Lackluster profitability reported by Scandi Standard

Net sales generated by Scandi Standard increased 7% to 2.564 billion krona (SEK; US$298.1 million), according to the latest quarterly report of financial results recently published.

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For the April-June period, net sales generated by Scandi Standard increased 7% to 2.564 billion krona (SEK; US$298.1 million), according to the latest quarterly report of financial results recently published. 

Despite this development, Earnings Before Interest and Taxes (EBIT) tumbled 28% to SEK75 million. As a result, the operating margin fell from 4.3% one year ago to 2.9%. At SEK79 million, adjusted EBIT was down 24% year-on-year, with the margin at 3.1% ‚ÄĒ 1.2 percentage points below last year‚Äôs level.

Commenting on the results, interim managing director and CEO Otto Drakenberg attributed these changes largely to a negative result in the firm‚Äôs ready-to-cook business in Denmark as well as to the lingering impacts of highly pathogenic avian influenza (HPAI) outbreaks. 

Another challenge for Scandi Standard has been the prices of feed ingredients, which he described as at an ‚Äúhistoric high level.‚ÄĚ However, Drakenberg said the firm has been able to adjust product prices derived from feed costs with many of its clients. Following a phase-in period, these agreements have helped mitigate the effects of higher production costs to some extent, he said.

For the half-year (January-June), Scandi Standard is reporting a 5% increase in net sales to SEK5.033 billion. The steep drop in EBIT during the second quarter led to a 9% decline in the six-month figure to SEK163 million, with the margin falling 0.4 percentage points year-on-year to 3.2%. Meanwhile, there was a 7% reduction in adjusted EBIT to SEK167 million, and the 3.3% margin on this measure was 0.3 percentage points below the level reported for the first half of 2020. 

From SEK1.70 for the corresponding period last year, the company’s half-year earnings per share amounted to SEK1.44 in 2021.

Recent business developments at Scandi Standard

During the latest reporting period, Johan Bygge was elected Chairman of the Board of Scandi Standard. 

Three months ago, the board of directors appointed Otto Drakenberg as the company’s interim managing director and CEO. This announcement was made a few days following the departure of Leif Bergvall Hansen, who held those responsibilities for eight years.

In May, the firm‚Äôs Swedish subsidiary Kronf√•gel experienced ‚Äúdeviations in connection with the slaughter and processing of chicken,‚ÄĚ reported Scandi Standard. Both subsidiary and parent companies were taking the reports in the Swedish media ‚Äúvery seriously,‚ÄĚ according to the firms. CEO at the time, Bergvall Hansen said they were ‚Äúimplementing powerful measures‚ÄĚ to restore confidence in the companies‚Äô chicken welfare and food safety standards.

A fall of 7% in sales in the Swedish market in June was blamed by the company on the adverse publicity and a loss of market confidence.

Over the summer, Drakenberg has said recently, the majority of the reported failures have been identified and rectified.

After the close of the reporting period, the coronavirus (COVID-19) pandemic hit the company‚Äôs operations in the Republic of Ireland. Rising cases among the workforce caused ‚Äúsignificant disruptions‚ÄĚ to production, Scandi Standard reports. It expects such COVID-related challenges to continue well into the current quarter ‚ÄĒboth in terms of staff absences and animal welfare issues from inconsistent production capacity. 

More on Scandi Standard

With annual slaughtering's estimated at 200 million birds, Scandi Standard is among the leading poultry producers in Europe, according to WATTPoultry.com‚Äôs Top Poultry Companies database.

Scandi Standard is a leading producer of chilled, frozen and ready-to-eat chicken products in the Nordic region and Ireland. Its Norwegian subsidiary also produces and sells eggs. The group‚Äôs brands include Danpo, Den Stolte Hane, KronfaŐägel, Manor Farm, and Naapurin Maalaiskana. The company‚Äôs customers are found in the retail, food-service and food industry sectors, and its products are exported to more than 40 countries.

According to the firm‚Äôs own web site, Scandi Standard generates annual sales of more than SEK9 billion with a total workforce of around 3,000.

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