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Huhtamäki

One of the largest shifts in environmental sustainability over the last couple of decades has been towards using bio-plastics and other recyclable and often compostable materials for food packaging. Slowly but surely, previous forms of plastics and styrofoams have been replaced by biodegradable materials that are safer for the environment. Huhtamäki is a company based in Espoo, Finland that specializes in global food packaging with an emphasis on using sustainable materials for things such as fast food restaurants, coffee shops, and produce trays. Huhtamäki trades on the NASDAQ Helsinki index under the ticker symbol HEL: HUH1V, and the currency it trades in is Euros. Learn more

Huhtamäki was established in Finland back in 1920, as a confectionery manufacturer, but over the years it evolved into an industrial conglomerate. In the late 1980’s, Huhtamäki gave up a majority of its branches to focus solely on food packaging, with the goal of becoming a world leader in the sector. The company has operations in over 30 different countries around the globe and has strategic partnerships with brands such as Burger King as well as ownership over the Chinet brand which is one of the leading names in disposable tableware.
The Bullish Case: Huhtamäki thrived even during the COVID-19 pandemic, which makes sense considering most restaurants that remained open had to cater to the takeout crowd. With the pandemic ongoing, and an unclear vision of how dining in restaurants will look like in the future, companies like Huhtamäki are well positioned to capitalize on a global shift to food delivery and takeout. Another tailwind for Huhtamäki is the rapid acceleration of the global food delivery industry, headlined by companies like DoorDash (NYSE:DASH), Uber (NYSE:UBER), and GrubHub (NYSE:GRUB), which may have changed forever how easy it is to get restaurant quality food delivered right to our doors. Governments around the world have started to ban materials like styrofoam, plastic drinking straws, and other non bio-plastics, in an effort to clean up the environment, and what are they replacing these with? That’s right, sustainable materials like Huhtamäki’s products.
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The Bearish Case: The bearish case for a company like Huhtamäki lies in how widely used the products can be. Adding on a few more strong companies to its client list will go a long way in establishing itself as the world leader in sustainable food packaging. The brand has been specifically in food packaging since 1988, although the global shift towards sustainable materials has really only gained momentum over the past few years. Still, with nearly every food company in North America switching over to bioplastics, Huhtamäki should be growing its client base faster than it has been. Net sales and free cash flow also both fell during 2020, posting year over year declines due to the COVID-19 pandemic. One positive is that adjusted EBITDA and margins rose slightly, despite the declines, but the stock has performed subpar over the past 52-weeks, lagging the benchmark S&P 500 index over that same time period.
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Final Verdict on Huhtamäki: The company operates in a great industry with a decent moat having been an established food packaging manufacturer for several decades now. Still, as the world shifts to sustainable materials and biopackaging, it is hard to imagine other companies will not slowly move in on what market ownership Huhtamäki already has. Unless it can aggressively expand its North American operations where the move to bioplastics has had the most impact, this stock may continue to lag and not provide any sort of long-term growth potential for investors.
Sebastian Seiler

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