HK RUOKATALO?S INTERIM REPORT FOR 1 JANUARY TO 30 SEPTEMBER 2004
HK Ruokatalo Oyj STOCK EXCHANGE BULLETIN 27 Oct. 2004, 10am 1(8)
HK RUOKATALOS INTERIM REPORT FOR 1 JANUARY TO 30 SEPTEMBER 2004
HK Ruokatalos turnover for the first nine months of 2004 was EUR
500.1 million, up by EUR 26.2 million on the corresponding figure a
year earlier. The operating profit rose to EUR 21.9 million compared
with EUR 19.7 million for the first nine months of 2003. Earnings
before exceptional items for the first nine months of the year rose to
EUR 18.2 million compared to EUR 16.1 million a year earlier. Earnings
per share for the nine months were EUR 0.56 (EUR 0.45 in 2003).
The year to date has been marked by higher sales and turnover. The
rate of growth is on target and has been faster than that of the
market as a whole. Despite the barbecue season failing to meet
expectations due to an unusually wet summer, Q3 of 2004 was as
envisaged. Growth was fastest in the Groups international business
and the Finnish poultry business also performed well. Pork and beef
posed the greatest challenges and at home have yet to achieve the
profitability level set.
The accession of Estonia, Latvia and Lithuania to the EU on 1 May 2004
created a common market area across the Baltics. This has enabled the
Group to tap the synergies provided by its units there. We have
streamlined operations particularly in Latvia and Lithuania. The
Groups Baltic units are shifting over to the same process-like way of
working as we have adopted in Finland. The Baltic units accounted for
EUR 81.5 million (EUR 79.0m) of Group turnover and EUR 5.7 million
(EUR 4.0m) of the operating profit. Business operations in the Baltics
contributed over a quarter of the Groups earnings and had a result of
EUR 5.0 million (EUR 3.2m) before exceptional items.
Sokolów, our Polish associate has been able to draw on its competitive
status with Polish EU membership. Sokolóws turnover was up by some 30
per cent during the start of the year. There has been a marked rise in
exports to Central Europe and exports now account for around 20 per
cent of Sokolóws turnover.
JOINT OWNERSHIP OF SOKOLÓW
On 6 August 2004, HK Ruokatalo and Danish Crown AmbA announced they
were to launch strategic cooperation in Sokolów, one of Polands
leading meat production and processing companies in which HK Ruokatalo
has had a stake since late 2002. Once the EUs competition authority
had given the joint venture the green light on 13 September 2004, HK
Ruokatalo transferred its 30.10 per cent shareholding in Sokolów to
Saturn Nordic Holding AB, a joint venture owned by HK Ruokatalo and
Danish Crown on a 50-50 basis. The driving force behind the joint
venture is to foster the further development of Sokolóws operations
and to help Sokolóws products gain access to the Central and Eastern
European markets. Saturn Nordic Holding AB acquired a majority holding
in Sokolów and, under Polish Securities Market Act, on 17 September
2004 made a public offer to acquire the remaining Sokolów shares. See
Events taking place since 30 September 2004ö
RESTRUCTURING
September saw the company embark on revamping the legal structure of
its operations in Finland. Industrial operations, sales, marketing and
logistics are to be merged into one company. Hitherto, five companies
in the Group have been responsible for these operations. Corporate
restructuring will take place in two stages. In the first stage, HK
Ruokatalo Oyjs fully-owned subsidiaries Broilertalo Oy, Food Kuljetus
Oy, Koiviston Teurastamo Oy and Pouttu Foods Oy will be merged into HK
Ruokatalo Oyj. Meeting on 16 September 2004, the Boards of Directors
of HK Ruokatalo and the subsidiaries concerned approved the merger
plan. The second stage of restructuring will see the Groups
industrial operations in Finland, including employees, being demerged
into a separate subsidiary. HK Ruokatalos subsidiary LSO Foods Oy,
which is responsible for the procurement of beef and pork and for
providing consultation to support primary production, remains outside
the restructuring project. The project is expected to take about six
months, including consideration by the authorities.
