HK RUOKATALO GROUP?S INTERIM REPORT 1 JANUARY TO 31 MARCH 2005
HK Ruokatalo Group Oyj STOCK EXCHANGE RELEASE, 2 May 2005 at 10:30am
HK RUOKATALO GROUPS INTERIM REPORT 1 JANUARY TO 31 MARCH 2005
HK Ruokatalo Group groups revenue rose to EUR 197.1 million, up by
29.9 per cent on the figure a year earlier. Group operating profit
increased to EUR 5.8 million and pre-tax earnings were EUR 5.0
million.
HK Ruokatalo switched over to IFRS-compliant financial reporting from
the start of 2005. This interim report and comparison information has
been prepared in compliance with IFRS recognition and measurement
principles. The groups IFRS comparison financial information for 2004
was published 29 April 2005.
REVENUE AND FINANCIAL PERFORMANCE
Consolidated Q1 revenue was EUR 197.1 million, up by EUR 45.3 million
or 29.9 per cent on the corresponding figure a year earlier. The
operating profit was EUR 5.8 million (EUR 5.4m) and the operating
result before taxes was EUR 5.0 million, compared to EUR 4.7 million
in 2004.
These figures include the groups business in Finland, the Baltics and
Poland. Saturn Nordic Holding - in which HK Ruokatalo Group has a 50
per cent stake and which, at 31 March 2005, owned 80.4 per cent of the
shares in Polands leading meat production and processing company
Sokolów S.A. - has been accounted for in the HK Ruokatalo Groups
consolidated figures using proportionate consolidation since 1 January
2005.
During Q1 of 2005, 33 per cent of group revenue and 37 per cent of HK
Ruokatalos operating profit was generated outside Finland. HK
Ruokatalos internationalisation strategy in recent years has
considerably strengthened the companys growth potential in businesses
where there is typically little growth on the home market.
BUSINESS IN FINLAND
Business and profitability in Finland grew as envisaged during Q1 of
2005. The pork and beef, or red meat market, was similar to that
witnessed during the autumn of last year. Continuous structural change
in the industry reflects the intensity of competition. A new
phenomenon on the poultry meat front is the growing share of imported
meat in the retail trade. Earlier this was evidenced mostly in the
horeca sector.
The largest sales channel for Finnish meat, HK Ruokatalo and its
subsidiaries strengthened their market share in the procurement of
pork, beef and poultry meat.
At home, we continue to strengthen our competitiveness in processed
meats, which underpin HK Ruokatalos meat processing operations.
BUSINESS IN THE BALTICS
In the Baltics, the structural change taking place in the retail trade
and fierce competition for shelf space continued. Rakvere
Lihakombinaat and its subsidiaries made progress with improving their
core process and successfully managed to strengthen their market
position. Rakveres operations are beginning to be in line with
targets. Tallegg continued work on running in the structural changes
put in place last autumn. We further perfected the entire poultry
chain from primary production to processing, marketing and quality
assurance.
BUSINESS IN POLAND
In Poland, Sokolów had a good start to the year. Q1 earnings exceeded
the target budgeted and earnings for the comparison period. The
operative result was otherwise up on the figure a year earlier. Under
the guidance and control of its Finnish-Danish owners, Sokolów has
made sound progress in line with targets.
CHANGE IN THE ARTICLES OF ASSOCIATION
Meeting on 23 February 2005, the extraordinary meeting of shareholders
voted to amend the companys Articles of Association as a result of
changes made in the corporate structure. The most important item of
business was the proposal to change the name of the company from HK
Ruokatalo Oyj to HK Ruokatalo Group Oyj. At the same time, Article 2
was amended to reflect the companys changing circumstances by the
addition to the companys objects to include not only the possession,
letting and trading of land, buildings and shares, but also other
investment activities. Article 7 was amended so that general meetings
of shareholders can be held in Turku, Espoo, Eura, Forssa, Helsinki,
Pori, Tampere or Vantaa. The companys new Articles of Association
came into force on 31 March 2005.
CHANGES IN GROUP STRUCTURE
September 2004 saw a start made on streamlining the legal structure of
the companys business operations in Finland. Streamlining was
completed during the period under review. Restructuring took place in
two stages. In the first stage, HK Ruokatalo Group Oyjs fully-owned
subsidiaries Broilertalo Oy, Food Kuljetus Oy, Koiviston Teurastamo Oy
and Pouttu Foods Oy merged with and into HK Ruokatalo Group Oyj on 31
March 2005.
In the second stage, the groups Finnish industrial operations, sales,
marketing, logistics and transportation, as well as the employees
concerned, were transferred to a subsidiary known as HK Ruokatalo Oy,
which was established in February. The business transfer from HK
Ruokatalo Group Oyj to HK Ruokatalo Oy took place on 1 April 2005.
Subsequent to the business transfer, HK Ruokatalo Group Oyj retains
responsibility for Group management, finance and administration. HK
Ruokatalo Group Oyj owns the entire share capital of HK Ruokatalo Oy.
Until 1 September 2005, the companies have the same chief executive
and the same persons sit on the boards of directors of both companies.
