HKScan Corporation, January-September Interim Report, 4 November 2021 at 8.30
a.m. Finnish time
HKScan’s Interim Report 1 January – 30 September 2021
HKScan’s EBIT stable, profit improvement continued in Finland and Sweden
July-September 2021
· HKScan’s net sales totalled EUR 446.8 (438.3) million. Clear growth in
retail sales of own branded products continued. Sales clearly increased
particularly in the product categories with higher added value, such as meals
and meal components. Food service sales increased as a result of the gradual
removal of restrictions related to the Covid-19 pandemic.
· The Group’s EBIT was EUR 7.6 (7.7) million and comparable EBIT EUR 7.7 (8.2)
million.
· Good profit development continued in HKScan’s largest markets Finland and
Sweden.
· Finland’s comparable EBIT improved by EUR 1.7 million and Sweden’s by EUR
1.0 million.
· In the Baltics, price pressure continued due to meat imports. Holding the
market position and significantly risen feed and energy prices weakened EBIT.
· Avian flu in Denmark and the resulting restrictions on exports outside the
EU continued to have a clear negative impact on EBIT. Strategy implementation
progressed as planned, and the sales increase was particularly clear in ready-to
-eat poultry products.
· Exceptionally high energy price increases raised HKScan's costs in all its
home markets.
· Cash flow from operating activities was EUR -15.6 (2.8) million due to
normal variation in the amount of trade payables and other non-interest-bearing
payables.
January-September 2021
· HKScan’s net sales totalled EUR 1,323.6 (1,308.1) million. Growth in retail
sales of own branded products continued. Sales clearly increased in the
strategically important products with higher added value, such as meals and meal
components. Food service sales recovered and sales were on the comparison
period’s level. Exceptionally challenging market conditions in the Baltics
decreased sales. In Denmark, the negative impact of avian flu on exports outside
the EU was significant.
· The Group’s EBIT improved by EUR 6.4 million to EUR 10.2 (3.8) million.
Comparable EBIT improved by EUR 2.3 million to EUR 7.2 (4.9) million.
· In Finland, EBIT improved by EUR 10.6 million and comparable EBIT by EUR 7.6
million.
· In Sweden, comparable EBIT improved by EUR 2.5 million.
· In the Baltics, a significant increase in feed and energy prices and price
pressure due to oversupply of pork in Europe led to a clear decline in
profitability.
· Avian flu, affecting business in Denmark throughout the year, and the
resulting restrictions on exports outside the EU have had a significant negative
impact on EBIT. A strategic shift in sales focus from low margin product
categories to products with higher added value clearly reduced the negative
impact of avian flu.
· Cash flow from operating activities was EUR 12.5 (23.3) million, the change
was due to normal variation in the amount of short-term payables.
· Interest-bearing net debt was EUR 333.3 (323.1) million and net gearing
102.5 (103.2) percent.
The figures in parentheses refer to the comparison period, i.e. the same period
in the previous year, unless otherwise mentioned. The figures in this report are
unaudited.
Outlook 2021
HKScan estimates that the Group’s comparable EBIT in 2021 will improve compared
to 2020.