In response to the changing market environment in the Baltics, we have
effected a division of roles between Group companies in the Baltics.
This action is intended to intensify and enhance mutual cooperation
between the Rakvere Lihakombinaat and Tallegg groups.
INVESTMENTS AND FINANCE
HK Ruokatalo acquired the Sokolów shares owned by Conrad Jacobson GmbH
of Germany. The deal was agreed in May. The first stage of the deal in
July took HK Ruokatalos holding in Sokolów from 21.12 per cent to
30.10 per cent. The second stage of the deal is scheduled for October.
See Events taking place since 30 September 2004ö
August saw the Group decide an extensive investment programme to
replace the entire pork slaughtering line and machinery dating from
1987 in Forssa and to raise capacity in a bid to be at the cutting-
edge of efficiency in Europe. The animal reception facilities and
quick carcass refrigeration plant dating from the 1980s will also be
replaced at the same time. The project is scheduled for completion in
autumn 2005 and is expected to cost just over EUR 20 million, most of
the cost of which will be spread over future quarters.
During the first nine months of 2004, the Group invested EUR 30.2
million (EUR 37.1m) of which Finland accounted for EUR 23.4 million
and the Baltics for EUR 6.8 million. Work continues on enlargement of
the dispatch terminal adjoining the production plant and modernisation
and raising the level of automation of the existing terminal. In
Latvia, Rigas Miesnieks new logistics centre came on stream in May.
In Estonia, Ekseko made further progress with investments to reduce
adverse environmental impacts.
Group interest-bearing debt totalled EUR 157.4 million (EUR 145.6m) at
30 September 2004. The equity ratio remained on track at 43.0 per cent
(43.2%).
EMPLOYEES
The Group employed an average of 4,799 persons (5,087) during the
first nine months of the year. This fall was owing to staff cuts in
the Baltics. An analysis of employees by country at the end of
September is as follows: Finland 58.9%, Estonia 35.4%, Latvia 4.9%,
Lithuania 0.7% and other countries 0.1%.
BOARD OF DIRECTORS AUTHORISATION
Meeting on 22 April 2004, the Annual General Meeting of Shareholders
authorised the Board of Directors 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-
emptive subscription right 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
authorisation is valid until 22 April 2005. To date, the Board of
Directors has not exercised this authorisation.
SHARE PERFORMANCE
During the first nine months of 2004, 6,548,473 HK Ruokatalo Series-A
shares were traded on the Helsinki Exchanges for a value of EUR
43,761,087. The average price was EUR 6.68 and the end of September
closing price was EUR 7.57. HK Ruokatalos market capitalisation at 30
September 2004 was EUR 195.7 million (EUR 156.8m).
INCREASE IN SHARE CAPITAL
Between 2 and 30 January 2004, the exercise of warrants attached to
shares issued in the 1998 Employee Offering increased the number of
the companys Series-A shares by 595,705 new Series-A shares and the
share capital by EUR 1,012,698.50. The issue price was EUR 5.94 per
share. The increase was entered in the Trade Register on 13 February
2004. The warrant scheme expired on 31 January 2004. A total of
119,656 warrants of the 150,000 warrants originally attached to the
Employee Offering were exercised to subscribe new Series-A shares.
Around 220 members of staff employed by the Group at the time
subscribed to shares in the 1998 Employee Offering.
NOTICES OF CHANGE IN OWNERSHIP
During the current year, the company received the following notices
regarding change of ownership pursuant to Chapter 2, Section 9 of the
Securities Market Act.
On 13 February 2004, Markku Helander reported that he had reduced his
stake in HK Ruokatalo to 4.91 per cent of the shares and 0.99 per cent
of the votes.
On 16 February 2004, Sampo Life Insurance Company reported that its
stake in HK Ruokatalo had fallen to 4.94 per cent of the shares and
0.99 per cent of the votes.
On 6 August 2004, LRF of Sweden reported its intention to sell its HK
Ruokatalo shares and, subject to the deal taking place, would have no
stake in HK Ruokatalo.
On 6 August 2004, Danish Crown of Denmark reported that its stake in
HK Ruokatalo would rise to 10.14 per cent of the shares and 2.04 per
cent of the votes if a planned deal went through.
