2014-11-05 07:00:00 CET
2014-11-05 07:00:05 CET
REGULATED INFORMATION
HKScan Oyj - Interim report (Q1 and Q3)
Restructuring continues – cash flow improving
HKScan Corporation Stock Exchange Release 5
November 2014, at 8:00 am
HKScan Group's interim report 1 January - 30 September 2014
Restructuring continues - cash flow improving
* Net sales totalled EUR 1 465.6 (1 565.3) million in January-September, and
EUR 498.4 (526.9) million in the third quarter.
* In January-September, reported EBIT came to EUR 48.3 (0.9) million, and the
EBIT margin was 3.3 (0.1) per cent. Comparable EBIT excluding non-recurring
items for the period was EUR -1.0 (4.5) million, and the corresponding EBIT
margin was -0.1 (0.3) per cent.
* For the third quarter, reported EBIT was EUR 7.3 (7.0) million, and the EBIT
margin was 1.5 (1.3) per cent. Comparable EBIT excluding non-recurring items
for the quarter amounted to EUR 7.3 (7.4) million, and the corresponding EBIT
margin was 1.5 (1.4) per cent.
* Cash flow before debt service was EUR 173.5 (0.6) million in
January-September, and EUR 16.3 (6.3) million in the third quarter.
* Profit/loss before taxes was EUR 46.9 (-1.1) million in January-September,
and EUR 5.8 (5.3) million in the third quarter.
* EPS was EUR 0.97 (0.06) in January-September, and EUR 0.10 (0.12) in the
third quarter.
* Net financial expenses were EUR -11.8 (-16.1) million in January-September,
and EUR -2.1 (-5.3) million in the third quarter.
* Net debt totalled EUR 170.9 (419.3) million, and net gearing came to 38.1
(104.5) per cent in January-September.
* Outlook for 2014: HKScan expects the comparable operating profit (EBIT)
margin for 2014 to be 0.5-1.0 per cent. The last quarter is expected to be the
strongest. In 2013, the corresponding comparable operating profit (EBIT) margin
was 0.5 per cent.
Hannu Kottonen, HKScan's CEO, comments on the third quarter:
“All markets remained weak in the third quarter. Tough sales price competition
and a further decline in sales volumes continued. However, the decline in value
was less than in volume, and we managed to increase our market share especially
in the branded products.
Despite the difficulties our EBIT performance matched the prior year, and
improvement was recorded in cash flow. Good headway continued with inventory
and working capital management.
The development program for 2014 proceeded with good performance. Production
restructuring was advancing on schedule in Sweden, which involved the
discontinuation of pig slaughtering in Skara.
Good progress is also being made in Group-wide brand strategy implementation as
well as in technology and operations footprint enhancement.
Implementation of the revised strategy for profitable growth was also kicked
off, with two major strategic investment initiatives announced in October. The
planned initiatives in Western Finland and Estonia are currently undergoing
feasibility studies. The final approvals are awaited next summer”.
KEY FIGURES, Q3
(EUR million) Q3/201 Q3/201 Q1-Q3/20 Q1-Q3/20 2013
4 3 14 13
--------------------------------------------------------------------------------
Net sales 498.4 526.9 1 465.6 1 565.3 2
113.2
--------------------------------------------------------------------------------
EBIT 7.3 7.0 48.3 0.9 11.7
--------------------------------------------------------------------------------
- % of net sales 1.5 1.3 3.3 0.1 0.6
--------------------------------------------------------------------------------
Profit/loss before taxes 5.8 5.3 46.9 -1.1 6.7
--------------------------------------------------------------------------------
- % of net sales 1.2 1.0 3.2 -0.1 0.3
--------------------------------------------------------------------------------
Profit/loss for the period 5.6 7.0 52.0 3.3 9.8
--------------------------------------------------------------------------------
- % of net sales 1.1 1.3 3.5 0.2 0.5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EBIT, excluding non-recurring income 7.3 7.4 -1.0 4.5 11.2
and expenses
--------------------------------------------------------------------------------
- % of net sales 1.5 1.4 -0.1 0.3 0.5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EPS, EUR 0.10 0.12 0.97 0.06 0.16
--------------------------------------------------------------------------------
Cash flow before debt service (mEUR) 16.3 6.3 173.5 0.6 86.8
--------------------------------------------------------------------------------
Cash Flow Before Financing 14.0 0.9 166.8 -6.1 75.3
Activities (mEUR)
--------------------------------------------------------------------------------
Return on capital employed (ROCE) 10.6 3.7 4.0
before taxes, %
--------------------------------------------------------------------------------
Net debt (mEUR) 170.9 419.3 335.3
--------------------------------------------------------------------------------
Gearing % 41.8 113.7 98.9
--------------------------------------------------------------------------------
Net Gearing % 38.1 104.5 82.0
--------------------------------------------------------------------------------
JANUARY - SEPTEMBER 2014
Net sales for the reported period were down on the corresponding period the
previous year. EBIT also saw a year-on-year decline, but the decline halted in
the third quarter. In January-September, Sweden improved modestly on last year,
but the converse applied to all other market areas. In the third quarter,
Finland and Denmark improved slightly from the prior year. Considering the
circumstances, pleasing progress was made in inventory management, with stocks
clearly lower than the previous year. The Group's overall financial position
remained strong and net financial expenses stabilized on the new, lower cost
level in the third quarter following the repayment of syndicated term loans.
Demand held steady in both the consumer and away from home markets. HKScan won
some market share with its branded products, but in general, private-label
products continued to increase their market share. Both value but especially
volume decreased, with both domestic and export markets being affected by pork
oversupply. The continuing Russian ban on pork imports from the EU countries
increased the surplus in the pork meat balance globally. Pork meat inventories
remained high throughout Europe, and global market prices remained
dissatisfactory. Animal purchasing prices continued to decrease, but this
failed to offset the deficit in sales prices. The rebalancing of volume to meet
a more profitable volume level continued in all market areas except the
Baltics, where there was some growth in volume.
