HK RUOKATALO?S INTERIM REPORT FOR 1 JANU
HK Ruokatalo Oyj STOCK EXCHANGE BULLETIN 28 APRIL 2003, at 11am 1(8)
HK RUOKATALOS INTERIM REPORT FOR 1 JANUARY TO 31 MARCH 2003
HK Ruokatalo Groups turnover for Q1 of 2003 was EUR 144.0 million,
which was slightly up on the corresponding figure a year earlier. Q1
earnings rose to EUR 3.5 million, compared to EUR 3.9 million for the
corresponding period in 2002.
Group sales progressed as planned and sales volumes rose by over five
per cent compared to Q1 of 2002. Sales rose both at home and in the
Baltics and market shares remained unchanged. The poultry meat market
is important for HK Ruokatalo. During the first three months of 2003,
the poultry market was stable and in part served to offset the price
fluctuations of other types of meat. The fall in pork prices in Europe
owing to the cyclical production of pork was also reflected in prices
in Finland and the Baltics. In the Baltics, the raw meat market was
thrown into further disarray by subsidised exports from Poland to the
Baltics. These factors largely explain the approximately EUR 0.8
million decrease in turnover to EUR 24.6 million of HK Ruokatalos
Baltic operations. Earnings from the Groups Baltic operations were
EUR 0.6 million before exceptional items.
HK Ruokatalo Group achieved all the central targets set for the first
three months of 2003. A somewhat more difficult market situation in Q1
was taken into consideration when setting the targets as well as the
fact that the important Easter season fell this year during Q2. A
contributory factor in success of the Group was the fact that HK
Ruokatalos core process the chain from the farm to the customer
worked well. Implementation of chain management, starting from the
farm, went according to plan. This is extremely important in an
industry based on fresh produce. Good progress was made with the other
end of the chain from the factory to the customer and further
improvement was evident in delivery reliability. This was largely
attributable to efforts to reduce internal disturbances.
INVESTMENTS AND FINANCE
During Q1 of 2003, the Group invested EUR 21.1 million (EUR 6.1m) of
which the Baltics accounted for EUR 1.8 million. The incorporation of
slaughterhouse Koiviston Teurastamo Oy into the Group affected the
total amount of investments. At home, the most important project was
refurbishing the former beef slaughtering facilities at Forssa for the
slaughter and cutting of pork. In the Baltics, the most important
investments were in getting the Latvia-based Rigas Miesnieks factory
into EU shape and in building a logistics centre is association with
the factory.
Group interest-bearing liabilities remained virtually unchanged at EUR
136.4 million at 31 March 2003, compared to EUR 136.3 million a year
earlier. The figure includes the end of the 1996 convertible capital
note programme and the conversion of the remaining notes into HK
Ruokatalo shares. There was further improvement in the capital base
from 40.1 per cent to 44.3 per cent.
CHANGES IN GROUP STRUCTURE
In June 2002, HK Ruokatalo and the owners of the Mellilä-based
slaughterhouse Koiviston Teurastamo Oy signed a preliminary agreement
whereby HK Ruokatalo would buy Koiviston Teurastamos entire share
capital. Once the Finnish Competition Authority had given the green
light, completion of the deal went quickly ahead in late January 2003.
Koiviston Teurastamo has been accounted for in the Group figures since
1 February 2003.
In February 2003, HK Ruokatalo increased its 85 per cent interest in
slaughterhouse Helanderin Teurastamo Oy to 100 per cent. Loimaa-based
Helanderin Teurastamo has been part of the HK Ruokatalo Group since
summer 2000.
AS Tallegg, the Groups Estonian poultry company consolidated its
position in Lithuania, where at the start of the year it acquired a
majority stake in Lithuanian poultry company UAB Selingas, in which it
previously had a minority interest.
EMPLOYEES
The Group employed an average of 4,803 persons (4,682) during Q1 of
2003. This increase was mainly in the wake of an expansion of the
Groups operations in the Baltics. An analysis of employees by country
at the end of March is as follows: Finland 53.3%, Estonia 37.7%,
Latvia 7.1%, Lithuania 1.8% and other countries 0.1%.
Development of corporate culture and work practices at production
plants is currently focusing on improving process and operating
practices. Likewise, we are stepping up leadership and its
reorganisation in a bid to achieve leadership coaching.
The Board of Directors decided to continue the incentive bonus scheme
commenced in 2001. Employees can receive a bonus for 2003 if the
domestic operating margin exceeds the target budgeted. One third of
the sum exceeding the budget target is to be used to pay bonuses and
the related social security payments.
SHARE PERFORMANCE
During Q1 of 2003, 497,946 HK Ruokatalo A Shares were traded on the
Helsinki Exchanges for a total of EUR 2,978,954. The middle price was
EUR 5.98 and the March closing price was EUR 5.87.
