HKScan Group’s Interim Report 1 January–30 September 2018: Result still in loss – the 40 meur efficiency improvement programme proceeds

HKScan Corporation             Interim Report release                      7 November 2018               at 8:00 EET

JULY–SEPTEMBER 2018 IN BRIEF

•  Net sales in July–September were EUR 416.2 (452.4) million.
•  EBIT was EUR -10.1 (-0.8) million. Comparable EBIT was EUR -10.1 (2.7) million. The corresponding EBIT margin was -2.4 (0.6) per cent.
•  EPS was EUR -0.19 (-0.07).
•  Cash flow before investments was EUR -12.4 (14.9) million and before debt service EUR -22.8 (-12.0) million.
•  The negative impact of the Rauma unit ramp-up on the Group’s comparable EBIT decreased from the previous quarter and was EUR -8.1 million in July–September (EUR -12.9 million during the second quarter). In addition, delivery capability of the unit improved further.
•  After the reporting period, HKScan announced a decision to rationalise its Finnish operations and the related statutory negotiations were completed. The number of employees will decrease by a total of 165. The company estimates it will achieve annual savings of about EUR 7 million. 
•  The rationalisation and adjustment of the Finnish production operations are part of HKScan’s Group-wide efficiency improvement programme (Stock Exchange Release on 19 July 2018) targeting annual savings of EUR 40 million during 2020 and onwards. 

JANUARY–SEPTEMBER 2018 IN BRIEF

•  Net sales in January–September were EUR 1 260.7 (1,332.7) million.
•  EBIT was EUR -45.7 (-18.1) million, and the EBIT margin -3.6 (-1.4) per cent. Comparable EBIT was EUR -45.3 (-5.3) million. The corresponding EBIT margin was -3.6 (-0.4) per cent.
•  EPS was EUR -0.82 (-0.43).
•  Cash flow before investments was EUR -47.0 (26.9) million and before debt service EUR -126.1 (-38.4) million.
•  Net debt was EUR 305.6 (193.4) million and net gearing stood at 89.7 (51.4) per cent. The increase was mainly resultant to Rauma poultry plant investment.
•  The challenges related to the Rauma unit ramp-up impacted the Group’s comparable EBIT by EUR -30.9 million in January–September.

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 by 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 emphasise 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, Q3

JARI LATVANEN, HKSCAN’S PRESIDENT AND CEO:

Our third quarter and January–September results were clearly disappointing. During the third quarter, we succeeded in improving further our delivery capability from the Rauma poultry unit, but the ramp-up related challenges still burdened our result. We continue to improve 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. Additionally, we see some positive signs of value growth in sales both in Sweden and Baltics.

In July 2018, we further specified our 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, further reduce administrative costs and utilise Group synergies to a greater extent than before.

As part of the above-mentioned efficiency improvement programme, we initiated a strategic review related to the rationalisation and adjustment of the Finnish production operations with a target to improve the profitability and competitiveness of our operations. As a result of the process, the number of employees will decrease. Additionally, all units within the scope of the negotiations will prepare for location-specific temporary layoffs due to seasonal fluctuations. With these measures, we will reach annual savings of about EUR 7 million.

To improve our performance, we have taken prompt actions in developing the utilisation of our production network. We will develop our production units towards centres of excellence specialised in dedicated categories. Our Rakvere unit has, for example, been decided to be one of the sites specialising in the rapidly growing meals category. This is supported by the ongoing investment in Rakvere. As an example of the efficient cross-border utilization of our production network, our Finnish Rauma unit, specialized in poultry, is today serving also other HKScan home markets. After the reporting period, we launched the Finnish Karinäs® poultry products in Sweden.  

During 2018 we have put further emphasis on category management work. As a result, we have discontinued plenty of unprofitable products and at the same time launched new, innovative products on the market. Efficient product portfolio management together with improvements in operational efficiency will improve our performance during the strategy period.

We are still in the early phase of our strategic transformation and turnaround process. Our performance is not yet satisfactory. Therefore, we will focus all our leadership resources on turning the adverse development and on improving our competitiveness and profitability.

PRESS CONFERENCE FOR ANALYSTS AND MEDIA 

Information meeting related to HKScan Corporation’s interim report January–September 2018 for analysts, institutional investors and media will be organised at Hotel Haven’s auditorium (address: Eteläranta 16, Helsinki) at 10–11 a.m. on 7 November 2018.

The Interim 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 close to 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
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