Strategy for profitable growth advanced to the implementation stage. The
Group's strategic must-win battles are to be modified to place a sharper focus
on profitable growth in the coming years. The execution of the strategy calls
for a greater emphasis on value-added products. Feasibility studies announced
after the reporting period, in October, concerning new production facilities in
Finland and in Estonia are to be carried out by next summer. The prospective
investments are estimated to total EUR 55-85 million depending on the scale of
the chosen options and final decisions.
The development programme for 2014 is proceeding on schedule, targeting an
annual profit improvement in excess of EUR 20 million and a reduction of over
EUR 50 million in net debt by 2015. This includes restructuring programs
ongoing in Sweden and Finland, where the targeted cost savings - exceeding EUR
11 million - are expected to be achieved.
HKScan's first Group brand, Flodins™, was launched in Finland in September,
followed by launches in Sweden and the Baltics in October. Flodins™ is a
significant step in the Group's brand strategy to clarify and strengthen the
HKScan Group brand and to update its product and concept brand portfolio.
The Group conducted its first-ever Group-wide Employee Engagement Survey in
September, achieving a participation rate of 82.5 per cent. The results of the
survey will be utilized to identify organizational strengths and potential
areas for improvement.
Sivun sisältö
MARKET AREA: FINLAND
(EUR million) Q3/2014 Q3/2013 Q1-Q3/201 Q1-Q3/2013 2013
4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net sales 194.7 200.4 573.4 593.9 804.1
--------------------------------------------------------------------------------
EBIT 3.0 2.1 -11.2 1.5 3.2
--------------------------------------------------------------------------------
- EBIT margin, % 1.5 1.1 -1.9 0.3 0.4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EBIT excluding non-recurring 3.0 2.6 0.8 5.2 6.9
expenses
--------------------------------------------------------------------------------
- EBIT margin, % 1.5 1.3 0.1 0.9 0.9
--------------------------------------------------------------------------------
In Finland, net sales in January-September totalled 573.4 (593.9) million and
EUR 194.7 (200.4) in the third quarter. EBIT excluding non-recurring expenses
was 0.8 (5.2) in January-September, and 3.0 (2.6) in the third quarter. EUR
12.0 million in asset impairments have been recorded as non-recurring items.
The total market volume continued to decrease during the third quarter.
Consumer purchasing power, lower food wastage and willingness to spend remained
low, which also pushed down sales volumes, especially in the retail business.
Russia's ban on EU pork imports increased oversupply directly and indirectly in
the domestic market.
Despite the low level of demand, some market share was gained in branded
products and in total. Total sales decreased still somewhat, but less in value
than in volume. Demand management, deliveries and frozen stock were managed
well. As a result, cash flow was clearly stronger than the previous year.
A review of the white-collar organization was completed at the end of
September. Statutory negotiations involved nearly 400 white-collar employees in
Finland, resulting in a headcount reduction of over 50 full-time positions. A
total of 68 employees were directly affected. Part of the agreed reductions
will be achieved through retirement and part-time employment arrangements. Most
of the changes will be completed in 2014. The targeted cost reduction of EUR 4
million including also other savings is expected to be achieved in 2015.
During the quarter, Chinese authorities conducted audits at Finnish pig
slaughterhouses including HKScan's Forssa facility. These audits were a first
step in efforts to establish direct export of pig meat from Finland to China.
MARKET AREA: BALTICS
--------------------------
(EUR million) Q3/2014 Q3/2013 Q1-Q3/2014 Q1-Q3/2013 2013
-----------------------------------------------------------------
-----------------------------------------------------------------
Net sales 47.3 44.7 129.2 130.4 175.1
-----------------------------------------------------------------
EBIT 2.8 4.1 4.8 5.8 7.7
-----------------------------------------------------------------
- EBIT margin, % 6.0 9.1 3.7 4.4 4.4
-----------------------------------------------------------------
In the Baltics, net sales in January-September totalled EUR 129.2 (130.4)
million, and 47.3 (44.7) million in the third quarter. EBIT was EUR 4.8 (5.8)
million in January-September and EUR 2.8 (4.1) million in the third quarter.
The Baltic market is suffering the most acutely from Russia's ban on EU pork
imports. Due to pork oversupply, pork sales prices were under heavy pressure.
Sales margins were maintained successfully thanks to positive cost development
in primary production, but the benefits were eaten by personnel-related cost
inflation and other overheads. Still, positive margin performance in the
poultry segment continued to support overall profitability.
The market position was maintained on the part of branded products thanks to
the successful launch of novelties and campaigns on the domestic market, but
continuing difficulties were encountered in exports. The frozen stock level was
on the same level as a year before. Other working capital items and capital
expenditure increased, resulting in weaker cash flow than the prior year.
African Swine Fever has been occurring in Estonia, posing an external business
risk. High-level mitigation actions have been implemented in all pork primary
production locations.
MARKET AREA: SWEDEN
(EUR million) Q3/2014 Q3/2013 Q1-Q3/201 Q1-Q3/2013 2013
4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net sales 227.4 239.0 670.5 710.3 966.5
--------------------------------------------------------------------------------
EBIT 5.1 5.1 -6.4 4.4 8.0
--------------------------------------------------------------------------------
- EBIT margin, % 2.2 2.1 -1.0 0.6 0.8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EBIT excluding non-recurring 5.1 5.1 4.8 4.4 10.2
expenses
--------------------------------------------------------------------------------
- EBIT margin, % 2.2 2.1 0.7 0.6 1.1
--------------------------------------------------------------------------------
In Sweden, net sales in January-September amounted to EUR 670.5 (710.3)
million, and EUR 227.4 (239.0) million in the third quarter. EBIT excluding
non-recurring expenses was EUR 4.8 (4.4) million in January-September, and EUR
5.1 (5.1) million in the third quarter.
