Apetit: Buying a turnaround company increases the risk level

Translation: Original published in Finnish on 10/10/2025 at 9:07 am EEST.

Apetit is expanding its frozen pea business by acquiring Swedish Foodhills AB. The target’s profitability has been clearly negative so far, as also reflected by the low deal valuation relative to the book value. It is challenging to predict a turnaround in profitability, which slightly raises the risk profile of the share. On the other hand, Apetit’s value creation potential has increased owing to the deal. While Apetit's organic earnings outlook is positive, Foodhills' losses will raise its earnings-based valuation in the coming years, leading to a weaker risk/reward ratio, in our view. We lower our recommendation to Reduce (was Accumulate) and the target price to EUR 14.0 (was EUR 15.0). 

Pea business expanded into Sweden through acquisition

Apetit announced on the morning of October 9 that it would acquire Foodhills AB, a Swedish company that cultivates and produces frozen peas in the Skåne region. Apetit has not made other acquisitions in the recent past, but it has a strong balance sheet, and, in addition, increasing exports and strengthening its market position in Sweden are key areas of focus in the company's strategy. The acquisition is estimated to be closed November 30, 2025, at the latest, and it requires approval from the Swedish authorities. Foodhills has invested significantly in its production plant (over 200 MSEK since 2018), against which the valuation of the acquired target in the transaction is low (EV: 60 MSEK). Because the transaction price is significantly lower than the balance sheet value, Apetit will record significant non-recurring profit from the transaction in Q4. Foodhills' revenue in 2024 was 168 MSEK (15.3 MEUR at the current exchange rate), and the EBIT was a loss of -55 MSEK (-5 MEUR). According to Apetit, the earnings impact for the group is neutral or slightly negative in the short term, but in the longer term, the impact is estimated to be slightly positive.

Apetit's expertise in peas could help turn around its profitability

Apetit already has solid expertise in cultivating and producing frozen peas, as well as exporting the product internationally. With the acquisition of Foodhills, Apetit is now by far the leading producer of frozen peas in the Nordic countries, with a market share of over 10%, even at the European level. We believe Apetit intends to develop both its commercial activities and operations, aiming to turn around its profitability. We predict that Foodhills' profitability will improve slightly in 2026 (estimated EBIT of -26 MSEK vs. median 2020-24: -33 MSEK) and significantly in 2027-28 (EBIT of 2-7 MSEK). We estimate that the short-term investment need will be lower than depreciation, meaning Foodhills could generate good cash flow for Apetit, even with low EBIT. Based on our 2028 forecasts, the acquisition's valuation would be EV/EBIT 8.6x and EV/EBITDA 2.4x. However, visibility on Foodhills' profitability turnaround is uncertain, and we also recognize the risk that the profitability of the business could remain negative, even at the EBITDA level.

Deal elevates earnings-based multiples for the coming years

Apetit's investment profile in recent years has been characterized by an upward trend in profitability and a relatively low level of risk. At the same time, revenue growth has been moderate and capital-intensive, as is typical for the industry. The acquisition of Foodhills will alter the investment profile, weakening the predictability of profitability. However, the company will have the opportunity for rapid, relatively capital-light growth through a potential turnaround in earnings. In our view, the result should show an organic improvement trend starting in H2'25, partly due to the improved availability of raw materials for oilseed products. On the other hand, Foodhills' losses will clearly raise earnings-based valuation multiples in the coming years, and our estimates indicate that a clearer turnaround in earnings will not occur until 2027–28. We are leaning towards a cautious recommendation as the international nature of the acquisition and the target's losses increase the level of risk. Evidence of Foodhills' positive profitability development could shift the investment story in a more attractive direction.