HK Ruokatalo Oyj   STOCK EXCHANGE BULLETIN 25 Feb. 2004, 11:15am


The financial statements signed by HK Ruokatalo’s Board of Directors
today show a year-on-year rise of 2.2 per cent in Group turnover to
EUR 647.4 million. The result before exceptional items was EUR 22.2
million (EUR 26.5m in 2002). The Board of Directors is to recommend
that 46 per cent of the EPS, equivalent to EUR 0.28 per share (EUR
0.27 in 2002), be distributed as dividend for 2003.

The year 2003 was marked by depressed prices. At home the consumer
price of pork and poultry was down by more than six per cent, beef by
three per cent and processed meats by almost the same figure. Prices
fell partly owing to lower prices on the global market and partly
owing to the competitive environment.

At home, consumer volume rose by three per cent spread evenly across
all types of meat. Domestic primary production of meat was up by an
average of four per cent on the year, with pork and beef production
rising by five per cent and poultry by one per cent. HK Ruokatalo
further consolidated its position as the largest marketing channel for
Finnish meat. We processed 140 million kilos of Finnish meat. This
figure includes both meat sold under our own brands and private label
products, which also account for a considerable share of our output.

Although HK Ruokatalo’s performance in 2003 was the second best in the
company’s history, we were still disappointed on some fronts. Earnings
for the summer season fell far short of the target. Earnings were
eroded by low pork prices attributable to the cyclical nature of pork
production, especially on the Baltic market. Additionally costs rose
because of certain non-recurring charges.

Our experiences during 2003 have led us to further simplify and
improve the process-like way in which we operate. The Group remains
committed to being one of the leading meat companies in the Baltic Sea
Region and we are working strategically to this end. We have primed
ourselves on this front by strengthening our competitive position in
an enlarging European Union and by taking into account the changing
needs of our customers. Given this and the impact of decisions and
actions taken at home and in the Baltics, we are well placed for
profitable business and success on the expanding markets.

Group turnover for 2003 was EUR 647.4 million, up by EUR 14.0 million
or 2.2 per cent on the figure a year earlier. The operating result
before exceptional items was EUR 22.2 million, compared to EUR 26.5
million in 2002.

The above figures include the Group’s Baltic operations, which posted
a turnover of EUR 107.9 million. Earnings before exceptional items
were EUR 3.5 million. This compares with a turnover of EUR 110.6
million and earnings of EUR 8.1 million in 2002.

HK Ruokatalo Group sales rose by over 5 per cent during the year.
Growth was boosted by the record sale of more than 2.5 million kilos
of Christmas hams. Sales of poultry products also rose faster than the
average consumption rate.

The overall rise in sales volume was on target. Likewise, earnings
were largely in line with expectations, with the exception of the
summer season when we fell well behind our target. The year was marked
by depressed prices, attributable to the cyclical nature of pig
production and the ensuing problems on the global meat raw material
market on the one hand, and the competitive environment on the other.
This in turn meant that the rise in Group turnover was smaller than
sales growth. Given the tougher market environment, 2003 can overall
be said to have been a satisfactory year for HK Ruokatalo despite the
company’s failure to achieve all targets.

EU preparations led to us booking non-recurring items in the Baltics.
At home, temporary interruptions to our core process led to additional
pressure on costs given the market situation.

At home, consumer prices were lower in many major product groups than
in 2002. The slight rise in the price of raw pork material in the
autumn turned out to be temporary and, since ham prices had already
largely been settled, failed to impact on the important Christmas
season. Continued low prices on the pork market are a result of the
cyclical nature of pork production. A strengthening euro and import
quotas imposed by Russia on the EU have prolonged this cycle of low

Market prices for poultry meat in Finland were stable, albeit lower
than in 2002. Cheap imports of poultry meat from South-East Asia and
South America have appeared on the EU market, although not much has
reached Finland.

World prices for raw meat material showed mostly depressed as a result
of the economic downturn. Nevertheless, HK Ruokatalo again achieved
its export target for Finnish meat. Direct customer contacts and sales
of special products resulted in HK Ruokatalo’s exports of Finnish meat
rising to EUR 42.9 million. As in 2002, the main export countries were
Japan and Russia. A strong euro continued to erode the profitability
of Finnish meat exports.