Russia's ban on EU pork imports drove down sales prices, a trend that was
especially marked in red meat and cold cuts. Private-label products kept
gaining market share, but the Group managed to win market share with its
branded products in certain processed meat and convenience food categories.
Sales of Svensk Rapsgris® (Swedish rapeseed-fed pork) and the launch of fresh
chicken progressed as planned, but frozen chicken products did not perform as
well as expected.
Frozen stock levels were kept clearly below the prior year and also trade
payables as well as investments contributed to stronger cash flow than the
previous year. Animal purchasing prices decreased for pork but remained higher
than expected for beef. Pork sourcing volumes were lowered in line with the
rebalancing plan. Production efficiency continued to improve.
The production restructuring project is proceeding as planned with full
implementation scheduled to be completed by early 2015, targeting an annualized
profit improvement in excess of EUR 7 million. HKScan closed its pig
slaughtering facility in Skara, as planned in September.
MARKET AREA: DENMARK
(EUR million) Q3/201 Q3/201 Q1-Q3/20 Q1-Q3/20 2013
4 3 14 13
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net sales 51.6 56.5 158.1 172.9 225.3
--------------------------------------------------------------------------------
EBIT -1.5 -2.0 -8.2 -2.8 3.6
--------------------------------------------------------------------------------
- EBIT margin, % -3.0 -3.5 -5.2 -1.6 1.6
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EBIT excluding non-recurring income -1.5 -2.0 -3.1 -2.8 -2.8
and expenses
--------------------------------------------------------------------------------
- EBIT margin, % -3.0 -3.5 -1.9 -1.6 -1.2
--------------------------------------------------------------------------------
Danish net sales in January-September totalled EUR 158.1 (172.9) million, and
EUR 51.6 (56.5) million in the third quarter. EBIT excluding non-recurring
income and expenses was -3.1 (-2.8) million in January-September, and EUR -1.5
(-2.0) million in the third quarter.
Poultry purchasing prices and volumes kept decreasing from the previous year,
but sales price pressure remained tough. Combined with the impact of lower
volumes, the result remained in the red. Actions to decrease frozen stock
continued, which continued to decrease margins also in the third quarter. Fresh
chicken products generated satisfactory margins, but with volumes being lower
than expected, the total margin was also lower than anticipated. Frozen
products continued to face severe sales price competition, resulting in low
margins in Denmark and Sweden. Cash flow remained weak due to low margins and
low working capital turn.
Turnaround efforts are in progress and the management team has been renewed.
The new General Manager will start in November. New product launches,
production efficiency improvements and volume rebalancing actions are in the
pipeline.
INVESTMENTS
The Group's investments in the third quarter totalled EUR 10.0 (13.8) million.
The market area breakdown is as follows:
(EUR million) Q3/2014 Q3/2013 Q1-Q3/2014 Q1-Q3/2013 2013
--------------------------------------------------------------------------------
Finland 3.3 6.4 9.8 10.8 15.2
--------------------------------------------------------------------------------
Baltics 1.9 1.5 9.3 7.5 8.7
--------------------------------------------------------------------------------
Sweden 1.6 1.6 3.6 3.5 6.1
--------------------------------------------------------------------------------
Denmark 1) 3.1 4.3 8.4 5.3 12.1
--------------------------------------------------------------------------------
Total 10.0 13.8 31.2 27.2 42.2
--------------------------------------------------------------------------------
---------------------------------------------------------------
1) 2013 investments include the rebuild of the Vinderup
plant.
A substantial amount of planned and executed investments focused on improving
operational efficiency, which has been identified as a strategic focus area. In
Finland, the main investment was a new slicing and packaging line in Mikkeli
and Forssa organ department refurbishment. In Sweden, process investments were
made in Linköping lamb slaughtering. In the Baltics, investments were done to
improve packaging capacity in Jelgava. In Denmark, the investments were related
to logistics rationalisation at Vinderup and Skovsgaard.
FINANCING AND TAXES
The Group's interest-bearing debt at the end of September stood at EUR 187.3
(456.4) million. Net debt decreased to EUR 170.9 (419.3) million mostly due to
the closing of the Sokolow divestment in June, when HKScan repaid all
syndicated loans amounting to approximately EUR 190 million.
The Group's liquidity has been good. Undrawn committed credit facilities at 30
September 2014 stood at EUR 161.5 (175.9) million. In addition, the Group had
other uncommitted overdraft and other facilities of EUR 22.5 (22.8) million.
The EUR 200.0 million commercial paper programme had been drawn to the amount
of EUR 117.5 (149.0) million.
Net financial expenses decreased due to the lower loan amount and were EUR -2.1
(-5.3) million in the third quarter and EUR -11.8 (-16.1) million in
January-September. Costs in the second quarter include one-time financial
restructuring expenses of EUR 1.1 million.
Group income taxes came to EUR -0.2 (1.6) million in the third quarter and were
EUR 5.0 (4.3) million in the positive in January-September.
SHARES
At the end of September, HKScan Group's share capital stood at EUR 66 820 528.
The Group's total number of shares issued, 55 026 522, was divided into two
share series as follows: A Shares, 49 626 522 (90.19% of the total number of
shares) and K Shares, 5 400 000 (9.81%). The A Shares are quoted on the NASDAQ
OMX Helsinki. The K Shares are held by LSO Osuuskunta (4 735 000 shares) and
Sveriges Djurbönder ek.för. (665 000 shares) and are not listed. The company
held 1 053 734 A Shares as treasury shares corresponding to 1.9 per cent of the
company's total number of shares and 0.7 per cent of the total number of votes.
