2011-05-06 07:00:00 CEST
2011-05-06 07:00:06 CEST
REGULATED INFORMATION
HKScan Oyj - Interim report (Q1 and Q3)
STRONG GROWTH IN HKSCAN'S NET SALES, POOR PORK PROFITABILTY ERODES PERFORMANCE IN Q1
HKScan Corporation STOCK EXCHANGE RELEASE 6 May 2011 at 8am
HKSCAN GROUP INTERIM REPORT 1 JANUARY - 31 MARCH 2011
STRONG GROWTH IN HKSCAN'S NET SALES, POOR PORK PROFITABILTY ERODES PERFORMANCE
IN Q1
* The HKScan Group's net sales in the first quarter amounted to EUR 592.7
million (EUR 483.6 m). Net sales grew by more than 22 percent, mainly as a
result of completed corporate acquisitions. Organic growth stood at
approximately 4 percent.
* Group EBIT came in at EUR 1.4 million (EUR 5.5 m).
* The HKScan Group's market standing is strong and the company is a leading
player in all its market areas.
* The Group's performance was eroded by the poor profitability of the pork
business in Finland and Sweden.
* The Group's efficiency programmes in Finland and Sweden as well as Rose
Poultry's integration into the HKScan Group in Denmark progressed as planned.
* Business in the Baltics and Poland was developed as planned.
* The company reaffirms its previously given guidance. The Group's full-year
EBIT is expected to improve compared with 2010.
HKSCAN GROUP
(EUR million)
Q1/2011 Q1/2010 2010
---------------------------------------------------
---------------------------------------------------
Net sales 592.7 483.6 2 113.9
---------------------------------------------------
EBIT 1.4 5.5 48.0
---------------------------------------------------
- EBIT margin, % 0.2 1.1 2.3
---------------------------------------------------
Profit/loss before taxes -3.3 3.9 36.5
---------------------------------------------------
Earnings per share, EUR -0.06 0.06 0.52
---------------------------------------------------
CEO MATTI PERKONOJA:
“Business in the HKScan Group developed as planned during Q1 resolutely
implementing the agreed efficiency programmes to build future competitiveness.
Within its market areas the company performed in line with its targets in the
processed meat and poultry businesses. With respect to meat, the most
significant success was the Rapeseed pork launched in Finland in February. The
product's success will open the prospect of the return of pork's popularity
among consumers.
In Finland and Sweden, the pork business chain in its entirety has been
negatively affected for an exceptionally long time by very low profitability,
which is clearly reflected in HKScan's results. Overproduction of pork
elsewhere in Europe has resulted in greater than usual pressure to import meat
to HKScan's market area. Disgorgement of pork stocks − accumulated during the
dioxin scandal in Germany − on the market during the latter part of the year
will continue to disrupt the pork market. At the same time, in Finland, the
release on the export market of stocks which arose due to the ban on exports to
Russia last year is creating additional challenges for profitability in the
business with respect to pork meat.
HKScan has been a large exporter of pork from Finland and Sweden. As the
profitability of HKScan's pork exports has weakened for an extended period, the
company has decided to significantly reduce exporting pork.
Easter, which is an import season for the company and which has a significant
impact on sales and profitability, was at the end of April this year. This
weakens the comparability of the period under review with the previous year.
Profitable business at HKScan is developed on the terms of customers and
consumers and by meeting their expectations. Profitable business is based on a
supply chain that is efficient and transparent and which operates responsibly.
The company has defined principles of responsibility to which it commits
itself, which apply to all the market areas.”
MARKET AREA: FINLAND
(EUR million)
Q1/2011 Q1/2010 2010
-----------------------------------------
-----------------------------------------
Net sales 188.0 167.8 718.5
-----------------------------------------
EBIT -0.6 -0.6 10.7
-----------------------------------------
- EBIT margin, % -0.3 -0.4 1.5
-----------------------------------------
In Finland, Q1 net sales grew compared with the previous year standing at EUR
188.0 million (EUR 167.8 m.) Part of the increase was attributable to
Järvi-Suomen Portti Oy's merger with the Group as of 1 January 2011. EBIT stood
at EUR -0.6 million (EUR -0.6 m). Q1 EBIT was eroded in particular by weakened
pork profitability.
The early part of the year progressed as planned in Finland with respect to
poultry meat and processed meats. Rapeseed pork launched in February has been
extremely well received by customers and consumers.
The productivity programme of HKScan Finland's subsidiary, HK Ruokatalo,
concerning the period 2011−2013 is ready, and the employer-employee
negotiations relating thereto concerning blue and white collar employees in HK
Ruokatalo's industrial processes, which started in November, came to an end in
January. HK Ruokatalo and its blue and white collar personnel employed in
industrial processes agreed on a target programme which, when implemented, will
improve the productivity of the company's industrial processes on average by 20
percent.
HK Ruokatalo's industrial activity will be enhanced by returning HK Ruokatalo's
partially outsourced operations relating to its core business (e.g. pork
cutting) in stages to the company during the current year. Implementation of
the productivity programme will mean a reduction of roughly 230 person-years in
HK Ruokatalo's business chain, including subcontractors and outsourced
operations, by the end of 2011.
The productivity programme is envisioned to deliver productivity benefits of
EUR 12 million on an annual level. The impacts will be evident in full by the
end of next year.
