HKSCAN GROUP’S HALF YEAR FINANCIAL REPORT 1 JANUARY–30 JUNE 2018:
RESULT STILL IN LOSS – STRATEGY IMPLEMENTATION PROCEEDS WITH INCREASED FOCUS ON EFFICIENCY IMPROVEMENT
HKScan Corporation Half Year Report Release 19 July 2018 8:05 a.m.
APRIL–JUNE 2018 IN BRIEF
- Net sales in April–June were EUR 433.5 (459.6) million.
- EBIT was EUR -17.0 (-10.5) million. Comparable EBIT was EUR -16.9 (-1.2) million. The corresponding EBIT margin was -3.9 (-0.3) per cent.
- EPS was EUR -0.31 (-0.22).
- Cash flow before investments was EUR 8.2 (34.4) and before debt service EUR -0.6 (15.5) million.
- The challenges related to the Rauma unit ramp-up impacted the April–June Group comparable EBIT by approximately EUR -12.9 (-0.9). However, delivery capability improved and stabilised on a good level. Operations at the Eura plant were terminated at the end of the quarter.
- Strategy implementation continued in all areas. After the reporting period, 19 July 2018, HKScan further specified the content, financial targets and schedule of its ongoing efficiency improvement programme. The goal of the extensive programme is to improve profitability and its full impact will be annual savings of 40 million euros during 2020 and onwards.
JANUARY–JUNE 2018 IN BRIEF
- Net sales in January–June were EUR 844.5 (880.3) million
- EBIT was EUR -35.5 (-17.3) million, and the EBIT margin -4.2 (-2.0) per cent. Comparable EBIT was EUR -35.2 (-8.0) million. The corresponding EBIT margin was -4.2 (-0.9) per cent.
- EPS was EUR -0.63 (-0.36)
- Cash flow before investments was EUR -34.6 (12.0) and before debt service EUR -103.3 (-26.4) million.
- Net debt was EUR 317.1 (177.3) million and net gearing stood at 102.6 (46.8) per cent.
- The challenges related to the Rauma unit ramp-up impacted the January–June Group comparable EBIT by EUR -22.7 (-0.9) million.
The figures in parentheses refer to the comparison period, i.e. the same period in the previous year, unless otherwise mentioned.
OUTLOOK 2018 (UNCHANGED)
Global meat consumption is projected to increase 1.6 per cent per annum during the coming years. Consumption growth is estimated to be led by poultry. There are also several value-related consumption trends that support HKScan’s strategy implementation.
In 2018, HKScan expects its strategy implementation to start recording results in terms of value growth in sales and operational efficiency in production.
The company will emphasize the implementation of its From Farm to Fork strategy through the five focus areas, which are Focus on meat, Leadership in poultry, Continue growing meals business, Cooperate with our farming community and Drive efficiency and cost-competitiveness.
KEY FIGURES, Q2
| (EUR million) | 4-6/2018 | 4-6/2017 | 1-6/2018 | 1-6/2017 | 2017 |
| Net sales | 433.5 | 459.6 | 844.5 | 880.3 | 1808.1 |
| EBIT | -17.0 | -10.5 | -35.5 | -17.3 | -40.3 |
| - % of net sales | -3.9 | -2.3 | -4.2 | -2.0 | -2.2 |
| Profit/loss before taxes | -19.6 | -12.6 | -40.8 | -20.8 | -49.2 |
| - % of net sales | -4.5 | -2.7 | -4.8 | -2.4 | -2.7 |
| Profit/loss for the period | -16.6 | -11.3 | -33.7 | -18.3 | -42.4 |
| - % of net sales | -3.8 | -2.5 | -4.0 | -2.1 | -2.3 |
| Comparable EBIT | -16.9 | -1.2 | -35.2 | -8.0 | -17.6 |
| - % of net sales | -3.9 | -0.3 | -4.2 | -0.9 | -1.0 |
| Comparable profit/loss before taxes | -19.5 | -3.3 | -40.4 | -11.6 | -26.5 |
| - % of net sales | -4.5 | -0.7 | -4.8 | -1.3 | -1.5 |
| EPS, EUR | -0.31 | -0.22 | -0.63 | -0.36 | -0.84 |
| Cash flow before investments | 8.2 | 34.4 | -34.6 | 12.0 | 57.8 |
| Cash flow before debt service | -0.6 | 15.5 | -103.3 | -26.4 | -49.6 |
| Cash flow before financing activities | 1.0 | 16.8 | -103.0 | -26.9 | -58.3 |
| Return on capital employed (ROCE) before taxes, % | -9.1 | -0.3 | -6.3 | ||
| Net debt | 317.1 | 177.3 | 208.2 | ||
| Net Gearing % | 102.6 | 46.8 | 59.3 |
JARI LATVANEN, HKSCAN’S PRESIDENT AND CEO:
