporated into our estimates. We will update our financing cost estimates before the Q3 interim report.
HKFoods operates in the food industry. The group includes several subsidiaries with business activities in the sale, marketing and production of meat products from pork, beef and poultry. The group operates the entire value chain, from slaughtering, cutting to processing and resale of the raw materials. HKFoods has the largest operations in the Nordic market. The head office is located in Turku.
Read more on company pageKey Estimate Figures07.08
| 2024 | 25e | 26e | |
|---|---|---|---|
| Revenue | 1,001.8 | 1,005.1 | 1,030.2 |
| growth-% | -13.9 % | 0.3 % | 2.5 % |
| EBIT (adj.) | 27.7 | 32.2 | 33.9 |
| EBIT-% (adj.) | 2.8 % | 3.2 % | 3.3 % |
| EPS (adj.) | -0.05 | 0.07 | 0.15 |
| Dividend | 0.09 | 0.05 | 0.06 |
| Dividend % | 11.1 % | 3.1 % | 3.7 % |
| P/E (adj.) | neg. | 20.6 | 10.1 |
| EV/EBITDA | 4.1 | 4.8 | 4.5 |
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