HKScan's market capitalization at the end of September stood at EUR 185.4
(188.2) million, breaking down as follows: Series A shares had a market value
of EUR 167.2 (169.7) million, and the unlisted Series K shares a calculated
market value of EUR 18.2 (18.5) million.
In January-September, a total of 10 084 409 (4 960 555) of the company's shares
with a total value of EUR 39 020 690 (18 913 516) were traded. The highest
price quoted in the period under review was EUR 4.49 (4.28), and the lowest was
EUR 3.37 (3.38). The average price was EUR 3.82 (3.81). At the end of
September, the closing price was EUR 3.37 (3.42).
LIQUIDITY PROVIDING AGREEMENT TERMINATED
The Liquidity Providing (LP) agreement between HKScan Corporation and FIM
Securities Ltd terminated on 31 July 2014. The agreement met the requirements
set for liquidity providing at NASDAQ OMX Helsinki Ltd. HKScan estimates that
the liquidity of the stock is sufficient and an external liquidity provider is
no longer needed.
ANNUAL GENERAL MEETING AND BOARD OF DIRECTORS' AUTHORIZATIONS
The Annual General Meeting of HKScan Corporation was held on 10 April 2014 in
Helsinki. The resolutions of the AGM, including authorizations given to the
Board, are reported in a stock release the same day. The Board has not
exercised the authorizations given by the AGM.
PERSONNEL
During January-September, HKScan's personnel averaged 7 776 (7 841) in number.
The average number of personnel in each market area was as follows:
Q1-Q3/2014 Q1-Q3/2013 2013
--------------------------------------
Finland 2 816 2 730 2 685
--------------------------------------
Baltics 1 770 1 758 1 761
--------------------------------------
Sweden 2 349 2 468 2 459
--------------------------------------
Denmark 841 885 869
--------------------------------------
Total 7 776 7 841 7 774
--------------------------------------
The breakdown of personnel by market area at the end of September was as
follows:
30.9.2014 30.9.2013 31.12.2013
-----------------------------------------
Finland 2 682 2 510 2 572
-----------------------------------------
Baltics 1 767 1 758 1 760
-----------------------------------------
Sweden 2 203 2 377 2 248
-----------------------------------------
Denmark 752 799 838
-----------------------------------------
Total 7 404 7 444 7 418
-----------------------------------------
CLAIM BY OY PRIMULA AB'S BANKCRUPTCY ESTATE
As announced in a stock exchange release published on 7 September 2012, HKScan
Corporation and HK Ruokatalo Oy (now HKScan Finland Oy) were notified that Oy
Primula Ab's bankruptcy estate has submitted an action for damages to the
District Court of Finland Proper concerning the companies. The claim amounts to
about EUR 16.3 million, plus claims related to interest and legal costs.
HKScan and HKScan Finland regard the action as unjustified, and the companies
have disputed the claim in its entirety in the pending trial. The action did
not result in any provisions in the consolidated financial statements.
SHORT-TERM RISKS AND UNCERTAINTY FACTORS
The most significant uncertainty factors in HKScan Group's business are related
to price trends and the potential excess or availability of local or global
meat raw material, as well as to the adequacy of price increases in relation to
costs.
The risks include various unexpected actions potentially taken by the
authorities which may impose restrictions on the business. Additionally, the
Group's ongoing development projects and organizational restructuring may
create uncertainties and unforeseen extra costs.
The risks of animal diseases in the food industry's raw meat supply or
potential international or regional food scandals impacting the overall
consumption outlook can never be fully excluded.
EVENTS AFTER THE REPORTING PERIOD
On 2 October, HKScan announced that it will consolidate its IT infrastructure
through a partnership agreement with Atos. The agreement includes development
of workspace, network and storage services as well as a cloud-enabled IT
infrastructure. The consolidation will improve HKScan's operational efficiency
and create cost savings.
On 9 October, HKScan announced that HKScan Sweden AB had signed a five-year
framework agreement for ongoing cooperation with Coop Sverige AB. Coop operates
700 retail stores in Sweden, holding over 21 per cent of the Swedish grocery
retail sector. The new five-year agreement is an upgrade of an existing
contract and its goal is to create new opportunities for further development of
the meat category. The deal will strengthen HKScan's foothold on the Swedish
market and ensure Coop good availability of Swedish meat raw material.
On 13 October, HKScan announced that the HKScan Board of Directors has given
permission to proceed with planning of two major investment projects. The first
is a prospective EUR 35-65 million facility in western Finland, and the other
is a EUR 20 million production facility to be located in Rakvere, Estonia. The
final investment sums depend on which implementation options are chosen. The
planned initiatives are currently undergoing detailed feasibility studies. The
final approvals are awaited next summer.
The investments will enable HKScan to develop its branded offering for growing
segments, enhance its product quality, improve working conditions and safety,
and reduce environmental impacts. The investment projects will also support
HKScan in streamlining its production structure, integrating its technology and
thereby improving operational efficiency.
OUTLOOK FOR 2014
HKScan adjusted its full-year outlook on 16 June 2014. HKScan expects its
full-year operating profit (EBIT) margin excluding non-recurring items to be
0.5-1.0 per cent. Performance in the last quarter is anticipated to be the
strongest. The corresponding full year figure for 2013 was 0.5 per cent.
The full-year reported operating profit including non-recurring items is
estimated to be significantly higher as a result of the sale of HKScan's shares
in Saturn Nordic Holding AB.