A similar trend was evident in the Baltics, where pressure from the
global market is felt much more acutely than in Finland because of the
small market and low border protection. On the other hand, the Baltic
states’ protectionist actions against each other continue to hamper
cross-border business operations. Additionally, the fragmented market
makes it difficult to be a strong performer in Lithuania, where there
are many small companies in the meat industry facing a strongly
centralised retail trade.

The pork cycle put pressure on Rakvere Lihakombinaat, which produces
most of its own pork. The company’s own pork production is already
approaching the global market price level and the aim during the next
few years is to further trim production costs. Depressed prices and
restrictions resulted in Rakvere Lihakombinaat and its subsidiaries
falling short of their targets.

Poultry meat prices remained good in Estonia and satisfactory in
Latvia. Tallegg retained its position in Estonia and strengthened its
position in Latvia, especially in fresh broilers. Otherwise Tallegg
addressed improvements to its own production processes in a bid to
compete with cheap poultry meat imports.

Sokolów, HK Ruokatalo’s Polish associate, considerably improved its
profitability during the year under review, with turnover exceeding
PLN 1 billion and net earnings rising to PLN 18 million. Exports in
particular strengthened. Sokolów is Poland’s market leader in meat and
processed meats.

During the year under review, we made corporate acquisitions to
improve cost-effectiveness and were involved in ownership
restructuring arrangements to consolidate HK Ruokatalo’s position
abroad and to simplify the division of responsibility within the
Group. No new territorial conquests were made.

Acquirement of the entire share capital of slaughterhouse Koiviston
Teurastamo Oy in Mellilä took place in January 2003 once the Finnish
Competition Authority had unconditionally given the arrangement the
green light. The letter of intent was signed in summer 2002. The deal
enabled HK Ruokatalo to improve its pork processing operations and
avoid having to make major investments in its other slaughterhouses.
Correspondingly, Koiviston Teurastamo slaughterhouse has benefited
from HK Ruokatalo’s nationwide marketing channels.

HK Ruokatalo increased its 85 per cent interest in Helanderin
Teurastamo Oy slaughterhouse to 100 per cent in February 2003. Loimaa-
based Helanderin Teurastamo has been part of the Group since summer
2000. In a bid to improve efficiency between operating premises, the
Loimaa facility was closed in May and slaughtering switched to the
Forssa and Mellilä slaughterhouses.

In April 2003, HK Ruokatalo acquired an interest in Vantaa-based meat
wholesaler Lihatukku Harri Tamminen Oy, which produces various kinds
of consumer-packed meat. These premium meat products made of Finnish
rawmeat complement HK Ruokatalo Group’s other products.

In May 2003 and in October 2003, the Group increased its holding in
Outokumpu-based Pouttu Foods Oy, a meat procurement and slaughterhouse
company, from 50 per cent to 90 per cent and subsequently to full
ownership. This arrangement considerably strengthens HK Ruokatalo’s
supply of Finnish beef. HK Ruokatalo and Pouttu Oy established Pouttu
Foods as a joint venture in 1996.

In October 2003, HK Ruokatalo became the largest single shareholder in
Sokolów S.A., Poland’s leading meat company. Subsequent to share
transactions with Polish shareholders, HK Ruokatalo increased its
stake in Sokolów from 11.1 per cent to 21.1 per cent.

The role of the Federation of Swedish Farmers (LRF) as a strategic
investor in AS Tallegg, which belongs to the HK Ruokatalo Group, ended
in December 2003, when LRF withdrew from its operations in Estonia. To
this end LRF sold HK Ruokatalo its own half of AS Baltic Poultry,
which the two companies had established as a joint venture to hold
Tallegg shares. Subsequent to the deal, HK Ruokatalo’s holding in
Tallegg rose to 98.3 per cent. HK Ruokatalo and LRF acquired a
majority stake in Tallegg in June 2001.

At the start of the year, AS Tallegg acquired a majority stake in
Lithuanian poultry company UAB Selingas, in which it previously had a
minority interest.

