In anticipation of adverse impacts arising from the COVID-19 pandemic, Sweden-based poultry meat company Scandi Standard is implementing cost-saving measures.
The first-quarter financial report from Scandi Standard reveals changes in business that may become widely associated with the global novel coronavirus (COVID-19) pandemic.
Overall, the firm reports a “strong result” for the first three months of 2020. Adjusted operating income for the period is expected to be 115 million krona (SEK; US$11.5 million) — above the SEK110 million in the same quarter of last year.
Scandi Standard reports “a robust balance sheet, a solid financing, and significant current headroom to its financial covenants.”
Pandemic presents business challenges
Despite the company’s reported confidence, the COVID-19 pandemic brings some significant changes to Scandi Standard’s business.
With most hospitality outlets closed, the firm has reported a 50-60% reduction in its food service sales for the first quarter of the year. This has been — at least largely — balanced by a rise of 10-15% in retail sales as more consumers are confined to and cooking in their homes.
Scandi Standard reports it has “executed forceful measures” to switch its throughput of products to match the new circumstances.
In normal times, around 20% of the firm’s products are sold to foodservice businesses. The drop in this market sector has been particularly marked in Scandinavia and Ireland, the company reports. With many restaurants and canteens closed, Scandi Standard’s sales to the retail sector are running above the previous year’s level of 64%.
While the firm reports adjusted operating income held up well in the quarter, this figure excludes non-comparable items. This category of costs is expected to reach SEK50 million for the period, of which around 70% is attributed to COVID-19. Main drivers are linked to the necessary changes to production capacity, provision for the food service inventory, and bad debt.
Precautionary cash preservation measures
Looking ahead, the company expects additional costs arising from the closure of the production line through April 2020. Beyond that, additional biosecurity will be required in all the firm’s facilities to protect the workforce, and to mitigate the risk of downtime related to staff shortages.
In case the situation escalates, Scandi Standard is to implement cash preservation measures, including avoidance of any non-essential capital expenditure.
Additionally, the board of directors will not propose to the SEK147-million dividend to the 2020 Annual General Meeting that had been announced in the interim report from the final quarter of last year.
More on Scandi Standard
Based in Sweden, Scandi Standard is the leading poultry meat producer in the Nordic region, according to the firm’s latest annual report. It was founded in 2013 by the merger of Kronfågel (Sweden) and Danpo (Denmark), and the acquisition of Den Stolte Hane (Norway). In 2015, the group acquired Finland’s Naapurin Maalaiskana, and Manor Farm of the Irish Republic two year later.
Net sales in 2019 amounted to SEK9.891 billion, achieving organic growth of 12% over the year. Sales were particularly strong in the ready-to-eat sector. The firm also exports to more than 40 countries.
According to the Poultry International Top Companies listings, annual slaughterings of more than 115 million birds put Scandi Standard in 29th position in the rankings of the largest poultry companies in Europe. As well as broilers, it produces turkeys, ducks and table eggs (in Norway).
View our continuing coverage of the coronavirus/COVID-19 pandemic.