Our second quarter and first half-year results were disappointing. The result was still burdened by the challenges related to the Rauma poultry unit ramp-up process in Finland. However, we succeeded in improving our poultry delivery capability. We terminated our operations at the Eura plant and consolidated the Finnish poultry volumes to Rauma during the second quarter. We continue to give our full attention to the performance of the unit in order to ensure improvement in the efficiency and financial performance of the Rauma plant. In the long run, the unit will substantially improve our efficiency and competitiveness, thus contributing to HKScan’s strategy implementation.
As our performance is not yet acceptable, we have taken firm actions to correct the negative result trend. Today, we communicated the financial target, scope and schedule of our ongoing group-wide efficiency improvement programme. The programme targets EUR 40 million annual savings during the year 2020 and onwards. We expect the most significant benefits of the programme to stem from improved operational efficiency. On top of that, we will, among other things, reduce administrative costs further and utilise Group synergies to a greater extent than before. The planned efficiency improvement measures related to production and logistics operations in Finland, announced on 25 June 2018, are also part of the Group-wide efficiency improvement programme.
We are in the early phase of our strategic transformation and turnaround process. It requires strong leadership as well as engagement and input of the entire HKScan team. We will cooperate with our personnel to find the best measures for improving our competitiveness and profitability and thereby safeguarding our position as a solid and sustainable employer also in the future.
There are several trends supporting our holistic From Farm to Fork strategy. Consumers are increasingly interested in food origin as well as in production procedures along the entire food chain. The trend has resulted in increased demand of sustainably produced domestic products at all our home markets in Nordics – especially in Sweden. We are now capitalising our competitive advantage of sustainability also in our export business, for example in China, where our first export deliveries were shipped from Finland in April 2018.
PRESS CONFERENCE FOR ANALYSTS AND MEDIA
Information meeting related to HKScan Corporation’s Half year report for analysts, institutional investors and media will be organised at HKScan’s Vantaa facility (address: Väinö Tannerin tie 1, 01510 Vantaa) at 10–11 a.m. on 19 July 2018.
The Half year report will be presented by Jari Latvanen, President and CEO, and Mikko Forsell, CFO. The event will be held in Finnish.
Conference calls in English will be arranged upon separate request. Those interested in the calls, kindly contact HKScan Communications, communications@hkscan.com (phone +358 10 570 5700) to make an appointment.
HKScan Corporation
Board of Directors
Further information is available from Jari Latvanen, President and CEO, and Mikko Forsell, CFO. Please submit a call-back request via the Group media desk +358 (0)10 570 5700 or email: communications@hkscan.com
HKScan is a Nordic meat and meals company. We employ over 7 300 professionals in striving to serve the world´s most demanding consumers, maintaining quality throughout the full chain of operations, From Farm to Fork. HKScan produces, markets and sells high-quality, sustainably produced pork, beef, poultry and lamb products, as well as charcuterie and meals, with strong consumer brands, including HK®, Scan®, Rakvere®, Kariniemen®, Rose®, Pärsons® and Tallegg®. Our customers are the retail, food service, industrial and export sectors, and our home market comprises of Finland, Sweden, Denmark and the Baltics. We export to over 50 countries. In 2017, HKScan had net sales of EUR 1.8 billion, making us one of Europe’s leading meat and meals companies.
www.hkscan.com
DISTRIBUTION:
Nasdaq Helsinki Key media www.hkscan.com
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