On 16 September 2004, LRF and Danish Crown announced that the deals
announced on 6 August 2004 had taken place.
PREPARATION FOR IAS/IFRS
The company will prepare its first IFRS compliant financial statements
for the financial year beginning 1 January 2005. Likewise, the interim
reports and comparative data will be published in compliance with IFRS
principles. The company will explain in connection with its 2004
financial statement bulletin the changes in the quantitative data in
the opening balance sheet dated 1 January 2004 that arise because of
the differences between Finnish GAAP and IAS/IFRS.
EVENTS TAKING PLACE SINCE 30 SEPTEMBER 2004
Meeting on 7 October 2004, the Board of Directors decided to call an
Extraordinary General Meeting of Shareholders on 27 October 2004 and
to propose to the Meeting an increase in share capital through a new
issue based on the pre-emptive subscrition right of shareholders. The
plan is to generate a maximum of EUR 36.2 million in new equity. In
the rights issue, existing shareholders would be offered one new
Series-A share at an issue price of EUR 4.20 for every three shares
they already hold. It is planned the offering will take place between
4 and 25 November 2004. In the same context, the Board of Directors
decided to propose to the Extraordinary General Meeting that it elect
Mr Kjeld Johannesen to the Board of Directors to replace Mr Lars
Danell, who has submitted his resignation.
Relating to legal restructuring, in compliance with the Finnish
Companies Act, on 20 October 2004, HK Ruokatalo Oyj notified the
companys shareholders of the merger plan now that the plan had been
entered in the trade register.
The public offer for the remaining Sokolów shares made by joint
venture Saturn Nordic Holding AB in Poland expired on 25 October 2004.
Information about the result of the offer will be given in a stock
exchange bulletin on or around 27 October 2004.
Under an agreement signed earlier in May this year, HK Ruokatalo Oyj
acquired on 26 October 2004, the second lot of Sokolów S.A. shares
owned by Conrad Jacobson GmbH of Germany. The deal involved 2.49 per
cent of the shares and votes representing Sokolów. HK Ruokatalo will
soon transfer the shares to Saturn Nordic Holding AB in the form of a
share exchange.
THE FUTURE
No major changes in business development are in sight and progress
with Group profitability is expected to be on track with the Groups
internal plans over the next few months. We remain ahead of targets in
respect of the Baltics and the poultry business in Finland. Although
raw pork prices are rising, the prevailing pricing practice in Finland
has not yet enabled us to pass this rise on in full to consumers. We
have yet to meet our red meat target in Finland and are seeking to
remedy this situation through investments and restructuring within the
Group.
In Poland, higher pork prices affect profitability in the same way as
they do in Finland if we are unable to pass these increases on to the
consumer. In the Baltics, however, there is less pressure to pass on
prices since we produce most of the pork needed there ourselves. The
price rise has a positive impact on the profitability of our Finnish
meat exports.
Progress has been made as planned with improving logistics. Work on
modernising and enlarging the dispatch terminal at Vantaa is well
underway. When deployed in late winter 2005, the terminal will have
greater processing efficiency and enable us to centre distribution
operations in the Helsinki Metropolitan Region in one place. Closure
of the convenience foods factory in Riihimäki and transfer of that
factorys operations to Vantaa will take place by the end of the year.
Work on replacing the slaughtering line at Forssa will continue until
autumn 2005.
Progress is being made as planned with the legal restructure of the
Groups Finnish operations. It is expected the ensuing cost savings
will be in evidence from the second half of 2005 onwards.
We continue to hone our core process and streamline the organisation
in the Baltics. These actions are required in response to the
transition from three different markets in three separate states to a
large single Baltic market as a result of the Baltic States joining
the EU on 1 May 2004.
In Poland, Saturn Nordic Holding ABs offer to purchase Sokolów shares
from minority shareholders expired on 25 October 2004. The next stage
is to take steps to develop Sokolóws business at the practical level.
