Apetit Q3'25: Favorable organic trend, Foodhills raises risk level

Translation: Original published in Finnish on 10/27/2025 at 08:37 am EET

Q3 was broadly in line with our expectations. The favorable development of Oilseed Products led to small upward revisions in operational earnings estimates. We expect organic earnings development to be favorable in the near term, but the operational earnings impact of the Foodhills acquisition, which will take place in Q4, is difficult to predict and likely to be negative at least in the short term. We are not prepared to fully rely on a potential earnings turnaround until there is more concrete evidence of it. We reiterate our Reduce recommendation and EUR 14.0 target price.

Big picture shows quarter in line with expectations

As a whole, the Q3 report was largely in line with expectations. Revenue grew as expected by 2%. Operational profitability was even stronger than estimated (9% above estimate), considering the 0.4 MEUR expert costs included in the EBIT in Food Solutions. The profitability of Food Solutions was negatively affected by a poor pea harvest, as Apetit pays pea farmers contract-based compensation for cultivation areas that are unsuitable for harvesting. The result of Oilseed Products improved by 0.2 MEUR y/y, supported by the decrease in raw material prices, and exceeded our forecast. Net income was weighed down by the negative earnings of the associate company Sucros, which pushed the reported EPS 22% below the estimate. However, without one-off expert fees, adjusted net income would have been only an estimated 11% below the forecast. Cash flow from operating activities has continued its good development, while organic investments have decreased slightly.

The organic earnings outlook is moderately favorable

Apetit’s earnings guidance for 2025 remained unchanged. The Group's operating profit, excluding the impact of the acquisition, is expected to decrease slightly from the comparison year (2024: 9.3 MEUR). Our 2025 EBIT estimate, excluding the impact of the acquisition, is 8.4 MEUR, which increased by 9% due to the strong performance of Oilseed Products. As a whole, EBIT forecasts for 2025-27 increased moderately by 5-7% For 2026, we estimate organic earnings growth of around 0.7 MEUR, driven by a good harvest in root vegetables and oilseeds, as well as new product launches. Apetit has continued to commercialize the BlackGrain ingredient by increasing the production capacity of the raw material required for the ingredient and by launching a burger patty utilizing the ingredient for professional kitchens in the fall. We estimate that new products will bring gradual revenue growth, with a moderate impact on earnings in the short term, but as volumes grow, profitability will improve in the medium term.

Acquisition of loss-making Foodhills raised the risk level

Overall, we expect Apetit's EBIT to decrease during 2026, which is affected by the unprofitability of the Foodhills business to be acquired in Q4. Sweden's largest producer of frozen peas, Foodhills, has long been unprofitable, and we estimate it will still generate an operating loss of -2.4 MEUR in 2026. Our estimates include an earnings turnaround for Foodhills for 2027-28 (EBIT: 0.2-0.6 MEUR), but the visibility of success in this area is still low. Earnings-based valuation is elevated based on the next few years' (2025-26e) earnings (EV/EBIT: 11-13x) relative to our estimated fair value for Apetit (approximately 10x). The balance sheet-based valuation, in turn, is favorable (0.7x), which is influenced by the very low purchase price paid for Foodhills relative to its balance sheet value. If the earnings turnaround is successful, earnings-based multiples would again decrease to attractive levels, and the upside potential indicated by the balance sheet-based valuation could materialize. However, the international nature of the acquisition and the unprofitability of the target increase the riskiness of the investment case and the required return premium until more concrete evidence of a turnaround is available.