Procurement company LSO Foods Oy was not part of restructuring and its
responsibilities remain unchanged.
INVESTMENTS AND FINANCE
During Q1 of 2005, the group invested EUR 12.6 million (EUR 5.9m) of
which Finland accounted for EUR 10.7 million.
Work continued on an extensive investment project to replace the pork
slaughtering line and to increase capacity at Forssa. The project will
also see the modernisation of animal reception facilities and the
quick carcass refrigeration plant. This investment is intended to take
us to the cutting-edge of efficiency in Europe.
Work continued on basic plans for the separate freezing plant to be
built at Forssa.
At the Vantaa site, work continued on upgrading the order picking
system and increasing the level of automation in the older part of the
terminal.
The consolidation of Saturn Nordic Holding Groups figures have
resulted in a significant growth in asset items in the balance sheet.
The groups interest-bearing debt at 31 March 2005 was EUR 179.3
million (EUR 154.1m). EUR 31.7 million of the EUR 46.9 million
increase in debt since the turn of the year is a result of the
consolidation of Saturn Nordic Holding Groups debts. The share issue
of November 2004 resulted in the equity ratio rising to 46.8 per cent
(41.9%).
BOARD OF DIRECTORS AUTHORISATION TO INCREASE THE SHARE CAPITAL
At the end of the period under review, the Board of Directors had an
authorisation, given by the Annual General Meeting of Shareholders on
22 April 2004, to decide whether to increase the share capital through
one or more rights issues, whether to issue one or more convertible
bond loans and/or warrants so that in a rights issue or when issuing
convertible bonds or warrants, a maximum of 2,000,000 of the companys
new Series A Shares having a nominal value of EUR 1.70 may be issued
and the companys share capital may be raised by no more than EUR
3,400,000.
The authorisation allows the Board of Directors to disapply the pre-
emption rights of existing shareholders and to decide the issue price
and other terms and conditions of subscription and the terms and
conditions of a convertible bond loan or warrants. To date, the Board
of Directors has not exercised this authorisation.
EMPLOYEES
The group employed, Poland excluded, an average of 4,367 persons
(4,647) during Q1 of 2005. An analysis of employees by country at 31
March is as follows: Finland 59.8%, Estonia 35.0%, Latvia 4.1%,
Lithuania 1.0% and other countries 0.1%.
EVENTS TAKING PLACE AFTER 31 MARCH 2005
On 12 April 2005, the companys Board of Directors appointed Kai
Seikku MSc (Econ. & Bus. Admin.) as HK Ruokatalos next CEO. Seikku
will assume the post of managing director of HK Ruokatalo Oy, which is
responsible for the Groups industrial operations in Finland, on 1
September 2005. He will take up the post of CEO of the entire HK
Ruokatalo Group on 1 April 2006, when the present CEO, Simo
Palokangas, retires.
HK Ruokatalo Groups Annual General Meeting held on 12 April 2005
adopted the parent companys and consolidated financial statements and
discharged the members of the Board of Directors and the CEO from
liability for 2004. It was decided to declare a dividend of EUR 0.29
per share as recommended by the Board of Directors.
Marcus H. Borgström, Agricultural Counsellor (Hon), Markku Aalto,
farmer, Kjeld Johannesen, managing director, Tiina Varho-Lankinen MSc
and Heikki Kauppinen BSc were all re-appointed to the Board. CEO Simo
Palokangas was appointed as a new member of the Board. Mr Borgström
and Mr Aalto were reappointed as chairman and deputy chairman
respectively.
Petri Palmroth CPA auditor was appointed the companys second auditor
for 2005 to replace Kauko Lehtonen, who had tendered his resignation.
Authorised public accountants PricewaterhouseCoopers Oy were appointed
as the companys auditors for 2006, with Jari Henttula CPA as the
principal auditor and Petri Palmroth CPA. Mika Kaarisalo CPA and Pasi
Pietarinen CPA were re-appointed as the companys deputy auditors.
Saturn Nordic Holding AB, the joint venture owned by HK Ruokatalo
Group and Danish Crown, announced that its holding in Sokolów A.S had
grown to 80.4 per cent.
THE FUTURE
The figures for Q1 2005 were slightly up on those a year earlier.
Considering the current year as a whole our targets remain as they
were.
At home, we continue to strengthen the Processing and Production
Group, which will be the focus of investment in a bid to increase our
share of the market in processed meats. To this end, we make even
better use of HK Ruokatalos acclaimed brands. At home, investments in
enhancing the Slaughtering and Cutting Group and distribution
logistics will progress as planned.
In the Baltics, we will work to strengthen our competitiveness. We
will seek to achieve operative and structural synergetic benefits from
the red and white meat process chains. Competition is expected to
remain intense, which is why we need to focus our core process.
In Poland, the strengthened position of our joint venture, Saturn
Nordic Holding, as Sokolóws owner provides a sound platform to
continue the encouraging development made under HK Ruokatalo and
Danish Crowns guidance and control.