THREE INCREASES IN SHARE CAPITAL
(1) Between 2 and 29 January 2003, notes of the 1996 convertible
capital note were converted into shares, increasing the number of the
companys A Shares by 2,122,320. The corresponding increase in share
capital, EUR 3,607,944.00, was entered in the Trade Register on 25
February 2003.
(2) The Board of Directors increased the share capital through a EUR
109,335.50 private placing, whereby 64,315 new HK Ruokatalo A Shares
were offered to the owners of Helanderin Teurastamo Oy. The issue was
part of a corporate arrangement under which HK Ruokatalo increased its
85 per cent ownership of Helanderin Teurastamo Oy slaughterhouse to
100 per cent. The increase in share capital was entered in the Trade
Register on 26 February 2003.
(3) Warrants attached to shares issued in the 1998 Employee Offering
were exercised between 3 February and 14 March 2003, increasing the
number of the companys A Shares by 350. The corresponding increase in
share capital, EUR 595.00, was entered in the Trade Register on 4
April 2003.
The increases made during the period under review resulted in HK
Ruokatalos share capital entered in the Trade Register rising from
EUR 39,206,216.00 to EUR 42,924,090.50.
REPAYMENT OF THE CONVERTIBLE CAPITAL NOTE
On 2 January 2003, the company decided to bring forward repayment of
the 1996 convertible capital note and offered to pay it back
prematurely. The note was originally due to mature at the end of 2006.
Bearers of the notes were requested to notify whether they wished to
convert their notes into the companys A Shares instead of repayment.
By the deadline of 29 January 2003, holders of all the outstanding
53,058 notes had announced that they wished to convert them. On 30
December 1996, HK Ruokatalo issued a FIM 62.5 million (approximately
EUR 10.5m) convertible capital note to professional investors. The
note was a convertible subordinated capital loan and had a term of ten
years. Each of the 62,500 notes issued in the loan had a nominal value
of FIM 1,000 (EUR 168.18793). Since all the notes have been converted
into shares, the company needed no cash to repay them.
NOTICE OF CHANGE IN OWNERSHIP
On 6 February 2003, Sampo Life Insurance Company (business identity
code 0641130-2) issued a notice pursuant to Chapter 2, Section 9 of
the Securities Market Act that subsequent to conversion of notes in
the 1996 convertible capital note on 30 January 2003, it owned
2,291,165 HK Ruokatalo A Shares. At the time, this corresponded to
9.93 per cent of the shares and 1.82 per cent of the votes.
BOARD OF DIRECTORS AUTHORISATIONS
The Annual General Meeting of 15 April 2002 authorised the Board of
Directors to decide whether to increase the share capital through one
or more rights issues, one or more convertible bond loans and/or
warrants so that the companys share capital may be raised by no more
than a maximum of EUR 3,162,000 through the issuance of a maximum of
1,860,000 of the companys new A Shares.
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. The pre-emption
rights of existing shareholders may be disapplied if there exists an
important financial reason to do so, such as financing, implementing
or enabling company acquisitions, strengthening or developing the
companys financial or capital structure or carrying out other
arrangements related to the development of the companys operations.
The Board of Directors may not disapply the pre-emption rights of
existing shareholders to the benefit of any member of the companys
inner circle. The Board of Directors has the right to decide whether
the shares issued in a rights issue can be subscribed for in kind or
are otherwise subject to certain conditions.
At the end of the period under review, a maximum of 1,795,685 A shares
or EUR 3,052,664.50 of the authorisation was unexercised.
EVENTS TAKING PLACE SINCE 31 MARCH 2003
The Annual General Meeting held on 9 April 2003 adopted the financial
statements for 2002 and discharged the Board of Directors and the CEO
from liability. It was decided to pay a dividend of EUR 0.27 per
share.
Marcus H. Borgström, Markku Aalto and Lars Danell were re-appointed to
the Board of Directors. Tiina Varho-Lankinen and Heikki Kauppinen were
appointed to replace Pentti Virtanen and Simo Palokangas. Mr Borgström
was re-elected as Chairman of the Board.
The Annual General Meeting granted the Board of Directors
authorisation to increase the share capital by a maximum of EUR
3,060,000 through offering a maximum of 1,800,000 A Shares for
subscription. This authorisation includes the right to waive the pre-
emption rights of existing shareholders.
A collective bargaining agreement applying to the entire food industry
was signed in early April. The agreement is for four years, which is
extremely long by Finnish standards, and is in line with the general
labour market policy set out in the spring.
THE FUTURE
General economic uncertainty is widely evident in domestic forecasts
for the future. However, consumer behaviour as regards meat products
remains unchanged and the Group is expected to continue to make steady
progress.