In order to ensure adequate slaughtering and cutting capacity for Finnish beef,
HK Ruokatalo has signed a service agreement with the western Finland-based
slaughterhouse Paimion Teurastamo on the slaughter of beef purchased by its
procurement company HK Agri. The service agreement covers slaughtering
amounting to about 3-6 million kg a year. In conjunction with this, HK
Ruokatalo and Kaivon Liha, which belongs to the same group as Paimion
Teurastamo, signed a major agreement on the supply of Finnish beef. In terms of
volume, the agreement covers approximately 3-4 million kg.
The agreement constitutes part of the measures designed to develop HK Agri's
beef procurement in Finland. During the early part of the year, procurement has
been enhanced in, among other areas, eastern Finland, where new production
contracts, with dairy farms in particular, have been concluded.
The new corporate entity Järvi-Suomen Portti Oy established by HKScan Finland
Oy and Osuuskunta Karjaportti began operations at the beginning of 2011. The
new company will continue the production of processed meats at Osuuskunta
Portti's plant located in Tikkala in the town of Mikkeli.
HK Ruokatalo merged its meat procurement and primary production as well as feed
trade into a single company at the beginning of 2011. The duties of the feed
company Lounaisfarmi and the chicken production chain of HK Ruokatalo were
transferred to LSO Foods, the name of which changed at the same time to HK
Agri.
MARKET AREA: SWEDEN
(EUR million)
Q1/2011 Q1/2010 2010
-----------------------------------------
-----------------------------------------
Net sales 252.3 230.5 997.1
-----------------------------------------
EBIT 0.3 2.7 20.4
-----------------------------------------
- EBIT margin, % 0.1 1.2 2.0
-----------------------------------------
In Sweden, net sales were EUR 252.3 million (EUR 230.5 m) and EBIT EUR 0.3
million (EUR 2.7 m).
Sales volumes in Swedish retail have declined by an exceptional amount during
the early part of the year, and the Swedish food industry has failed to obtain
its share of the growth in consumer purchasing power.
The strong Swedish krona has continued to exert an impact on the growth of
imported raw material volumes. Moreover, the overproduction of pork meat in
Europe and the dioxin scandal regarding production-animal feed in Germany at
the beginning of the year have lowed the price of imported meat and undermined
the competitiveness of production based on Swedish meat raw material.
To restore the profitability of its business, Scan AB will towards the end of
the year launch products based on imported raw material under its own brand.
The meat raw material will be imported primarily from other production
facilities belonging to the HKScan Group. Products marketed under the Scan
brand will continue to be made from Swedish meat raw material.
Sales of the Pärsons brand of cold cuts have developed as planned.
In March, Scan announced that in autumn 2012 it will be launching a new pork
meat, Rapsgris, for the Swedish market based on the Finnish Rapeseed pork
concept.
The efficiency programme underway at Scan is proceeding as planned.
MARKET AREA: DENMARK
(EUR million)
Q1/2011 Q1/2010 2010
------------------------------------------
------------------------------------------
Net sales 57.5 - 21.8*)
------------------------------------------
EBIT -0.5 - -0.0*)
------------------------------------------
- EBIT margin, % -0.9 0.0*)
------------------------------------------
*) Rose Poultry A/S has been merged with the HKScan Group since November 29,
2010.
In Denmark, Rose Poultry's net sales stood at EUR 57.5 million. EBIT was EUR
-0.5 million.
The integration of Rose Poultry A/S, which joined the HKScan Group in November,
is progressing according to plan. In the future Rose Poultry's fresh product
range will be developed through HKScan's strong know-how in poultry and the
company's position in its home market in Denmark, in Sweden and in the UK will
be further strengthened.
In April, Rose Poultry decided to concentrate and improve its operations in the
production facilities located in Vinderup and Skovsgaard and discontinue
slaughtering operations at the Padborg plant in southern Denmark.
MARKET AREA: BALTICS
(EUR million)
Q1/2011 Q1/2010 2010
-----------------------------------------
-----------------------------------------
Net sales 39.3 35.8 160.4
-----------------------------------------
EBIT 0.9 1.1 8.7
-----------------------------------------
- EBIT margin, % 2.2 3.0 5.4
-----------------------------------------
Net sales in the market area of the Baltic increased compared with the previous
year standing at EUR 39.3 million (EUR 35.8 m). EBIT came in at EUR 0.9 million
(EUR 1.1 m). As in the other HKScan market areas, the price of meat in the
Baltics has risen. Energy costs too have risen in the Baltic states.
High unemployment and higher food prices continue to affect consumers'
purchasing behaviour in the Baltics. Demand for more affordable products has
continued to grow, and food is increasingly being prepared from basic raw
materials.
The Rakvere Group's Latvia-based subsidiary AS Rigas Miesnieks acquired last
year a total of 98.8 percent of AS Jelgavas Galas Kombinats, a Latvian company
specializing in smoked meat products. Integration of the company in Rigas
Miesnieks has gone as planned. The companies' production-related activities
will be centralized during the course of the year mainly in Jelgavas' new and
efficient facility. Rigas Miesnieks's dispatching department and administration
will remain in Riga. During Q1, integration has given rise to some overlapping
expenditure.