CONSOLIDATED FINANCIAL STATEMENTS 1 JANUARY - 30 SEPTEMBER 2014
CONSOLIDATED INCOME STATEMENT
(EUR million) Note Q3/201 Q3/201 Q1-Q3/201 Q1-Q3/201 2013
4 3 4 3
--------------------------------------------------------------------------------
Net sales 498.4 526.9 1 465.6 1 565.3 2 113.2
--------------------------------------------------------------------------------
Cost of goods sold 1. -466.2 -498.4 -1 417.1 -1 494.0 -2
014.8
--------------------------------------------------------------------------------
Gross Profit 32.2 28.5 48.5 71.3 98.4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Other operating items total 1. 1.8 5.5 91.4 18.7 33.4
--------------------------------------------------------------------------------
Sales and marketing costs 1. -14.4 -12.6 -46.7 -42.8 -58.1
--------------------------------------------------------------------------------
General administration 1. -12.3 -14.4 -44.8 -46.3 -62.0
costs
--------------------------------------------------------------------------------
Operating Profit 7.3 7.0 48.3 0.9 11.7
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial income and -2.1 -5.3 -11.8 -16.1 -23.6
expenses
--------------------------------------------------------------------------------
Share of profit/loss in 0.7 3.6 10.4 14.1 18.6
associates
--------------------------------------------------------------------------------
Profit/loss before taxes 5.8 5.3 46.9 -1.1 6.7
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Income tax -0.2 1.6 5.0 4.3 3.1
--------------------------------------------------------------------------------
Profit/loss for the period 5.6 7.0 52.0 3.3 9.8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Non-controlling interests -0.1 -0.3 0.1 -0.2 -1.1
--------------------------------------------------------------------------------
Profit/loss for the period 5.5 6.7 52.1 3.1 8.7
--------------------------------------------------------------------------------
Earnings per share calculated on profit
attributable to equity holders of the parent:
--------------------------------------------------
EPS, undiluted, continuing 0.10 0.12 0.97 0.06 0.16
operations, EUR/share
--------------------------------------------------------------------------------
EPS, diluted, continuing 0.10 0.12 0.97 0.06 0.16
operations, EUR/share
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(EUR million) Q3/201 Q3/201 Q1-Q3/20 Q1-Q3/20 2013
4 3 14 13
--------------------------------------------------------------------------------
Profit/loss for the period 5.6 7.0 52.0 3.3 9.8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME (after
taxes):
--------------------------------------------------------------------------------
Exchange differences on translating 0.4 3.3 -4.9 -4.0 -3.4
foreign operations
--------------------------------------------------------------------------------
Cash flow hedging -0.3 1.3 -1.5 4.1 2.8
--------------------------------------------------------------------------------
Revaluation 0.0 0.0 0.0 0.0 0.0
--------------------------------------------------------------------------------
Actuarial gains or losses 0.0 0.0 0.0 1.6
--------------------------------------------------------------------------------
TOTAL OTHER COMPREHENSIVE INCOME 0.1 4.6 -6.4 0.2 1.0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME FOR THE 5.7 11.6 45.6 3.4 10.8
PERIOD
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME FOR THE
PERIOD ATTRIBUTABLE TO:
--------------------------------------------------------------------------------
Equity holders of the parent 5.6 11.3 45.7 3.2 9.7
--------------------------------------------------------------------------------
Non-controlling interests 0.1 0.3 -0.1 0.2 1.1
--------------------------------------------------------------------------------
Total 5.7 11.6 45.6 3.4 10.8
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
(EUR million) Note 30.9.2014 30.9.2013 31.12.2013
--------------------------------------------------------------------------------
ASSETS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Intangible assets 2. 147.4 153.6 152.1
--------------------------------------------------------------------------------
Tangible assets 3. 377.9 417.0 411.5
--------------------------------------------------------------------------------
Holdings 41.6 148.7 149.9
--------------------------------------------------------------------------------
Other non-current assets 36.5 37.4 30.6
--------------------------------------------------------------------------------
TOTAL NON-CURRENT ASSETS 603.5 756.7 744.1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Inventories 4. 140.8 178.9 152.5
--------------------------------------------------------------------------------
Current receivables 132.4 154.3 137.0
--------------------------------------------------------------------------------
Cash and cash equivalents 14.3 36.6 68.7
--------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 287.5 369.8 358.1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Assets of disposal group classified as 0.0 0.0 0.0
held for sale
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL ASSETS 890.9 1 126.5 1 102.2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUITY 5. 448.5 401.4 409.0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Non-current loans, interest-bearing 58.5 136.8 245.1
--------------------------------------------------------------------------------
Non-current liabilities, 31.4 39.0 36.5
non-interest-bearing
--------------------------------------------------------------------------------
TOTAL NON-CURRENT LIABILITIES 89.9 175.8 281.6
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Current loans, interest-bearing 128.8 319.6 159.3
--------------------------------------------------------------------------------
Current liabilities, 223.8 229.8 252.3
non-interest-bearing
--------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 352.6 549.3 411.6
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL EQUITY AND LIABILITIES 890.9 1 126.5 1 102.2
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN CONSOLIDATED EQUITY
(EUR 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.
million)
--------------------------------------------------------------------------------
EQUITY AT 66.8 73.5 -10.8 143.5 32.0 2.0 0.0 93.0 400.0 9.0 409.0
1.1.2014
--------------------------------------------------------------------------------
Result - - - - - - - 52.1 52.1 -0.1 52.0
for the
financia
l period
--------------------------------------------------------------------------------
Other
comprehe
nsive
income
(+) /
expense
(-)
--------------------------------------------------------------------------------
Transl. - - - - - -4.9 - - -4.9 - -4.9
diff.
--------------------------------------------------------------------------------
Cash flow - - -1.5 - - - - - -1.5 - -1.5
hedging
--------------------------------------------------------------------------------
Actuarial - - - - - - - - - - 0.0
gains or
losses
--------------------------------------------------------------------------------
Total - - -1.5 - - -4.9 - 52.1 45.7 -0.1 45.6
compreh.
income
for the
period
--------------------------------------------------------------------------------
Direct - - - - - - - 0.0 0.0 - 0.0
recognit
. in
retained
earnings
--------------------------------------------------------------------------------
Transfers - -0.6 - - -21.9 - - 22.5 0.0 - 0.0
between
items
--------------------------------------------------------------------------------
Dividend - - - - - - - -5.4 -5.4 -0.7 -6.1
distribu
t.