CONSOLIDATED INCOME STATEMENT
(EUR million)
1-3/2005 1-3/2004 1-12/2004
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Revenue 197.1 151.8 680.4
Operating profit 5.8 5.4 35.8
Share of associates results 0.3 0.5 2.1
Financial income and expenses -1.1 -1.1 -5.2
Profit before taxes 5.0 4.7 32.7
Taxes -1.0 -0.8 -6.2
Result for the period under review 3.9 3.9 26.0
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EPS, diluted, EUR 0.11 0.13 0.76
CONSOLIDATED BALANCE SHEET
(EUR million)
31 Mar 05 31 Mar 04 31 Dec 04
ASSETS
Non-current assets
Intangible assets 3.9 4.1 4.0
Goodwill on consolidation 46.9 27.2 29.0
Property, plant, and equipment 240.0 193.7 200.4
Financial assets 6.4 22.0 46.1
Deferred tax assets 0.6 1.4 0.6
Other receivables 3.7 4.2 4.0
Current assets
Inventories 64.1 48.9 44.7
Trade and other receivables 100.2 71.5 86.9
Cash at bank and in hand 16.3 6.4 13.9
ASSETS, TOTAL 482.2 379.3 429.7
EQUITY AND LIABILITIES
Equity belonging to the shareholders
of parent company 216.0 157.1 210.0
Minority interests 9.7 2.0 1.9
Equity, total 225.7 159.1 211.9
Deferred tax liability 9.6 9.7 9.9
Non-current interest-bearing debt 88.7 98.0 82.2
Pension obligations 2.3 4.9 2.3
Long-term provisions for liabilities 1.4 0.2 0.2
Current interest-bearing debt 90.5 56.1 50.3
Trade and other current payables 64.1 51.4 72.9
EQUITY AND LIABILITIES, TOTAL 482.2 379.3 429.7
CASH FLOW STATEMENT (EUR 1000)
1-3/2005 1-3/2004 1-12/2004
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Operating activities
Net cash inflow/outflow from
operating activities 10,133 10,641 54,553
Change in net working capital -15,712 -16,547 -5,624
Financial items and taxes -2,069 -2,048 -10,365
Net cash inflow/outflow from
operating activities -7,648 -7,954 38,564
Investments
Net cash inflow/outflow from
investing activities -11,465 -5,553 -50,732
Financing activities
Change in loans 14,835 4,309 -17,929
Dividends paid 0 0 -7,237
Share issue 0 3,539 39,209
Net cash inflow/outflow from
financing activities 14,835 7,848 14,043
Change in liquid assets -4,278 *) -5,659 1,875
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*) Saturn Nordic Holding groups opening balance at 31 December 2004
is taken into account.
ANALYSIS BY SEGMENT (EUR million)
Revenue and operating profit by main market area*)
1-3/2005 %-share 1-3/2004 change
-------------------------------------------------------------
Revenue
-Finland 132.8 67.4 127.6 4%
-The Baltics 26.1 13.2 24.6 6%
-Poland 39.9 20.3 0.0 -
-Between segments -1.7 -0.9 -0.4 309%
-Total 197.1 100.0 151.8 30%
Operating profit
-Finland 3.7 63.3 4.2 -11%
-The Baltics 1.4 23.5 1.3 9%
-Poland 0.8 13.2 0.0 -
-Between segments 0.0 0.0 0.0 -
-Total 5.8 100.0 5.4 7%
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*) The figures for the Polish market for 2004 are included in the
operating profit for Finland.
FINANCIAL INDICATORS 31 Mar 05 31 Mar 04 31 Dec 04
Earnings per share (EPS) 0.11 0.13 0.76 1), 0.88 2)
Equity per share, 31 March EUR 6.27 5.42 6.09
Equity ratio, % 46.8 41.9 49.3
Adjusted number of shares 34,463,193 28,967,925 34,463,193
Gross investments, EUR mill. 12.6 5.9 52.3
Employees, average 4,367 4,647 4,713
1) Based on number of shares at year-end: 34,463,193
2) Based on adjusted average number of shares during the accounting
period: 29,428,181
CONSOLIDATED CONTINGENT LIABILITIES
(EUR 1000)
31 Mar 05 31 Mar 04 31 Dec 04
Debts for which pledges or
mortgages given as surety
- pension loans 14,584 16,426 14,584
- loans from financial institutions 75,305 115,895 79,530
For own debt
- pledges 10,007 10,007 10,007
- real estate mortgages 52,928 89,088 53,086
- business mortgages 22,125 22,056 22,125
For associated undertakings
- guarantees 120 50 120
For others
- pledges 17 40 17
- guarantees 6,690 5,340 4,868
Other own commitments
Leasing commitments 359 470 399
Other liabilities 30 3,015 4,860
Liabilities arising from derivative instruments
Nominal values of the derivatives
Currency derivatives 1,009 2,763 0
Commodity derivatives 4,362 3,694 4,655
Figures in this report are unaudited.
HK Ruokatalo Group Oyj
Board of Directors
Simo Palokangas
CEO
DISTRIBUTION:
Helsinki Exchages
Internet: www.hk-ruokatalo.fi