In Latvia, the Group's market share has increased to nearly a third with the
Jelgavas Galas Kombinats acquisition.
Despite the challenges, our business in the Baltics has adjusted to the
prevailing market conditions in an exemplary manner.
MARKET AREA: POLAND
(EUR million)
*) Q1/2011 Q1/2010 2010
-----------------------------------------
-----------------------------------------
Net sales 70.5 63.9 279.3
-----------------------------------------
EBIT 3.0 4.2 15.5
-----------------------------------------
- EBIT margin, % 4.2 6.6 5.6
-----------------------------------------
*) The figures refer to HKScan's share (50%) of the Sokolów Group's figures.
In Poland, Sokolów's net sales were EUR 70.5 million (EUR 63.9 m) and EBIT EUR
3.0 million (EUR 4.2 m).
Sokolów has continued to increase its sales in all market channels. Growth has
been strongest in the modern retail supermarkets and hypermarkets and in
exports making it possible to offset the strong rise in raw material costs.
CHANGES IN GROUP STRUCTURE
The new corporate entity Järvi-Suomen Portti Oy established by HKScan Finland
Oy and Osuuskunta Karjaportti began operations at the turn of the year. The new
company will continue and develop the production of processed meats at
Osuuskunta Portti's plant located in Tikkala in the town of Mikkeli. HKScan
Finland is a majority shareholder in the new company with a 90 percent holding.
HK Ruokatalo merged its meat procurement and primary production as well as feed
trading into a single company at the beginning of 2011. The duties of the feed
company Lounaisfarmi and the chicken production chain of HK Ruokatalo were
transferred to LSO Foods, the name of which changed at the same time to HK
Agri.
CHANGES IN ORGANIZATION
Sirpa Laakso (Econ. & Bus. Adm.) assumed the post of Executive Vice President,
HR at HKScan Corporation and membership on the Management Team on 13 January
2011. Ms Laakso is responsible for HKScan's HR functions and for their
development in all of the Group's market areas. She reports to CEO Matti
Perkonoja.
CAPITAL EXPENDITURE AND FINANCE
The Group's production-related gross investments in the first quarter of 2011
totalled EUR 15.1 million (EUR 18.9 m) and were divided among
production-related investments in the market area as follows: Finland EUR 4.7
million (EUR 8.9 m), Sweden EUR 2.5 million (EUR 6.0 m), Denmark EUR 1.1
million (EUR - m) and the Baltics EUR 2.9 million (EUR 2.1 m). HKScan's share
of Sokolów investments in Poland was EUR 3.9 million (EUR 1.9 m).
In Finland, the most important investments concerned the modernization of
Järvi-Suomen Portti's production line and the expansion of HK Ruokatalo's beef
slaughterhouse in Outokumpu. In Sweden Scan invested in, among other things,
improvement of the pork slaughter process in Kristianstad and Pärsons's new
cold-cut line in Halmstad. In Denmark, investments involved the integration of
Rose Poultry A/S and modernization of the production lines to ensure efficiency
and growth. In the Baltics, the main investments were the transfer of Rigas
Miesnieks's production to Jelgava's new production facility and the
modernizations carried out on the production lines to secure manufacturing
capacity.
The Group's interest-bearing debt at the end of March stood at EUR 509.5
million (EUR 435.0 m). Gross interest-bearing debt at the turn of the year was
EUR 514,2 million. The growth in debt from the corresponding period a year
earlier (Q1/2010) is attributable mainly to the Rose Poultry deal executed in
November 2010.
In January, relending by the pension company was increased by 30 million with
the aim of diversifying the loan portfolio. At the end of period under review,
part of Rose Poultry's financing was rearranged through the parent company.
Rising interest rates and increase in total loans have resulted in a
substantial rise in net financial expenses. Untapped credit facilities at 31
March 2011 stood at EUR 189.4 million (EUR 212.3 m). In addition, the Group has
other untapped overdraft and other facilities of EUR 49.1 million (EUR 42.0 m).
The EUR 100 million commercial paper programme had been drawn in the amount of
EUR 58.0 million (EUR 18.0 m).
At the end of the period under review, the equity ratio was 34.4 percent
(37.2%). The equity ratio at the turn of the year was 34.0 percent.
TREASURY SHARES
At 31 March 2011, HKScan held a total of 53 734 of its A Shares. These had a
market value of EUR 0.36 million (EUR 6.63 each) and accounted for 0.10% of all
shares and 0.03% of all votes. No dividend is paid on treasury shares.
RESOLUTIONS PASSED BY EXTRAORDINARY GENERAL MEETING
HKScan Corporation's Board of Directors decided in its meeting held on 4
January 2011 to convene an Extraordinary General Meeting on 4 February 2011 at
11 am to decide on the composition of the Board after receiving the notices of
resignation of three Board members. Notice of resignation was tendered by
Markku Aalto, Tiina Varho-Lankinen and Matti Murto.
HKScan's largest shareholder, LSO Osuuskunta, proposed as new members of the
Board of Directors Juha Kylämäki, Niels Borup and Tero Hemmilä. Juha Kylämäki
(law student) is a farm entrepreneur and broiler meat producer. Niels Borup,
MSc (Econ. & Bus. Admin.), is a farm entrepreneur and a pork and milk producer.
Tero Hemmilä, M.Sc. (Agr. & For.), is managing director of Yara Suomi Oy.