Joint venture Saturn Nordic Holding group will be consolidated in the
2004 financial statements on the basis of pro-rata ownership. This
will have a material impact on HK Ruokatalo Groups figures for 2005.
Cooperation with Danish Crown in Sokolów will provide HK Ruokatalo
with good strategic potential to be closely involved at the spearhead
of development in Central and Eastern Europe as the retail trade
becomes increasingly concatenated and as foods move within and from
the EU.
CONSOLIDATED PROFIT AND LOSS ACCOUNT (EUR 1000)
1-9/2004 1-9/2003 1-12/2003
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Turnover 500,051 473,844 647,435
Operating profit 21,935 19,701 27,465
Profit before exceptional items 18,160 16,063 22,189
Group result before taxes 18,160 16,063 22,189
Result for the period under review 14,401 11,269 15,380
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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. Deferred taxes
also take into account the change in the Finnish tax rate.
CONSOLIDATED BALANCE SHEET (EUR 1000)
30.9.2004 30.9.2003 31.12.2003
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ASSETS
Fixed assets
Intangible assets 5,746 7,373 7,247
Goodwill on consolidation 23,074 24,507 24,597
Tangible assets 195,810 192,211 193,279
Financial assets 36,040 17,809 21,366
Fixed assets, total 260,670 241,900 246,489
Current assets
Stocks 43,463 40,994 39,704
Debtors 77,681 70,860 79,724
Cash at bank and in hand 7,935 16,799 12,055
Current assets, total 129,079 128,653 131,483
Assets, total 389,749 370,553 377,972
EQUITY AND LIABILITIES
Shareholders equity 165,664 149,600 153,778
Capital loan 50 50 50
Minority interests 1,791 10,531 1,871
Group reserve - 1,208 -
Provisions for liabilities and charges 162 167 178
Deferred tax liability 7,824 7,375 8,727
Long-term creditors 107,112 105,362 97,765
Short-term creditors 107,146 96,260 115,603
Shareholders equity and liabilities,
total 389,749 370,553 377,972
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CASH FLOW STATEMENT (EUR 1000)
1-9/2004 1-9/2003 1-12/2003
Operating activities
Net cash inflow/outflow from operating
activities 38,912 35,476 48,465
Change in net working capital -5,373 -8,019 -8,451
Financial items and taxes -8,199 -7,811 -9,463
Net cash inflow/outflow from
operating activities 25,340 19,646 30,551
Investments
Net cash inflow/outflow from
investing activities -30,048 -35,120 -55,391
Financing
Change in loans 4,286 12,869 17,478
Dividends paid -7,237 -6,244 -6,244
Share issue 3,539 9,304 9,317
Net cash inflow/outflow from
financing activities 588 15,929 20,551
Change in liquid assets -4,120 455 -4,289
FINANCIAL INDICATORS
Earnings per share (EPS), 0.56 0.45 0.62
Equity per share at 30 Sept, 6.41 5.92 6.09
Equity ratio, % 43.0 43.2 41.2
Number of shares 25,847,395 25,249,465 25,251,690
Gross fixed asset
investments, million 30.2 37.1 64.8
Gross investments as % of turnover 6.1 7.8 10.0
Employees, end of
- month average 4,799 5,087 5,034
CONSOLIDATED CONTINGENT LIABILITIES (EUR 1000)
30.9.2004 30.9.2003 31.12.2003
Debts for which pledges or
mortgages given as surety
- pension loans 16,426 17,783 16,519
- loans from financial institutions 109,098 103,982 114,949
For own debt
- pledges 10,007 13,827 9,561
- real estate mortgages 86,250 87,890 89,088
- business mortgages 22,186 24,371 23,804
For associated undertakings
- guarantees 120 67 50
For others
- pledges 40 42 40
- guarantees 5,075 5,447 6,292
Other own commitments
Leasing commitments 448 491 510
Other liabilities 3,749 1,115 1,315
Figures in this report are unaudited.
Helsinki, 27 October 2004
HK Ruokatalo Oyj
Board of Directors
Simo Palokangas
CEO
DISTRIBUTION:
Helsinki Exchanges
Internet: www.hk-ruokatalo.fi
