HKScan reports improved profitability in 2019

Commenting on the annual financial results for 2019, the chief executive officer of Scandinavia-based meat company HKScan highlights improved profitability following a major restructuring of its business.

(HKScan)
(HKScan)

Commenting on the annual financial results for 2019, the chief executive officer of Scandinavia-based meat company HKScan highlighted improved profitability following a major restructuring of its business.

During the fourth quarter of 2019, profitability improved across the business and in all market areas when compared with the previous year, according to HKScan Corporation.

A 2% increase in net sales to EUR463.8 million (US$508 million) during the period led to a shift in Earnings Before Interest and Taxes (EBIT) from EUR -1.9 million to a positive EUR5.8 million. Underlying the EBIT improvement were positive developments in its Finnish poultry business, greater operational efficiency, and better cost control, the company stated.

For the full audited 12-month results — for January 1 to December 31, 2019 — HKScan reports stronger cash flow, and significant improvements in financial performance. Net sales for the year just ended were up by 1.7% at more than EUR1.744 billion. In comparable currencies, this figure was over EUR1.765 billion, which was a year-on-year increase of 2.9%.

Comparable EBIT for the year improved by EUR44.1 million to EUR -2.2 million, with changes in currency rates accounting for EUR -400,000. For the annual EBIT, the figure remained negative at EUR -23.2 million, but this compares with EUR -48.8 million for 2018.

CEO: 'We are on the right track'

HKScan’s CEO, Tero Hemmillä, siad the company’s profit improvement is now “almost on target” following a major restructuring of the business that began one year ago. Commenting on the audited annual results for 2019, he also indicated that cash flow arising from operating activities was EUR59.2 million — an improvement of EUR74 million from the previous year.

Compared to 2018, all of the firm’s market areas achieved positive development in terms of comparable EBIT. Leading performers were Finland and the Baltic states, while there were improvements in Sweden, and in the second half of 2019 by HKScan’s Danish business.

“It is clear that the group’s profitability is not yet at a satisfactory level, but we will continue our goal-oriented, systematic work together with the entire personnel,” said Hemmillä.

Confirming its commitment to its Rauma poultry processing plant in Finland, HKScan is to invest a further EUR6 million later this year. Renewing the slaughter process will bring not only increased capacity, but also improved productivity and operational reliability to meet the growing demand for poultry meat forecast.

Future prospects for home markets, exports

Total meat consumption in Finland and Sweden dipped in 2019, which the company attributed to an increase in consumer prices. While there was strong growth in poultry meat purchases in these markets, less pork and beef was bought. Consumption of all three meat types increased in the Baltic countries, while poultry meat gained in popularity in Denmark.

Looking ahead, HKScan forecasts continued clear increases in poultry consumption in its home markets.

In line with its targets, the firm’s pork exports to China expanded in 2019. Driven by demand and with domestic production hit by African swine fever, Hemmillä said this trade with China will likely continue in 2020.

HKScan is also working to obtain authorization from China for more of its poultry and beef plants to broaden the range of products it can export.

At the end of last year, HKScan announced a new group-wide operating model. Part of the group’s Turnaround Program, this changes involves a shift from a matrix organization to country-based Business Unit level P&L management where Finland, Sweden, the Baltic states, and Denmark form the reporting units. These changes came into operation at the start of 2020.

HKScan announced a strategic partnership with Finnish plant protein firm Hes-Pro Oy in November 2019. Under this agreement, HKScan will market and sell Hes-Pro products in selected retail and food service markets.

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