HKScan Group’s Financial Statements Release 1 January–31 December 2018: Fourth quarter result improved but still in loss – further corrective actions under way
HKScan Corporation, Financial Statements Release, 6 February 2019, at 8:00 EET
HKSCAN GROUP’S FINANCIAL STATEMENTS RELEASE 1 JANUARY–31 DECEMBER 2018:
FOURTH QUARTER RESULT IMPROVED BUT STILL IN LOSS – FURTHER CORRECTIVE ACTIONS UNDER WAY
OCTOBER–DECEMBER 2018 IN BRIEF
- Net sales in October–December were EUR 454.7 (475.3) million.
- EBIT was EUR -3.8 (-22.2) million. Comparable EBIT was EUR -2.2 (-12.3) million. The corresponding EBIT margin was -0.5 (-2.6) per cent.
- EPS was EUR -0.20 (-0.39).
- Cash flow before investments was EUR 31.9 (30.9) million and before debt service EUR 18.9 (-11.3) million.
- The negative impact of the Rauma unit ramp-up on the Group’s comparable EBIT decreased from the previous quarter, amounting to approximately EUR -4.8 million in the fourth quarter (EUR -8.1 million in third quarter). In addition, delivery capability improved further.
JANUARY–DECEMBER 2018 IN BRIEF
- Net sales in January–December were EUR 1,715.4 (1,808.1) million.
- EBIT was EUR -49.5 (-40.3) million, and the EBIT margin -2.9 (-2.2) per cent. Comparable EBIT was EUR -47.5 (-17.6) million. The corresponding EBIT margin was -2.8 (-1.0) per cent.
- EPS was EUR -1.00 (-0.79).
- Cash flow before investments was EUR -15.1 (57.8) million and before debt service EUR -107.2 (-49.6) million.
- Net debt was EUR 289.4 (208.2) million and net gearing stood at 88.6 (59.3) per cent. The increase was mainly caused by the Rauma poultry plant investment.
- The challenges related to the Rauma unit ramp-up impacted the Group’s comparable EBIT by EUR -35.7 million in January–December.
The figures in parentheses refer to the comparison period, i.e. the same period in the previous year, unless otherwise mentioned.
OUTLOOK 2019
Global meat consumption is projected to increase during the coming years. Within HKScan’s home markets, consumption growth is estimated to be led by poultry and meal categories, while demand in other categories is expected to remain stable. HKScan expects its improvement programmes and other corrective actions to start recording results in 2019.
KEY FIGURES, Q4
| (EUR million) | 10-12/2018 | 10-12/2017 | 2018 | 2017 | |
| Net sales | 454.7 | 475.3 | 1 715.4 | 1 808.1 | |
| EBIT | -3.8 | -22.2 | -49.5 | -40.3 | |
| - % of net sales | -0.8 | -4.7 | -2.9 | -2.2 | |
| Profit/loss before taxes | -6.6 | -23.5 | -58.3 | -45.5 | |
| - % of net sales | -1.5 | -4.9 | -3.4 | -2.5 | |
| Profit/loss for the period | -9.2 | -20.1 | -51.2 | -39.5 | |
| - % of net sales | -2.0 | -4.2 | -3.0 | -2.2 | |
| Comparable EBIT | -2.2 | -12.3 | -47.5 | -17.6 | |
| - % of net sales | -0.5 | -2.6 | -2.8 | -1.0 | |
| Comparable profit/loss before taxes | -5.0 | -13.6 | -56.3 | -22.9 | |
| - % of net sales | -1.1 | -2.9 | -3.3 | -1.3 | |
| EPS, EUR | -0.20 | -0.39 | -1.00 | -0.79 | |
| Cash flow before investments | 31.9 | 30.9 | -15.1 | 57.8 | |
| Cash flow before debt service | 18.9 | -11.3 | -107.2 | -49.6 | |
| Cash flow before financing activities | 16.6 | -15.5 | -114.4 | -58.3 | |
| Return on capital employed (ROCE) before taxes, % | -7.4 | -6.3 | |||
| Net debt | 289.4 | 208.2 | |||
| Net gearing % | 88.6 | 59.3 |
TERO HEMMILÄ, HKSCAN’S CEO
HKScan’s full-year result was disappointing. The implementation of the From Farm to Fork strategy has not yielded the desired change in the company’s profitability. Firm actions are now needed to correct the negative development.
The Group’s From Farm to Fork strategy is a relevant framework for us. As a part of our annual strategy process, we will update the strategy and re-define our strategic focus areas. The strategy work will start immediately and proceed during the first half of the year.
It is evident that we need to strengthen our foundation based on strong meat industry competences and focus more firmly on leading the meat value chain efficiently. This requires more active management of all parts of the long value chain. These capabilities have somewhat eroded in our company, which has been one factor causing inefficiency and weak financial performance. Once we have corrected these basic issues, we can start shifting our focus towards actions targeting renewal.
To ensure our focus on our customers and consumers we aim to put stronger emphasis on market area level management of the value chain and the product portfolio. Our aim is to operate in a more dynamic and efficient way, closer to our customers. Increasing net sales and improving productivity and cost efficiency will remain our key focus areas when building a more solid foundation for our business.
During the second half of the year, HKScan succeeded in improving further the delivery capability from the Rauma poultry unit, but there were still challenges that strongly burdened the result. There is still plenty of work to be done in order to reach the targeted level of operational efficiency. In the near future, we will further strengthen our focus and level of special expertise needed in Rauma to improve the unit’s efficiency and thereby its financial performance.
The group-wide efficiency improvement programme, specified in July 2018 is ongoing. The programme targets EUR 40 million annual savings during the year 2020 and onwards. We expect the most significant savings to stem from improved operational efficiency and reduced administrative costs. Effects of the programme are not showing yet in the 2018 results.
Despite the challenges, HKScan has several important strengths supporting our profitability improvement efforts. We have skilled personnel, strong consumer brands, a large selection of great products and a strong place on the consumer’s dinner table. I firmly believe that, together with our personnel, we will be able to improve the company’s competitiveness.
PRESS CONFERENCE FOR ANALYSTS AND MEDIA
Information meeting related to HKScan Corporation’s financial statements report for analysts, institutional investors and media will be organised at Hotel Haven’s auditorium (address: Eteläranta 16, Helsinki, Finland) at 10–11 a.m. on 6 February 2019.
The financial statements will be presented by Tero Hemmilä, 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: HKScan Media Service Desk +358 (0)10 570 5700 or email: communications@hkscan.com
HKScan is a Nordic meat and meals company. We employ close to 7 200 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 close to 50 countries. In 2018, HKScan had net sales of EUR 1.7 billion.
DISTRIBUTION:
Nasdaq Helsinki
Main media
www.hkscan.com
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