In accordance with the proposal of HKScan's largest shareholder, LSO
Osuuskunta, the Extraordinary General Meeting elected to HKScan's Board of
Directors on 4 February 2011 Juha Kylämäki, Niels Borup and Tero Hemmilä. At
the organisation meeting held immediately following the Extraordinary General
Meeting, the Board elected Juha Kylämäki as its Chairman and Niels Borup as
Deputy Chairman. In addition to the above-mentioned new members Matti
Karppinen, Pasi Laine and Otto Ramel continued as members of HKScan's Board of
Directors.
BOARD OF DIRECTORS' EXISTING AUTHORIZATIONS
See “Events taking place since 31 March 2011”
EMPLOYEES
In the first three months of 2011, HKScan had an average workforce of 8 227
employees (6 825 in Q1/2010).
The increase in employees was due the restructuring arrangements in 2010. The
Danish company, Rose Poultry A/S, and the Latvian company, Jelgavas Galas
Kombinats A/S, joined the Group in the latter part of 2010 and Järvi-Suomen
Portti Oy early in 2011. The comparison figures from Q1/2010 are therefore
exclusive of the numbers of employees in these three companies.
The average number of employees in each market area was as follows:
Q1/2011 Q1/2010
-------------------------
Finland 2 524 2 183
-------------------------
Sweden 2 882 2 862
-------------------------
Denmark 917 -
-------------------------
Baltics 1 904 1 780
-------------------------
Sokolów employed an average of 5 877 (5 586) persons.
Analysis of employees by country at 31 March is as follows:
31.3.2011 31.3.2010
-------------------------------------
Sweden 32.4% 37.6%
-------------------------------------
Finland 30.9% 32.0%
-------------------------------------
Estonia 19.4% 23.0%
-------------------------------------
Denmark 11.7% 0.6%
-------------------------------------
Latvia 2.9% 2.6%
-------------------------------------
Poland (Scan) 2.1% 3.2%
-------------------------------------
Other countries 0.6% 1.0%
-------------------------------------
Additionally, the Sokolów Group had 6 025 (5 611) employees at the end of the
period under review.
RISKS AND UNCERTAINTY FACTORS IN THE NEAR FUTURE
The most significant uncertainty factors in the HKScan Group's business involve
developments in the price of raw materials and Finnish and Swedish pork in
particular; in future possibly the availability of these too. Market
area-specific uncertainty factors have to do with the success of the business
development programmes in Finland and Sweden and the integration of the Rose
Poultry acquisition in Denmark.
Challenges in the global economic situation will continue. Major fluctuation in
the Group's central currencies and higher interest rates may affect the Group's
competitiveness, net sales, earnings and balance sheet. Changes in demand
attributable to the financial situation such as, for example, growing
unemployment, may occur in the Group's market areas or its export markets.
These may affect the Group's net sales and earnings.
Any unforeseeable authorities procedures may affect the company's business in
its export markets.
The possibility of animal diseases can never be fully excluded in the food
industry's raw meat supplies.
The Group is currently involved in certain legal proceedings and civil
litigation. The cases remain pending, but are not expected to have significant
impacts on the Group's financial standing.
EVENTS TAKING PLACE AFTER THE END OF THE REVIEW PERIOD
(1) In Denmark, Rose Poultry decided in April to concentrate its operations in
the production facilities located in Vinderup and Skovsgaard and discontinue
slaughtering operations at the Padborg plant in southern Denmark.
(2) The Annual General Meeting of HKSCan Corporation held on April 27, 2011
adopted the parent company's and consolidated financial statements and
discharged the members of the Board of Directors and the CEO from liability for
the year 2010. The Annual General Meeting resolved on the payment of EUR 0.22
per share in dividend for 2010 in accordance with the proposal of the Board of
Directors.
(3) In departure from the recommendation of the Board of Directors, the Annual
General Meeting resolved, on the proposal of HKScan's largest shareholder, LSO
Osuuskunta, that the number of members of the company's Board of Directors be
six (6). Juha Kylämäki, Niels Borup, Matti Karppinen, Tero Hemmilä and Otto
Ramel were, in accordance with the proposal of the Board of Directors,
re-elected to a new term and, on the recommendation of LSO Osuuskunta, Henrik
Treschow was elected as a new member. At the organization meeting held
immediately following the AGM, the Board re-elected Juha Kylämäki as chairman
and Niels Borup as deputy chairman.
(4) The AGM resolved to elect PricewaterhouseCoopers Ltd, an audit firm
chartered by the Central Chamber of Commerce, with APA Johan Kronberg as
responsible auditor, and APA Petri Palmroth as the Company's auditors until the
close of the next Annual General Meeting. APA Mika Kaarisalo and APA Jari
Viljanen were elected as deputy auditors.
(5) The Annual General Meeting authorised the Board of Directors to resolve on
purchasing the Company's own Series A shares and/or on the acceptance of own
series A shares as pledge, as follows:
The aggregate number of Series A shares to be purchased and/or accepted as
pledge shall not exceed 2,500,000, which corresponds to approximately 4.5% of
all the shares in the Company and approximately 5.0% of all the Series A shares
in the Company.