In summer 2003, Seppo Ohvo, executive vice president, Commercial
Operations, and Ilkka Häyhä, executive vice president, Baltic Group,
announced their intention to leave HK Ruokatalo. Reijo Kiskola,
managing director of subsidiary Broilertalo, was appointed executive
vice president, Commercial Operations and HK Ruokatalo’s marketing
director Olli Antniemi was appointed executive vice president, Baltic
Group. Esa Mäki was appointed managing director of Broilertalo. He
joined the Group at the start of November.

In this connection, the Production Group was split into two:
Slaughtering & Cutting and Processing & Production. Risto Koivisto,
managing director of subsidiary Koiviston Teurastamo, was appointed
executive vice president of Slaughtering & Cutting. Jari Leija
continues as executive vice president, Processing & Production.

The Group’s gross investments almost doubled to EUR 64.8 million,
compared to EUR 33.4 million in 2002. Investments at home accounted
for EUR 55.7 million of this figure.

HK Ruokatalo’s corporate restructuring and acquisitions of shares at
home and abroad are intended to generate long-term benefits: the
company does not make financial investments. The acquisitions are
detailed in “Changes in Group structureö above. Integration of
Koiviston Teurastamo into the Group had the greatest impact from the
production perspective. The early part of the year saw the completion
of refurbishing the former beef slaughtering facilities at Forssa for
the slaughter and cutting of pork. Work progressed in Latvia on
modernising the Rigas Miesnieks factory and on building a logistics
centre. In Estonia, Ekseko, a pig farm company, invested in reducing
environmental loading.

In September 2003, Rakvere Lihakombinaat’s production facilities were
the first Estonian meat company in Estonia to receive the approval of
the EU authorities.

Corporate and share acquisitions resulted in an increase in the
Group’s interest-bearing liabilities to EUR 149.3 million (EUR 130.6m)
at year-end 2003. Despite the considerable increase in loans, the
equity ratio remained on target at 41.2 per cent (41.9%).

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.
By the deadline of 29 January 2003, holders of all the outstanding
53,058 notes had announced that they wished to convert them to the
company’s A Shares.

During the year under review, the Board of Directors increased the
share capital by a total of EUR 3,721,657.00 by the issuance of
2,189,210 new A Shares. The increases were as follows:

(1) Between 2 and 29 January 2003, notes of the 1996 convertible
capital note were converted into shares, increasing the number of the
company’s A Shares by 2,122,320. The corresponding increase of EUR
3,607,944.00 in the share capital was entered in the Trade Register on
25 February 2003. The issue price of the new shares was EUR 4.20 per

(2) A private placing of EUR 109,335.50 took place in February, when
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 issue price was EUR 5.87 per share. The increase in share capital
was entered in the Trade Register on 26 February 2003.

(3) Between 3 February and 14 March 2003, the exercise of warrants
attached to shares issued in the 1998 Employee Offering increased the
number of the company’s A Shares by 350 new A Shares. The issue price
was EUR 6.21 per share. The corresponding increase in share capital,
EUR 595.00, was entered in the Trade Register on 4 April 2003.

(4) Between 3 and 28 November 2003, a total of 2,225 new A Shares were
issued by virtue of employee warrants. The issue price was EUR 5.94
per share. The increase in share capital of EUR 3,782.50 was entered
in the Trade Register on 15 December 2003.

The new shares subscribed under (1), (3) and (4) above are entitled to
receive a dividend for the 2003 financial year and thereafter and new
shares subscribed under (2) for the 2002 financial year and

During the year under review, the company received two notices
pursuant to Chapter 2, Section 9 of the Securities Market Act.

On 6 February 2003, Sampo Life Insurance Company reported 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, the shares corresponded to 9.93 per cent of the share capital
and 1.82 per cent of the votes.

On 14 October 2003, the Federation of Swedish Farmers (LRF) reported
that its holding in HK Ruokatalo had fallen to 10.38 per cent of the
share capital and 2.05 per cent of the votes.

At year-end 2003, the Group employed 4,788 people, compared to 4,718 a
year earlier. Employees by country: Finland 55.5%, Estonia 35.2%,
Latvia 7.0%, Lithuania 2.2%, other countries 0.1%.

The Group employed an average of 5,034 (4,882) people during the year.
This increase reflects the inclusion of new Group companies and an
increase in the number of seasonal employees at home. In Estonia,
Tallegg’s efficiency programme led to a fall in employee numbers.