--------------------------------------------------------------------------------
EQUITY AT 66.8 72.9 -12.4 143.5 10.1 -2.9 0.0 162.2 440.3 8.2 448.5
30.9.201
4
--------------------------------------------------------------------------------
(EUR 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.
million)
--------------------------------------------------------------------------------
EQUITY AT 66.8 73.3 -13.7 143.5 26.4 5.4 0.0 93.7 395.4 8.6 404.0
1.1.2013
--------------------------------------------------------------------------------
Result for - - - - - - - 3.1 3.1 0.2 3.3
the
financial
period
--------------------------------------------------------------------------------
Other
comprehens
ive income
(+) /
expense
(-)
--------------------------------------------------------------------------------
Transl. - - - - - -4.0 - - -4.0 - -4.0
diff.
--------------------------------------------------------------------------------
Cash flow - - 4.1 - - - - - 4.1 - 4.1
hedging
--------------------------------------------------------------------------------
Actuarial - - - - - - - - - - -
gains or
losses
--------------------------------------------------------------------------------
Total - - 4.1 - - -4.0 - 3.1 3.2 0.2 3.4
compreh.
income for
the period
--------------------------------------------------------------------------------
Direct - - - - - - - 0,0 0,0 - 0,0
recognit.
in
retained
earnings
--------------------------------------------------------------------------------
Transfers - - - - 5.4 - - -5.4 0.0 - 0.0
between
items
--------------------------------------------------------------------------------
Dividend - - - - - - - -5.4 -5.4 -0.6 -6.0
distribut.
--------------------------------------------------------------------------------
EQUITY AT 66.8 73.3 -9.5 143.5 31.8 1.4 0.0 85.9 393.2 8.2 401.4
30.9.2013
--------------------------------------------------------------------------------
COLUMNS: 1. Share capital, 2. Share premium reserve, 3. Revaluation reserve, 4.
Reserve for invested unrestricted equity (RIUE), 5. Other reserves, 6.
Translation differences, 7. Treasury shares, 8. Retained earnings, 9. Equity
holders of the parent, 10. Non-controlling interests, 11. Total
CASH FLOW STATEMENT
(EUR million) Q1-Q3/2014 Q1-Q3/2013 2013
-------------------------------------------------------------------------------
Cash flow before change in net working capital 29.4 48.0 76.4
-------------------------------------------------------------------------------
Change in net working capital -6.5 -23.1 46.2
-------------------------------------------------------------------------------
Financial items and taxes -6.2 -7.4 -11.8
-------------------------------------------------------------------------------
CASH FLOW FROM OPERATING ACTIVITIES 16.7 17.5 110.8
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Cash flow from investing activities 150.1 -23.7 -35.6
-------------------------------------------------------------------------------
CASH FLOW AFTER INVESTING ACTIVITIES 166.8 -6.1 75.3
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Change in loans -214.7 -6.7 -55.9
-------------------------------------------------------------------------------
Dividends paid -6.1 -6.0 -5.9
-------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES -220.8 -12.7 -61.8
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
NET CASH FLOW -54.0 -18.9 13.5
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 68.7 55.6 55.6
-------------------------------------------------------------------------------
Translation differences -0.4 -0.1 -0.4
-------------------------------------------------------------------------------
Cash and cash equivalents at end of period 14.3 36.6 68.7
-------------------------------------------------------------------------------
FINANCIAL INDICATORS
30.9.2014 30.9.2013 31.12.2013
-----------------------------------------------------------------------------
Earnings per share (EPS), undiluted, EUR 0.97 0.06 0.16
-----------------------------------------------------------------------------
Earnings per share (EPS), diluted, EUR 0.97 0.06 0.16
-----------------------------------------------------------------------------
Equity per share, EUR 8.2 7.3 7.4
-----------------------------------------------------------------------------
Equity ratio, % 50.3 35.6 37.1
-----------------------------------------------------------------------------
Adjusted average number of shares, mill. 54.0 54.0 54.0
-----------------------------------------------------------------------------
Gross capital expenditure on PPE, EUR mill. 31.2 27.2 42.2
-----------------------------------------------------------------------------
Employees, end of month average 7 776 7 841 7 774
-----------------------------------------------------------------------------
NOTES TO CONSOLIDATED INTERIM REPORT
ACCOUNTING POLICIES
HKScan Corporation's interim report for 1 January - 30 September 2014 has been
prepared in compliance with IAS 34 Interim Financial Reporting standards. The
same accounting principles have been applied in the interim report as in the
annual financial statements for 2013, with the exception of the new IFRS 10
(Consolidated Financial Statements) and IFRS 11 (Joint arrangements) standards
(effective as of 1 January 2014). In addition, costs incurred by centralized
Group services such as Group Technology and Operations Development are to be
invoiced individually by Market Areas as of January 1, 2014. The Group's
financial reporting in 2014 will be in line with these changes. The quarterly
Group and market area information for 2013 has been restated accordingly. Due
to the rounding of the figures to the nearest million euros in the interim
report, some totals may not agree with the sum of their constituent parts.
Accounting principles are explained in the financial statements for 2013.
The interim report is unaudited.
