For the first quarter of the current financial year, Finland-based meat company HKScan attributes its improved performance to sales growth and operational efficiencies.
Compared to the same period of 2019, HKScan achieved a 6.8% increase in net sales to EUR428.9 million (US$463 million) for January-March of this year. This growth helped support an improvement of EUR10.8 million in the group’s Earnings Before Interest and Taxes (EBIT). At EUR-3.9 million, the latest quarter’s EBIT continued to be negative. However, the firm calculates that this measure turns positive at EUR3.9 million on the basis of a rolling 12-month period.
Commenting on the quarter’s results, HKScan’s CEO Tero Hemmilä highlighted that all the company’s areas of business had contributed to the positive development in terms of net sales. Targets had been achieved in Denmark, Sweden and the Baltic region, which all registered improvements in profitability. While failing to meet some targets in Finland, performance by the poultry business continued to improve. This followed on from investments in the plant at Rauma at the start of the year, which are expected to deliver greater reliability as well as higher productivity.
COVID-19's impacts on HKScan’s business
In his comments, Hemmilä outlined some of the impacts on the firm’s business resulting from the novel coronavirus (COVID-19) virus pandemic.
Foremost was an increase in costs as HKScan took a series of measures to ensure consumer and customer satisfaction, the safety of its workforce, and continuity of production.
Abrupt changes in demand arising from the crisis and lock-down also added costs as retail sales increased, and food-service collapsed. While weakened demand from the food-service channel hampered the firm’s operations, the sharp decline in sales to this sector were largely offset by retail, where HKScan has a strong position, according to Hemmilä.
Looking ahead, he forecasts that retail sales and demand for meat and processed meat products will continue to develop positively in the coming months. Furthermore, the upward trends in online food sales and deliveries directly to consumers’ homes are likely to remain strong, even after the epidemic.
At the start of the quarter, the COVID-19 epidemic in China adversely impacted HKScan’s exports to that country. Seeking out alternative markets incurred additional logistics costs. However, exports to China began to recover towards the end of the period, and overall were close to the target for the quarter.
HKScan’s profit improvement and continued strengthening of cash flow will provide the company with a solid basis to continue the ongoing profitability improvement, as well as to build the conditions for growth, according to Hemmilä.
More on HKScan
Founded more than 100 years ago, HKScan now has around 7,000 employees, nearly 20 production units and thousands of farms producing meat for its range of products. The firm has a key role in the food supply and food security in its home markets — Finland, Denmark, Sweden, and the Baltic states — as well as exports.
HKScan has introduced a number of strategic changes in its operations over the past year, including introducing a new group-wide operating model, and a renewed focus on improving profitability.
These changes were reflected in improved performance of HKScan reported in its full-year results for 2019.
Earlier this year, the firm signed an agreement for the construction of a new logistics site near Tallinn in Estonia to support its business in the Baltic states.
One month ago, HKScan announced its intention to buy additional land at Vantaa in Finland to facilitate the future expansion of its factory and logistics center. This development is subject to local authority approval.