KEY FIGURES, NET SALES
(EUR million) 7-9/2021 7-9/2020 1-9/2021 1-9/2020 2020
Net sales 446,8 438,3 1 323,6 1 308,1 1 781,0
Finland 188,9 190,0 562,5 563,4 772,4
Sweden 170,8 162,2 503,6 477,6 662,1
Baltics 43,2 44,1 125,8 132,0 175,0
Denmark 44,0 42,0 131,6 135,1 171,5
KEY FIGURES, EBIT
(EUR million) 7-9/2021 7-9/2020 1-9/2021 1-9/2020 2020
EBIT 7,6 7,7 10,2 3,8 21,3
- % of net sales 1,7 1,7 0,8 0,3 1,2
Comparable EBIT 7,7 8,2 7,2 4,9 17,0
- % of net sales 1,7 1,9 0,5 0,4 1,0
Comparable EBIT, Finland 3,1 1,4 3,3 -4,3 6,0
- % of net sales 1,6 0,7 0,6 -0,8 0,8
Comparable EBIT, Sweden 6,9 5,9 14,2 11,7 19,0
- % of net sales 4,1 3,6 2,8 2,5 2,9
Comparable EBIT, Baltics -0,9 1,8 -0,7 3,8 4,0
- % of net sales -2,1 4,2 -0,5 2,8 2,3
Comparable EBIT, Denmark 0,1 1,0 -1,0 1,7 1,1
- % of net sales 0,2 2,3 -0,8 1,3 0,6
KEY FIGURES, OTHER
(EUR million) 7-9/2021 7-9/2020 1-9/2021 1-9/2020 2020
EBITDA 23,5 24,0 54,5 53,1 78,1
Profit/loss before taxes 5,4 5,6 1,5 -2,9 12,3
- % of net sales 1,2 1,3 0,1 -0,2 0,7
Profit/loss for the 3,6 3,7 -2,1 -6,4 4,8
period
- % of net sales 0,8 0,9 -0,2 -0,5 0,3
EPS, EUR 0,03 0,03 -0,06 -0,10 -0,01
Comparable EPS, EUR 0,03 0,03 -0,09 -0,09 -0,05
Cash flow from operating -15,6 2,8 12,5 23,3 63,7
activities
Cash flow after -23,9 -5,2 59,9* -47,9* -21,4*
investing activities
Return on capital 5,1 0,1 3,9
employed (ROCE) before
taxes, %
Net debt 333,3 323,1 299,6
Net Gearing % 102,5 103,2 91,0
* Year 2020 includes the investment to the plot of the Vantaa unit EUR 37.7
million.
1-9/2021 includes the sale of Vantaa property (land and buildings) with EUR 76.1
million.
HKScan’s CEO Tero Hemmilä
HKScan’s July-September EBIT was stable in relation to the comparison period.
The company’s key market areas Finland and Sweden clearly strengthened their
EBIT whereas Denmark and the Baltics were clearly down from the comparison
period in a very exceptional market situation. The company’s EBIT was EUR 7.6
million, while in the comparison period it was EUR 7.7 million. Comparable EBIT
was EUR 7.7 million and EUR 8.2 million in the comparison period. The rolling 12
-month comparable EBIT was EUR 19.4 million at the end of the review period
whereas in the comparison period it was EUR 10.6 million. During the Turnaround
programme, our comparable EBIT has improved cumulatively by almost EUR 66
million.
In July-September, our net sales were stable although slightly up on the
comparison period. As restrictive measures due to the Covid-19 pandemic were
gradually removed, food service sales recovered with an improvement of more than
5 percent from the comparison period. We did well with our own branded products.
Our sales strengthened especially in processed meat products, meal components
and meals, which has also clearly decreased the need for more cyclical and less
profitable exports.
The profit development within the Group was two-fold and the reasons for this
are clear. I am pleased that HKScan’s key home markets Finland and Sweden
continued their positive profit improvement in line with our targets. In Denmark
and in the Baltics, we were not able to improve profitability in a very
exceptional market situation. The development in Denmark and in the Baltics was
not satisfactory and the performance of the review period was disappointing, as
expected. We have initiated corrective actions to improve the situation.
In Finland and Sweden, the increase in the added value of products and sales
growth of branded products secured the good development. This development also
represents value creation in line with our strategy. Sweden has been able to
improve its comparable EBIT for 14 consecutive quarters in relation to
comparison periods. In this development, the most significant factor is the
differentiating added value built in our product portfolio through the Scan
brand, but also excellent productivity improvements in our production
processes.
In Finland, we have been able to improve cumulatively our comparable EBIT by
over EUR 49 million during the Turnaround programme. In Finland, we have a
strong position in processed meat products, meal components and poultry products
as well as a clear target to further grow in poultry products, meals and snacks.
Our strategic target is to be increasingly strong and appealing to both
consumers and retail, supported by HKScan’s own strong offering and that of our
subsidiaries, Kivikylän, Tamminen and Boltsi. Profit improvement in the poultry
business continued and our Rauma production unit’s operational development
progressed. I am pleased with the strong sales growth of our partner and
associate company Mäkitalon Maistuvat’s ready-to-eat salads over a short period
of time and with the excellent welcome the products have received from our
customers and consumers.