Under the terms of his contract, CEO Simo Palokangas has the
possibility to retire in October 2004. The Board of Directors has
agreed with Mr Palokangas that he will continue to head the HK
Ruokatalo Group for the present.

Between 2 and 30 January 2004, the exercise of warrants attached to
shares issued in the 1998 Employee Offering increased the number of
the company’s A Shares by 595,705 new A Shares and the share capital
by EUR 1,012,698.50. The issue price was EUR 5.94 per share. Since the
warrant programme expired on 31 January 2004, this was the final
period of subscription. A total of 150,000 warrants were originally
attached to Employee Shares. Of these, 119,656 were exercised to
subscribe to new A Shares. Around 220 employees employed by the Group
at the time subscribed to shares in the 1998 Employee Offering.

LSO Foods Oy took over the procurement operations of subsidiary Pouttu
Foods Oy at the start of 2004.

In early 2003, the company launched a project to introduce IFRS
accounting standards. The project is studying the differences between
IFRS accounting principles and those currently used by the Group and
will determine the IFRS compliant principles for HK Ruokatalo’s
consolidated financial statements. The project will also study the
impact of the changes in accounting practice on the balance sheet and
financial indicators starting in 2004, revamp the consolidated
accounting and reporting guidelines and deploy a new consolidated
accounting system.

The project is divided into a number of part-projects, the most
important of which are segment reporting (IAS 14), leases (IAS 17),
intangible assets (IAS 38), impairment of assets (IAS 36) and
agriculture (IAS 41). In respect of stocks, HK Ruokatalo Group changed
to using a method of valuation corresponding to IAS/IFRS standards in
its financial statements, with the exception of agriculture.

In the current light, we do not expect the introduction of IFRS
standards to have a material impact on the consolidated result or
balance sheet values.

We will work with auditors to train the organisation and interpret the

The first financial statements compliant with IFRS rules will be
prepared for the financial year beginning 1 January 2005. Likewise,
the interim reports with comparative information will be published in
accordance with IFRS accounting principles as recommended by the
Financial Supervision Authority.

HK Ruokatalo Group’s business has made progress as expected during
2004. Work is underway to further enhance cost-effectiveness.

We will be increasing intense cooperation with our principle retail
customers in a bid to increase sales and cut costs in a spirit of

Competition remains fierce on the Finnish meat market, which in turn
may herald a further fall in the number of companies in the business
at some point.

EU enlargement will improve the Group’s business conditions in the
Baltics because we will be able to operate efficiently across the
Baltic market. The business environment of Sokolów, our associate
company in Poland, is improving. Poland’s accession to the EU will
bring about a significant competitive advantage to companies like the
Sokolów Group as the grey economy shrinks and as export opportunities
open up to densely populated regions, especially in Central Europe.

Although the Group’s poultry units are closely monitoring the outbreak
of avian flu, which started in the Far East, it is still too early to
assess what impact, if any, the disease will have on our poultry
business. Whilst we continue expect the long envisaged upswing in
prices on the pork market, there is still no definite sign of this in

The Group’s distributable equity is EUR 31,558,941.93. The parent
company’s distributable equity is EUR 20,120,592.98. The Board of
Directors recommends that the company pay a 2003 dividend of EUR 0.28
per share, in other words a total of EUR 7.2 million.

HK Ruokatalo Oyj’s Annual General Meeting will be held at the
company’s head office at Kaivokatu 18, Turku starting at 1pm on
Thursday 22 April 2004. To be eligible to attend the meeting,
shareholders should be registered by 8 April 2004 in the share
register kept by the Finnish Central Securities Depository Ltd. Notice
of the Annual General Meeting and agenda will be published later.