The Company's own shares may be purchased on the basis of the authorisation
only by using non-restricted equity which consequently reduces the amount of
the funds available for distribution of profits. The Company's own shares may
be purchased for a price quoted in public trading on the purchase day or for a
price otherwise determined by the market.
The shares may be purchased under the proposed authorisation in order to
develop the capital structure of the Company. In addition, the shares may be
repurchased under the proposed authorisation in order to finance or carry out
acquisitions or other arrangements, to be transferred for other purposes, or to
be cancelled.
The Board of Directors shall resolve upon the method of purchase. Among other
means, derivatives may be utilized in purchasing the shares. The shares may be
purchased in a proportion other than that of the shares held by the
shareholders (directed purchase). A directed purchase of the Company's own
shares always requires a weighty economic reason for the Company and the
authorisation may not be utilized inconsistently with the principle of equal
treatment of shareholders. The authorisation is effective until 30 June 2012.
The authorisation revokes that granted on 23 April 2010 by the Annual General
Meeting to the Board of Directors to acquire the company's own A Shares.
(6)The Annual General Meeting authorised the Board of Directors to resolve on
an issue of shares, options, as well as other instruments entitling to shares
as referred to in Chapter 10 Section 1 of the Finnish Companies Act, as
follows:
This authorisation concerns the issuance of Series A shares. The Board of
Directors shall be authorised to decide on the number of shares to be issued.
The authorisation shall, however, be limited to a maximum of 2,500,000 Series A
shares. The maximum amount of the shares covered by the authorisation
corresponds to approximately 4.5% of all the registered shares of the Company
and approximately 5.0% of all the Series A shares in the Company.
The Board of Directors shall be authorised to resolve upon all the terms and
conditions of the issue of shares and other instruments entitling to shares.
The authorisation to issue shares shall cover the issuing of new shares as well
as the transfer of the Company's own shares. The issue of shares and other
instruments entitling to shares may be implemented as a directed issue. The
authorisation shall be effective until 30 June 2012.
The authorisation revokes authorisation granted on 23 April 2010 by the Annual
General Meeting to the Board of Directors to resolve on an issue of shares,
options as well as other instruments entitling to shares.
The authorisation to issue new shares, options as well as other instruments
entitling to shares were granted in order to enable the Board of Directors to
decide flexibly on capital markets transactions that are beneficial for the
Company, such as securing the financing needs of the Company or implementing
acquisitions. A directed share issue always requires a weighty economic reason
for the Company and the authorisation may not be utilized inconsistently with
the principle of equal treatment of shareholders.
FUTURE OUTLOOK
Consumer demand for meat is expected to remain steady in the Group's domestic
markets. The decentralized structure of HKScan's business in different product
groups and geographical areas, and the initiated efficiency programmes in
Finland and Sweden provide the foundation for stronger development of the
Group's competitiveness and profitability.
If it continues, the difficult situation in the international pork market will
erode the profitability of the business in the early part of the year,
especially in Finland and Sweden. Pork profitability will be improved by
raising prices and adjusting volume.
The company reaffirms its previously given guidance. The Group's full-year EBIT
is expected to improve compared with 2010.
CONSOLIDATED FINANCIAL STATEMENTS 1 JANUARY - 31 MARCH 2011
CONSOLIDATED INCOME STATEMENT
(EUR million)
Note Q1/2011 Q1/2010 2010
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
NET SALES 592.7 483.6 2 113.9
-----------------------------------------------------------------------------
Operating income and expenses 1. -573.5 -464.1 -2 006.2
-----------------------------------------------------------------------------
Share of associates' results 0.2 0.5 1.8
-----------------------------------------------------------------------------
Depreciation and impairment -18.0 -14.6 -61.5
-----------------------------------------------------------------------------
EBIT 1.4 5.5 48.0
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Financial income 2.6 2.2 8.1
-----------------------------------------------------------------------------
Financial expenses -7.8 -4.8 -21.9
-----------------------------------------------------------------------------
Share of associates' results 0.6 1.0 2.2
-----------------------------------------------------------------------------
PROFIT/LOSS BEFORE TAXES -3.3 3.9 36.5
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Income taxes 0.7 0.1 -5.7
-----------------------------------------------------------------------------
PROFIT/LOSS FOR THE PERIOD -2.7 4.0 30.8
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
PROFIT/LOSS FOR THE PERIOD ATTRIBUTABLE TO:
-----------------------------------------------------------------------------
Equity holders of the parent -3.1 3.4 27.9
-----------------------------------------------------------------------------
Non-controlling interests 0.4 0.6 2.9
-----------------------------------------------------------------------------
Total -2.7 4.0 30.8
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Earnings per share calculated on profit attributable to equity holders of the
parent:
EPS, undiluted, continuing operations, EUR/share -0.06 0.06 0.52
-------------------------------------------------------------------
EPS, diluted, continuing operations, EUR/share -0.06 0.06 0.52
-------------------------------------------------------------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 1 JANUARY - 31 MARCH
(EUR million)
Q1/2011 Q1/2010 2010
--------------------------------------------------------------------------------
Profit/loss for the period -2.7 4.0 30.8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME (after taxes):
--------------------------------------------------------------------------------
Exchange differences on translating foreign operations 1.1 7.2 13.5
--------------------------------------------------------------------------------
Available-for-sale investments 0.0 0.4 0.0
--------------------------------------------------------------------------------
Cash flow hedging 2.7 -2.8 1.8
--------------------------------------------------------------------------------