During the review period, we created the capability in Finland to enter the
consumer market with restaurant-level fresh meals. Meal sales started in pilot
stores with the Vietävä meal concept in October. We are also preparing the
investment in the production of snack products decided in the summer, which will
provide opportunities to grow in Finland in the profitable snack product
market.
In Sweden, after the review period, we signed a commercial cooperation agreement
related to the Maten é klar meal concept. The implementation of the agreement
will start early next year. The basic idea behind the Maten é klar concept is to
provide consumers with healthy, high quality meals.
In Denmark, the avian flu situation affecting the whole industry and companies
as well as the resulting restrictions on sales outside the EU continued to have
a clear negative impact on our performance. For other parts, our strategy has
progressed as planned and we will continue to focus on strengthening our market
position in Denmark and Sweden with fresh and ready-to-eat poultry products as
well as processed poultry products.
The market situation is exceptional in the Baltics, challenging our long local
value chain. The overproduction of pork in Europe has strongly reduced market
prices, also lowering the value of biological assets tied up in our business. At
the same time, the rapid and significant rise in feed and energy prices has been
very exceptional. However, the market will recover as the supply and demand
balance stabilises. The resulting market situation has significantly reduced the
profitability of our Baltic business in July-September. On the other hand, the
profitability of our Baltic poultry business and processed meat products is
better than in other product categories.
The value chain of HKScan’s meat business is facing some major questions.
Particularly the economic situation of the farms in meat production is in severe
crisis due to the surplus in the European pork market, the sharp rise in feed
prices and the scarcity of feed crops on the farms. The increase in prices for
feed, and also for other production inputs, both on farms and in HKScan’s own
operations, is widely reflected across the business, increasing costs. The price
of meat raw material will rise to ensure the profitability of meat production
and the availability. The situation is also creating clear pressure for higher
consumer prices for meat products.
As vaccination coverage has strengthened, the negative impact of the pandemic on
our business has decreased, but the situation in the Baltic countries and Poland
remains difficult. Through the strong commitment of our employees, we have
ensured that our production units and the entire supply chain have operated
without significant disruption. However, the pandemic is not over yet. While the
company's own preventive restrictions have been gradually removed, we will still
continue to follow them on a case-by-case and site-by-site basis.
In January-September, HKScan’s EBIT improved by EUR 6.4 million to EUR 10.2
million. Comparable EBIT improved by EUR 2.3 million to EUR 7.2 million. Finland
and Sweden were the clear profit drivers. Finland’s comparable EBIT was EUR 7.6
million and Sweden’s EUR 2.5 million better than in the comparison period. EBIT
for Denmark and the Baltics clearly declined for the reasons mentioned above.
HKScan needs a stronger balance sheet to complete a more significant food
company transformation as we build new food businesses and ways to face market
changes alongside our existing core businesses in the future. We are constantly
evaluating the position of our different businesses as part of the Group and its
strategy. The ending Turnaround period will be followed by a phase in which
improving the profitability of our core business will remain a priority. In
addition, we will actively strengthen the company’s balance sheet in various
means to enable a clearer and more impressive food company transformation.
HKScan Group continues the goal-oriented climate work through its Zero Carbon
programme aiming at a carbon-neutral food chain by the end of 2040. In addition
to our own production activities, we have this year focused on climate issues in
primary production and on building scalable ways to reduce emissions and
increase carbon sinks together with our contract farmers and partners.
The operating environment has been and continues to be very challenging, even
exceptional, with sharp increases in the prices of feeds, energy and other
production inputs. The situation requires determined efforts from the company to
achieve commercial improvements, to improve the efficiency of industrial
operations and to manage costs. The aim of this work is a clear improvement in
profitability. The company and all its employees are committed to this.
We are developing HKScan’s business comprehensively and with the Turnaround
achieved, we will be moving forward on a stronger basis. Our clear target is to
grow into a versatile food company creating strong shareholder value.
Key events in July-September 2021
HKScan strengthening its position in consumers’ food moments with new premium
fresh meals
A modern restaurant-level kitchen has been completed in HKScan’s Vantaa unit
where chefs prepare premium fresh meals. Sales of Vietävä concept fresh meals,
developed by chef Kape Aihinen, will be launched in pilot stores in phases
during the rest of the year. The fresh meals kitchen will be fully operational
in early 2022. New delicious fresh meals of high-quality will be sold at retail
service counters and as packaged products.