At home, the company is continuing work on a more effective division
of roles between the Forssa and Mellilä slaughterhouses. Slaughtering
at Loimaa will end in May and will be switched partly to Forssa and
partly to Mellilä in a bid for more rational operations.
Fiercer competition within the retail trade and industrys need to
respond to changing customer expectations give rise to further
pressure on prices in the meat industry. In supply chain management,
we will be looking to intensify cooperation with customers.
Signs are in evidence to suggest that prices of raw meat material on
the global market could start to rise towards the end of the year.
Until then, it would seem present low prices are set to continue. A
strong euro against the US dollar and Japanese yen will continue to
tax exports destined for outside euroland.
Our associated undertaking Sokolow in Poland is expected to continue
on a steady growth track. The companys performance in Q1 exceeded
clearly that of the corresponding period of 2002. Sokolow also
exceeded clearly its own targets set for Q1 of 2003.
CONSOLIDATED PROFIT AND LOSS ACCOUNT (EUR 1000)
Q1/2003 Q1/2002 Jan-Dec/2002
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Turnover 143,998 143,595 633,443
Operating profit 4,409 5,279 32,696
Profit before exceptional items 3,476 3,859 26,506
Group result before taxes 3,442 3,859 26,506
Result for the period under review 2,084 2,667 19,005
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The taxes in the profit and loss account take into account the
equivalent tax on income for the period under review.
CONSOLIDATED BALANCE SHEET (EUR 1000)
31 Mar 03 31 Mar 02 31 Dec 02
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ASSETS
Fixed assets
Intangible assets 8,063 10,450 8,315
Consolidation goodwill 25,071 17,960 17,152
Tangible assets 189,582 182,491 185,039
Financial assets 14,096 5,357 12,088
Fixed assets, total 236,812 216,258 222,594
Current assets
Stocks 42,251 36,068 34,504
Debtors 67,438 67,717 74,630
Cash at bank and in hand 7,618 5,275 16,344
Current assets, total 117,307 109,060 125,478
Assets, total 354,119 325,318 348,072
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders equity 146,713 121,257 135,346
Capital loan 50 10,512 8,924
Minority interests 10,059 9,129 10,349
Group reserve 1,242 1,317 1,260
Provisions for liabilities and charges 177 - 932
Deferred tax liability 7,372 5,655 7,102
Long-term creditors 88,795 91,185 85,145
Short-term creditors 99,711 86,263 99,014
Shareholders equity and
liabilities, total 354,119 325,318 348,072
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CASH FLOW STATEMENT (EUR 1000)
Q1/2003 Q1/2002Jan-Dec/2002
Operating activities
Net cash inflow/outflow from
operating activities 9,249 10,184 53,707
Change in net working capital -12,089 -14,695 -6,159
Financial items and taxes -1,824 -2,144 -10,754
Net cash inflow/outflow from
operating activities -4,664 -6,655 36,794
Investments
Net cash inflow/outflow from
investing activities -19,354 -5,932 -28,335
Financing activities
Change in loans 5,988 3,009 -4,700
Dividends paid 0 0 -3,856
Share issue 9,304 0 1,588
Net cash inflow/outflow from
financing activities 15,292 3,009 -6,968
Change in liquid assets -8,726 -9,578 1,491
FINANCIAL INDICATORS
Earnings per share EPS undiluted, EUR 0.09 0.12 0.84
Equity per share at 31 March, EUR 5.81 5.35 5.87
Equity ratio, % 44.3 40.1 41.9
Number of shares 25,249,115 22,684,800 23,062,480
Gross fixed asset
investments, EUR million 21.1 6.1 33.4
Gross investments as % of turnover 14.7 4.2 5.3
Employees, end of
month average 4,803 4,682 4,882
CONSOLIDATED CONTINGENT LIABILITIES (EUR 1000)
31 Mar 2003 31 Mar 2002 31 Dec 2002
Debts for which pledges or
mortgages given as surety
- pension loans 17,787 19,055 17,798
- loans from financial institutions 96,704 76,396 85,412
For own debt
- pledges 13,827 10,077 10,077
- real estate mortgages 88,772 94,245 89,453
- business mortgages 23,025 21,410 22,688
For associated undertakings
- guarantees 875 1,295 1,093
For others
- pledges 42 42 42
- guarantees 5,122 3,135 4,717
Other own commitments
Leasing commitments 212 377 209
Other liabilities 1,115 922 3,308
Figures in this report are unaudited.
Turku, 28 April 2003
HK Ruokatalo Oyj
Board of Directors
Simo Palokangas
Chief executive officer
DISTRIBUTION:
Helsinki Exchanges
Internet: www.hk-ruokatalo.fi