TOTAL OTHER COMPREHENSIVE INCOME 3.8 4.8 15.4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 1.1 8.8 46.1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE
TO:
--------------------------------------------------------------------------------
Equity holders of the parent 0.6 8.0 42.6
--------------------------------------------------------------------------------
Non-controlling interests 0.5 0.8 3.5
--------------------------------------------------------------------------------
Total 1.1 8.8 46.1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
(EUR million)
Note 31.3.2011 31.3.2010 31.12.2010
--------------------------------------------------------------------------------
ASSETS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NON-CURRENT ASSETS
--------------------------------------------------------------------------------
Intangible assets 2. 76.8 68.3 77.1
--------------------------------------------------------------------------------
Goodwill 3. 100.2 90.3 100.4
--------------------------------------------------------------------------------
Tangible assets 4. 534.7 479.4 537.8
--------------------------------------------------------------------------------
Holdings in associates 28.0 22.7 27.0
--------------------------------------------------------------------------------
Trade and other receivables 27.0 21.0 25.3
--------------------------------------------------------------------------------
Available-for-sale investments 12.5 11.1 13.1
--------------------------------------------------------------------------------
Deferred tax asset 14.4 14.2 14.4
--------------------------------------------------------------------------------
NON-CURRENT ASSETS 793.7 707.0 795.0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CURRENT ASSETS
--------------------------------------------------------------------------------
Inventories 5. 187.1 133.5 159.9
--------------------------------------------------------------------------------
Trade and other receivables 231.6 199.6 240.6
--------------------------------------------------------------------------------
Income tax receivable 2.3 0.3 0.3
--------------------------------------------------------------------------------
Other financial assets 0.4 2.1 3.9
--------------------------------------------------------------------------------
Cash and cash equivalents 48.3 49.5 69.5
--------------------------------------------------------------------------------
CURRENT ASSETS 469.7 385.1 474.1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ASSETS 1 263.4 1 092.1 1 269.2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUITY
--------------------------------------------------------------------------------
Share capital 6. 66.8 66.8 66.8
--------------------------------------------------------------------------------
Share premium reserve 73.3 74.2 73.4
--------------------------------------------------------------------------------
Treasury shares -0.0 -0.0 -0.0
--------------------------------------------------------------------------------
Fair value reserve and other reserves 157.3 146.7 154.4
--------------------------------------------------------------------------------
Translation differences 0.6 -7.1 0.6
--------------------------------------------------------------------------------
Retained earnings 123.8 115.7 124.4
--------------------------------------------------------------------------------
Equity attributable to equity holders of 421.8 396.2 419.6
the parent
--------------------------------------------------------------------------------
Non-controlling interests 11.2 9.5 11.1
--------------------------------------------------------------------------------
EQUITY 433.0 405.7 430.6
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NON-CURRENT LIABILITIES
--------------------------------------------------------------------------------
Deferred tax liability 37.6 31.7 38.9
--------------------------------------------------------------------------------
Non-current interest-bearing liabilities 380.7 335.6 361.2
--------------------------------------------------------------------------------
Non-current non-interest bearing 13.2 5.0 12.4
liabilities
--------------------------------------------------------------------------------
Non-current provisions 1.7 6.0 2.4
--------------------------------------------------------------------------------
Pension obligations 3.1 3.5 3.1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NON-CURRENT LIABILITIES 436.2 381.9 418.0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CURRENT LIABILITIES
--------------------------------------------------------------------------------
Current interest-bearing liabilities 128.8 99.4 153.0
--------------------------------------------------------------------------------
Trade and other payables 262.0 199.0 262.5
--------------------------------------------------------------------------------
Income tax liability 2.5 3.0 2.7
--------------------------------------------------------------------------------
Current provisions 0.8 3.1 2.3
--------------------------------------------------------------------------------
CURRENT LIABILITIES 394.2 304.5 420.6
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES 1 263.4 1 092.1 1 269.2
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN CONSOLIDATED EQUITY
(EUR million)
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.
--------------------------------------------------------------------------------
EQUITY 66.8 73.4 -6.5 143.5 0.0 17.4 0.6 0.0 124.4 419.6 11.1 430.6
AT
01.01.
11
--------------------------------------------------------------------------------
Income -0.0 2.7 -0.2 0.0 -1.9 0.6 0.5 1.1
and
expens
es
recogn
ized
during
the
period
, total
--------------------------------------------------------------------------------
Share-b 0.0 0.0
ased
compen
sation
expens
e
--------------------------------------------------------------------------------
Other 0.4 0.4 0.4
change
--------------------------------------------------------------------------------
Direct 1.2 1.2 1.2
recogni
tion in
retain
ed
earnin
gs
--------------------------------------------------------------------------------
Transfe 0.0 0.0
rs
betwee
n items
--------------------------------------------------------------------------------
Share 0.0 0.0
issue
--------------------------------------------------------------------------------
Purchas 0.0 0.0
e of
treasu
ry
shares
--------------------------------------------------------------------------------
Increas 0.0 0.0
e in
holdin
gs in
subsid
iaries
--------------------------------------------------------------------------------
Dividen 0.0 -0.3 -0.3
d
distri
bution
--------------------------------------------------------------------------------
EQUITY 66.8 73.3 -3.8 143.5 0.0 17.6 0.6 0.0 123.8 421.8 11.2 433.0
AT
31.03.