Consumer need for convenient, nutritionally high-quality and delicious ready
meals has further strengthened during the Covid-19 pandemic. New premium fresh
meals support HKScan’s strategy to grow profitably in consumers’ food moments.
Sweden’s renewed commercial organisation driving the strategy implementation
At the beginning of September, a renewed commercial organisation started in
HKScan’s Business Unit Sweden. The main goal of the renewal is to promote the
company’s strategy-based growth and transformation into a versatile food
company.
The renewed commercial organisation will enhance the focus on the development of
core business and customer relationships. It will also utilise strong commercial
expertise to increase profitability, efficiency and agility. Furthermore, the
organisation will accelerate adaptation to changes in the operating environment
and utilisation of new business opportunities that support the strategy. The new
organisation also has a New Business Team to ensure a strategy-based expansion
into new product categories and sales channels as well as growth through
partnerships.
New logistics centre in the Baltics improves customer service and reduces
environmental footprint
HKScan’s new logistics centre was taken into use in August and the first orders
were delivered to customers in September. The new logistics centre is located in
Estonia, near Tallinn. The centre serving the entire Baltic market area provides
customers with faster and more flexible service. HKScan centralises the
operations of its assembly centres in Rakvere and Riga in the new logistics
centre. The centre employs more than 100 people.
The modern logistics centre will bring savings in storage and distribution costs
and significantly reduce the environmental footprint. Solar panels installed on
the roof of the centre will reduce energy emissions by some 30 percent. In
addition, carbon dioxide emissions will be significantly reduced as transport
will be cut by about 400,000 kilometres per year.
In Denmark, the strategy implemented by raising the added value
In Business Unit Denmark, HKScan’s strong focus on adding value in poultry
products could be seen in a clear sales increase. HKScan has successfully
shifted sales from low-margin frozen export products to fresh, ready-to-eat
poultry products. There is still a lot of potential in Denmark’s home market and
Sweden’s export market.
A strategic shift in sales focus towards higher added value products has partly
reduced the negative effects of avian flu on business profitability.
An information meeting for analysts and the media
HKScan will organise an information meeting related to the Interim Report for
analysts, institutional investors and the media in the auditorium of the Hotel
Haven (address: Eteläranta 16, Helsinki, Finland) on 4 November 2021 at 10 am.
The event will be held in Finnish. The Interim Report will be presented by Tero
Hemmilä, CEO, and Jyrki Paappa, CFO.
To arrange an investor call in English, please contact Heidi Hirvonen, SVP
Communications, tel. +358 10 570 6072 or by email heidi.hirvonen@hkscan.com.
Financial reports
HKScan’s Financial Statements Bulletin for 2021 will be published on 10 February
2022.
Turku, 4 November 2021
HKScan Corporation
Board of Directors
For further information
Tero Hemmilä, CEO, tel. +358 10 570 2012
Jyrki Paappa, CFO, tel. +358 10 570 2512
Heidi Hirvonen, SVP Communications, tel. +358 10 570 6072
Media contacts: HKScan Media Service Desk +358 (0)10 570 5700 or email:
communications@hkscan.com
At HKScan, we make life tastier – today and tomorrow. Our strategic target is to
grow into a versatile food company. Our responsibly produced, delicious products
are part of consumers’ varied food moments – both every day and on special
occasions. We have some 7,000 HKScan professionals applying more than 100 years
of experience to make locally produced food. For us at HKScan, responsibility
means continuous improvements and concrete actions throughout the food chain. As
part of our Zero Carbon programme, we are targeting a carbon-neutral food chain
from farms to consumers by the end of 2040. Our home markets cover Finland,
Sweden, the Baltics and Denmark. Our strong product brands include HK®,
Kariniemen®, Via®, Scan®, Pärsons®, Rakvere®, Tallegg® and Rose™. Through our
strategic partnerships, we are also known for Kivikylän®, Tamminen® and Boltsi
brands. HKScan is a publicly listed company, and in 2020, our net sales totalled
nearly EUR 1.8 billion.
DISTRIBUTION:
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