ANALYSIS BY SEGMENT
Net sales and EBIT by market area
------------------------------------
(EUR million) Q3/2014 Q3/2013 Q1-Q3/2014 Q1-Q3/2013 2013
-----------------------------------------------------------------------------
NET SALES
-----------------------------------------------------------------------------
- Finland 194.7 200.4 573.4 593.9 804.1
-----------------------------------------------------------------------------
- Baltics 47.3 44.7 129.2 130.4 175.1
-----------------------------------------------------------------------------
- Sweden 227.4 239.0 670.5 710.3 966.5
-----------------------------------------------------------------------------
- Denmark 51.6 56.5 158.1 172.9 225.3
-----------------------------------------------------------------------------
- Between segments -22.5 -13.7 -65.7 -42.2 -57.7
-----------------------------------------------------------------------------
Group total 498.4 526.9 1 465.6 1 565.3 2 113.2
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
EBIT
-----------------------------------------------------------------------------
- Finland 3.0 2.1 -11.2 1.5 3.2
-----------------------------------------------------------------------------
- Baltics 2.8 4.1 4.8 5.8 7.7
-----------------------------------------------------------------------------
- Sweden 5.1 5.1 -6.4 4.4 8.0
-----------------------------------------------------------------------------
- Denmark -1.5 -2.0 -8.2 -2.8 3.6
-----------------------------------------------------------------------------
- Between segments - - - - -
-----------------------------------------------------------------------------
Segments total 9.3 9.3 -21.0 9.0 22.5
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Group administration costs -2.0 -2.3 69.3 -8.1 -10.7
-----------------------------------------------------------------------------
Group total 7.3 7.0 48.3 0.9 11.7
-----------------------------------------------------------------------------
NOTES TO THE INCOME STATEMENT
1. NON-RECURRING ITEMS
(EUR million) Q3/201 Q3/201 Q1-Q3/2 Q1-Q2/2 2013
4 3 014 013
--------------------------------------------------------------------------------
Restructuring redundancy expenses COGS, - - - -1.4 -1.5
Finland 1)
--------------------------------------------------------------------------------
Restructuring redundancy expenses SGA, - -0.5 - -1.1 -1.1
Finland 2)
--------------------------------------------------------------------------------
Restructuring expenses for production - - - -1.0 -1.0
setup, Finland 1)
--------------------------------------------------------------------------------
Impairment of assets, Finland 1) - - -12.0 - -
--------------------------------------------------------------------------------
Restructuring expenses for closed - - -3.7 - -
operations, Sweden 1)
--------------------------------------------------------------------------------
Impairment of assets, Sweden 1) - - -6.6 - -
--------------------------------------------------------------------------------
Impairment of assets, Sweden 3) - - - - -2.3
--------------------------------------------------------------------------------
Impairment of inventory 2011-2012, - - -0.8 - -
Sweden 1)
--------------------------------------------------------------------------------
Property insurance compensation, Denmark - - - - 7.1
3)
--------------------------------------------------------------------------------
Impairment of assets, Denmark 1) - - -5.2 - -
--------------------------------------------------------------------------------
Restructuring redundancy expenses SGA, - - - - -0.7
Denmark 2)
--------------------------------------------------------------------------------
Capital gain in sales of shares of - - 77.6 - -
Saturn Nordic Holding Ab 3)
--------------------------------------------------------------------------------
Non-recurring items Total - -0.5 49.3 -3.6 0.5
--------------------------------------------------------------------------------
1) Included in the Income Statement in the item ”COGS Total”
2) Included in the Income Statement in the item ”SGA Total”
3) Included in the Income Statement in the item ”Other operating items total”
NOTES TO THE STATEMENT OF FINANCIAL POSITION
2. CHANGES IN INTANGIBLE ASSETS
(EUR million) Q3/2014 Q3/2013 2013
---------------------------------------------------------
Opening Balance 152.1 156.1 156.1
---------------------------------------------------------
Translation differences -3.0 -0.9 -3.1
---------------------------------------------------------
Additions 1.0 0.7 2.1
---------------------------------------------------------
Additions, business acquisitions 0.8 0.0 0.0
---------------------------------------------------------
Disposals 0.0 0.0 0.0
---------------------------------------------------------
Depreciation and impairment -3.6 -2.4 -3.2
---------------------------------------------------------
Reclassification between items 0.1 0.0 0.3
---------------------------------------------------------
Closing balance 147.4 153.6 152.1
---------------------------------------------------------
3. CHANGES IN PROPERTY, PLANT AND EQUIPMENT
(EUR million) Q3/2014 Q3/2013 2013
---------------------------------------------------------
Opening Balance 411.5 437.0 437.0
---------------------------------------------------------
Translation differences -1.9 -1.0 -2.5
---------------------------------------------------------
Additions 30.5 27.2 40.5
---------------------------------------------------------
Additions, business acquisitions 0.0 0.0 0.0
---------------------------------------------------------
Disposals -1.4 -2.5 -5.0
---------------------------------------------------------
Depreciation and impairment -61.2 -43.7 -58.1
---------------------------------------------------------
Reclassification between items 0.4 0.0 -0.5
---------------------------------------------------------
Closing balance 377.9 417.1 411.5
---------------------------------------------------------
4. INVENTORIES
(EUR million) Q3/2014 Q3/2013 2013
------------------------------------------------------
Materials and supplies 71.0 58.5 85.8
------------------------------------------------------
Semi-finished products 8.8 3.2 4.0
------------------------------------------------------
Finished products 48.5 44.6 44.3
------------------------------------------------------
Other inventories 2.5 7.3 6.6
------------------------------------------------------
Inventories, advance payments 0.7 1.1 1.1
------------------------------------------------------
Biological asset, IFRS 41 9.4 64.2 10.7
------------------------------------------------------
Total inventories 140.8 178.9 152.5
------------------------------------------------------
5. NOTES TO EQUITY
Share capital Number of Share Share Reserve for Treasu Total
and share outstanding capit premium invested ry
premium shares al reserve unrestricted
reserve equity
--------------------------------------------------------------------------------
1.1.2014 53 972 788 66.8 72.9 143.5 0.0 283.1
--------------------------------------------------------------------------------
30.9.2014 53 972 788 66.8 72.9 143.5 0.0 283.2
--------------------------------------------------------------------------------
DERIVATIVE INSTRUMENT LIABILITIES
(EUR million) 30.9.2014 30.9.2013 31.12.2013
---------------------------------------------------------------------------
Nominal values of derivative instruments