11
--------------------------------------------------------------------------------
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.
12.
--------------------------------------------------------------------------------
--
EQUITY 66.8 74.2 -8.4 143.5 0.0 14.6 -13.1 0.0 111.6 389.3 9.4
398.7
AT
1.1.2
010
--------------------------------------------------------------------------------
--
Income 0.1 -2.4 0.3 6.0 4.0 8.0 0.8
8.8
and
expen
ses
recog
nized
durin
g the
perio
d,
total
--------------------------------------------------------------------------------
--
Share- -0.2 -0.2
-0.2
based
compe
nsatio
n
expen
se
--------------------------------------------------------------------------------
--
Other -1.0 -1.0 0.0
-1.0
chang
e
--------------------------------------------------------------------------------
--
Direct 0.1 0.1 -0.2
-0.1
recog
nition
in
retai
ned
earni
ngs
--------------------------------------------------------------------------------
--
Transf 0.0
0.0
ers
betwe
en
items
--------------------------------------------------------------------------------
--
Share 0.0
0.0
issue
--------------------------------------------------------------------------------
--
Purcha 0.0
0.0
se of
treas
ury
share
s
--------------------------------------------------------------------------------
--
Increa 0.0
0.0
se in
holdi
ngs in
subsi
diarie
s
--------------------------------------------------------------------------------
--
Divide 0.0 -0.6
-0.6
nd
distr
ibutio
n
--------------------------------------------------------------------------------
--
EQUITY 66.8 74.2 -10.8 143.5 0.0 13.9 -7.1 0.0 115.7 396.2 9.5
405.7
AT
31.03
.10
--------------------------------------------------------------------------------
--
COLUMNS: 1. Share capital, 2. Share premium reserve, 3. Revaluation reserve, 4.
Reserve for invested unrestricted equity (RIUE), 5. Other equity item, 6. Other
reserves, 7. Translation differences, 8. Treasury shares, 9. Retained earnings,
10. Equity holders of the parent, 11.Non-controlling interests , 12. Total
CASH FLOW STATEMENT
(EUR million)
Q1/2011 Q1/2010 2010
--------------------------------------------------------------------------------
Operating activities
--------------------------------------------------------------------------------
EBIT 1.4 5.5 48.0
--------------------------------------------------------------------------------
Adjustments to EBIT -0.2 -0.7 -4.6
--------------------------------------------------------------------------------
Depreciation and amortization 18.0 14.6 61.5
--------------------------------------------------------------------------------
Change in provisions -2.2 -2.8 -7.9
--------------------------------------------------------------------------------
Change in net working capital -13.1 -27.2 -3.7
--------------------------------------------------------------------------------
Financial income 0.8 2.2 8.1
--------------------------------------------------------------------------------
Financial expenses -6.8 -4.8 -21.9
--------------------------------------------------------------------------------
Taxes -1.5 0.1 -5.7
--------------------------------------------------------------------------------
Net cash flow from operating activities -3.6 -13.1 73.8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Investing activities
--------------------------------------------------------------------------------
Gross investments in property, plant and equipment -15.5 -16.1 -73.6
--------------------------------------------------------------------------------
Disposals of property, plant and equipment 1.4 1.5 7.0
--------------------------------------------------------------------------------
Investments in subsidiary - - -25.2
--------------------------------------------------------------------------------
Shares in associates purchased -0.2 -0.3 -1.6
--------------------------------------------------------------------------------
Shares in associates sold - - 1.3
--------------------------------------------------------------------------------
Loans granted -1.5 -0.7 -1.0
--------------------------------------------------------------------------------
Repayments of loans receivable 0.1 0.1 1.2
--------------------------------------------------------------------------------
Net cash flow from investing activities -15.7 -15.5 -91.9
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cash flow before financing activities -19.3 -28.6 -18.1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financing activities
--------------------------------------------------------------------------------
Current borrowings raised 22.6 31.2 169.9
--------------------------------------------------------------------------------
Current borrowings repaid -49.4 -22.5 -159.1
--------------------------------------------------------------------------------
Non-current borrowings raised 81.2 10.4 45.2
--------------------------------------------------------------------------------
Non-current borrowings repaid -59.5 -16.0 -33.0
--------------------------------------------------------------------------------
Dividends paid - - -11.9
--------------------------------------------------------------------------------
Purchase of treasury shares - 0.0 -0.0
--------------------------------------------------------------------------------
Net cash flow from financing activities -5.1 3.2 11.1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Change in cash and cash equivalents -24.5 -25.5 -7.0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cash and cash equivalents at 1.1. 73.4 75.9 75.9
--------------------------------------------------------------------------------
Effect of changes in exchange rates on cash and cash -0.2 1.2 4.5
equivalents
--------------------------------------------------------------------------------
Cash and cash equivalents at 31.3. 48.7 51.6 73.4
--------------------------------------------------------------------------------
FINANCIAL INDICATORS
31.3.2011 31.3.2010 31.12.2010
-------------------------------------------------------------
-------------------------------------------------------------
EPS, undiluted, EUR -0.06 0.06 0.52
-------------------------------------------------------------
EPS, diluted, EUR -0.06 0.06 0.52
-------------------------------------------------------------
Equity per share, 31.3, EUR 7.67 7.34 7.63
-------------------------------------------------------------
Equity ratio, % 34.4 37.2 34.0
-------------------------------------------------------------
Adjusted average
-------------------------------------------------------------
number of shares, mill. 55.0 54.0 54.0
-------------------------------------------------------------
Gross capital expenditure
-------------------------------------------------------------
on PPE, EUR million 15.1 18.9 70.7
-------------------------------------------------------------
Employees, end of month
-------------------------------------------------------------
average 8 227 6 825 7 491
-------------------------------------------------------------
NOTES TO THE GROUP'S INTERIM REPORT
ACCOUNTING POLICIES
HKScan Corporation's interim report for 1 January - 31 March 2011 has been
prepared in compliance with IAS 34 Interim Financial Reporting. The same
accounting principles have been applied in the interim report as in the annual
financial statements for 2010. These accounting principles are explained in the
financial statements for 2010.