                                                 2003         2002

Turnover                                      647,435      633,443
Materials and services                        414,262      398,132
Staff costs                                   115,767      108,626
Depreciation and value adjustments             21,402       21,512
Other operating charges                        76,043       74,455
Operating profit                               27,465       32,696
Financial income and charges, net              -5,276       -6,190
Result before exceptional items                22,189       26,506
Exceptional items, net                              -            -
Result before appropriations and taxes         22,189       26,506
Result for the year                            15,380       19,005


                                                 2003         2002
Fixed assets
Intangible assets                               7,247        8,315
Consolidation goodwill                         24,597       17,152
Tangible assets                               193,279      185,039
Financial assets                               21,366       12,088
Fixed assets, total                           246,489      222,594
Current assets
Stocks                                         39,704       34,504
Debtors                                        79,724       74,630
Cash at bank and in hand                       12,055       16,344
Current assets, total                         131,483      125,478
Assets, total                                 377,972      348,072

Shareholders’ equity                          153,778      135,346
Capital loan                                       50        8,924
Minority interests                              1,871       10,349
Group reserve                                       -        1,260
Provisions for liabilities and charges            178          932
Deferred tax liability                          8,727        7,102
Long-term creditors                            97,765       85,145
Short-term creditors                          115,603       99,014
Shareholders’ equity and liabilities, total   377,972      348,072

                                                 2003         2002

Operating activities
Net cash inflow/outflow from
operating activities                           48,465       53,707
Change in net working capital                  -8,451       -6,159
Financial items and taxes                      -9,463      -10,754
Net cash inflow/outflow from
operating activities                           30,551       36,794

Net cash inflow/outflow from
investing activities                          -55,391      -28,335

Financing activities
Change in loans                                17,478       -4,700
Dividends paid                                 -6,244       -3,856
Share issue                                     9,317        1,588
Net cash inflow/outflow from
financing activities                           20,551       -6,968

Change in liquid assets                        -4,289        1,491

                                                 2003         2002

Debts for which pledges or
mortgages given as surety
- pension loans                                16,519       17,798
- loans from financial institutions           114,949       85,412

For own debt
- pledges                                       9,561       10,077
- real estate mortgages                        89,088       89,453
- business mortgages                           23,804       22,688

For associated undertakings
- guarantees                                       50        1,093

For others
- pledges                                          40           42
- guarantees                                    6,292        4,717

Other own commitments
Leasing commitments                               511          209
Other liabilities                               1,315        3,308


                                                 2003         2002

Turnover, EUR 1000                            647,435      633,443
Operating profit, EUR 1000                     27,465       32,696
- as % of turnover                                4.2          5.2
Result before exceptional items, EUR 1000      22,189       26,506
- as % of turnover                                3.4          4.2
Result before appropriations
and taxes, EUR 1000                            22,189       26,506
- as % of turnover                                3.4          4.2
Return on equity (ROE), %                        10.7         15.3
Return on investment (ROI), %                     9.8         12.6
Equity ratio, %                                  41.2         41.9
Gross investments, EUR 1000                    64,764       33,350
- as % of turnover                               10.0          5.3
R&D expenditure, EUR 1000                       6,091        5,150
- as % of turnover                                0.9          0.8
Employees, average                              5,034        4,882


                                                 2003         2002

Earnings per share (EPS), undiluted, EUR         0.62         0.84
Earnings per share (EPS), diluted, EUR           0.60         0.74
Equity per share, EUR                            6.09         5.87
Dividend per share, EUR                          0.28 1)      0.27
Dividend payout ratio, undiluted, %              45.4 1)      32.3
Dividend payout ratio, diluted, %                46.5 1)      36.4
Effective dividend yield, %                       4.3 1)       4.5
Price/earnings ratio (P/E)
- undiluted                                      10.5          7.1
- diluted                                        10.8          8.0
Lowest trading price, EUR                        5.16         3.20
Highest trading price, EUR                       6.80         6.11
Middle price, EUR                                6.14         5.12
Closing price on year, EUR                       6.50         5.95
Market capitalisation, EUR million              164.1        137.2
Shares traded, 1,000                          7,073.7      4,577.7
- % of average number                            36.2         26.4
Adjusted number of shares
- average during the financial year        24,919,804   22,734,831
- at the end of the financial year         25,251,690   23,062,480
- fully diluted                            25,847,395   25,948,865

1) Based on Board of Directors’ recommended dividend.

The figures in this report are unaudited

HK Ruokatalo Oyj
Board of Directors

Simo Palokangas
Chief executive officer

Helsinki Exchanges
Main media

About Us

HKScan is a Nordic meat and meals company. We employ over 7 300 professionals in striving to serve the world ìs 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