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Foreign exchange derivatives 77.2 67.9 78.3
---------------------------------------------------------------------------
Interest rate derivatives 158.7 255.1 211.6
---------------------------------------------------------------------------
Electricity derivatives 7.0 9.6 9.3
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Fair values of derivative instruments
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Foreign exchange derivatives -0.3 0.0 -0.8
---------------------------------------------------------------------------
Interest rate derivatives -15.5 -17.0 -16.0
---------------------------------------------------------------------------
Electricity derivatives -1.4 -1.2 -2.1
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
CONSOLIDATED OTHER CONTINGENT LIABILITIES
---------------------------------------------------------------------------
(EUR million)
---------------------------------------------------------------------------
30.9.2014 30.9.2013 31.12.2013
---------------------------------------------------------------------------
Debts secured by
---------------------------------------------------------------------------
pledges or mortgages
---------------------------------------------------------------------------
- loans from financial institutions 31.6 302.2 273.7
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Given as security
---------------------------------------------------------------------------
- real estate mortgages 12.3 12.5 12.4
---------------------------------------------------------------------------
- pledges 0.3 4.9 0.4
---------------------------------------------------------------------------
- floating charges 2.9 9.0 9.0
---------------------------------------------------------------------------
---------------------------------------------------------------------------
For associates
---------------------------------------------------------------------------
- guarantees 2.5 7.5 7.5
---------------------------------------------------------------------------
---------------------------------------------------------------------------
For others
---------------------------------------------------------------------------
- guarantees and pledges 8.5 11.8 15.7
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Other contingencies
---------------------------------------------------------------------------
Leasing commitments 14.3 16.0 17.2
---------------------------------------------------------------------------
Rent liabilities 43.6 50.6 49.4
---------------------------------------------------------------------------
Other commitments 6.6 7.2 6.6
---------------------------------------------------------------------------
THE FAIR VALUE DETERMINATION PRINCIPLES APPLIED BY THE GROUP ON FINANCIAL
INSTRUMENTS MEASURED AT FAIR VALUE
Derivatives
The fair values of currency derivatives are determined by using the market
prices for contracts of equal duration on the reporting date. The fair values
of interest rate swaps are determined using the net present value method
supported by the market interest rates on the reporting date. The fair value of
commodity derivatives are determined by using publicly quoted market prices.
30.9.2014 Level 1 Level 2 Level 3
--------------------------------------------------------------------------------
Assets measured at fair value
--------------------------------------------------------------------------------
Financial assets recognised at fair value
--------------------------------------------------------------------------------
through profit or loss
--------------------------------------------------------------------------------
- Trading securities - - - -
--------------------------------------------------------------------------------
- Trading derivatives
--------------------------------------------------------------------------------
- Interest rate swaps - - - -
--------------------------------------------------------------------------------
- Foreign exchange derivatives 0.2 0.0 0.2 0.0
--------------------------------------------------------------------------------
- Commodity derivatives - - - -
--------------------------------------------------------------------------------
Available-for-sale financial assets
--------------------------------------------------------------------------------
- Investments in shares 0.0 0.0 0.0 0.0
--------------------------------------------------------------------------------
Total 0.2 0.0 0.2 0.0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Liabilities measured at fair value
--------------------------------------------------------------------------------
Financial liabilities recognised at fair
value
--------------------------------------------------------------------------------
through profit or loss
--------------------------------------------------------------------------------
-Trading derivatives
--------------------------------------------------------------------------------
- Interest rate swaps -15.5 0.0 -15.5 0.0
--------------------------------------------------------------------------------
of which subject to cash flow hedging -15.4 0.0 -15.4 0.0
--------------------------------------------------------------------------------
- Foreign exchange derivatives -0.5 0.0 -0.5 0.0
--------------------------------------------------------------------------------
of which subject to net investment hedging - - - -
--------------------------------------------------------------------------------
- Commodity derivatives -1.4 0.0 -1.4 0.0
--------------------------------------------------------------------------------
of which subject to cash flow hedging -1.4 0.0 -1.4 0.0
--------------------------------------------------------------------------------
Total -17.4 0.0 -17.4 0.0
--------------------------------------------------------------------------------
BUSINESS TRANSACTIONS WITH RELATED PARTIES
(EUR million) Q1-Q3/2014 Q1-Q3/2013 2013
----------------------------------------------------------
Sales to associates 50.1 85.3 106.5
----------------------------------------------------------
Purchases from associates 29.6 43.1 55.1
----------------------------------------------------------
Trade and other receivables 3.0 3.2 4.0
----------------------------------------------------------
Trade and other payables 3.1 3.5 5.0
----------------------------------------------------------
NEXT FINANCIAL REPORT
HKScan Group's financial statements bulletin 2014 will be published on 11
February 2015.
Vantaa, 5 November 2014
HKScan Corporation
Board of Directors
Further information is available from HKScan Corporation's President and CEO,
Hannu Kottonen and CFO, Tuomo Valkonen. Kindly submit a call-back request to
Marja-Leena Dahlskog, SVP Communications, firstname.surname@hkscan.com or tel.
+358 10 570 2142
HKScan is the leading Nordic meat expert. We sell, market and produce
high-quality, responsibly-produced pork, beef, poultry and lamb products,
processed meats and convenience foods under strong brand names. Our customers
are the retail, food service, industrial and export sectors, and our home
markets comprise Finland, Sweden, Denmark and the Baltics. We export to close
to 50 countries. HKScan's net sales is EUR 2.1 billion and we have some 7 700
employees, making us one of the Europe's leading meat companies.
DISTRIBUTION:
NASDAQ OMX Helsinki
Main media
www.hkscan.com
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