The consolidated financial statements have been prepared in compliance with the
same accounting policies as in 2010 except for the following new standards,
interpretations and standard amendments which are effective as of 1 January
2011.
- Change to IAS 32, Financial Instruments: Presentation - Classification of
Rights Issues (effective from 1 February 2010 or the succeeding financial
periods). The change applies to the accounting treatment (classification) for
the issue of shares, options and warrants outside the issuer's functional
currency. The amendments have no impact on consolidated reporting.
- IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments
(effective from 1 July 2010 or the succeeding financial periods). The
interpretation clarifies accounting where an entity renegotiates the terms of a
financial liability and as a result, issues its own equity instruments to the
creditor to settle all or a part of the financial liability. The amendments
have no impact on consolidated reporting.
- Amendments to IFRIC 14 interpretation, Prepayment of Minimum Funding
Requirement (effective from 1 January 2011 or the succeeding financial
periods). The amendment is aimed at correcting the unintended consequence of
IFRIC 14 IAS 19 − The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction. After the amendments, entities are
permitted to recognize as an asset some voluntary prepayments for minimum
funding contributions. The amendments have no impact on consolidated reporting.
- Revised IAS 24, Related Party Disclosures(effective from 1 January 2011 or
the succeeding financial periods). The revised standard clarifies the
definition of a related party and simplifies the disclosure requirements for
government-related entities.
ANALYSIS BY SEGMENT (EUR million)
Net sales and EBIT by main market area
Q1/2011 Q1/2010 2010
-----------------------------------------------------
NET SALES
-----------------------------------------------------
-Finland 188.0 167.8 718.5
-----------------------------------------------------
- Sweden 252.3 230.5 997.1
-----------------------------------------------------
− Denmark 57.5 - 21.8
-----------------------------------------------------
- Baltics 39.3 35.8 160.4
-----------------------------------------------------
- Poland 70.5 63.9 279.3
-----------------------------------------------------
- Between segments -15.0 -14.3 -63.3
-----------------------------------------------------
Group total 592.7 483.6 2 113.9
-----------------------------------------------------
-----------------------------------------------------
EBIT
-----------------------------------------------------
- Finland -0.6 -0.6 10.7
-----------------------------------------------------
- Sweden 0.3 2.7 20.4
-----------------------------------------------------
− Denmark -0.5 - -0.0
-----------------------------------------------------
- Baltics 0.9 1.1 8.7
-----------------------------------------------------
- Poland 3.0 4.2 15.5
-----------------------------------------------------
- Between segments - - -
-----------------------------------------------------
Segments total 3.1 7.4 55.2
-----------------------------------------------------
-----------------------------------------------------
Group administration costs -1.7 -1.9 *-7.2
-----------------------------------------------------
Group total 1.4 5.5 48.0
-----------------------------------------------------
* Includes EUR 0.9 million in soil decontamination expenses on sold land
recognized in Q2.
NOTES TO THE INCOME STATEMENT
1. NON-RECURRING ITEMS
(EUR million)
Q1/2011 Q1/2010 2010
---------------------------------------------------------------------
Soil decontamination expense on sold land *) - - -0.9
---------------------------------------------------------------------
Gains on disposal of production facilities *) - - 7.9
---------------------------------------------------------------------
Total non-recurring items - - 7.0
---------------------------------------------------------------------
*) Included in the income statement in the item “Operating income and expenses”.
NOTES TO THE BALANCE SHEET
2. CHANGES IN INTANGIBLE ASSETS
(EUR million)
Q1/2011 Q1/2010 2010
--------------------------------------------------------------
Carrying amount at beginning of period 77.1 65.7 65.7
--------------------------------------------------------------
Translation differences 0.2 3.2 8.1
--------------------------------------------------------------
Increase 0.3 0.2 1.2
--------------------------------------------------------------
Increase (acquisitions) 0.0 0.0 4.2
--------------------------------------------------------------
Decrease 0.0 -0.0 -0.2
--------------------------------------------------------------
Depreciation and impairment -0.9 -0.8 -3.5
--------------------------------------------------------------
Transfer to other balance sheet item 0.1 0.0 1.5
--------------------------------------------------------------
Carrying amount at end of period 76.8 68.3 77.1
--------------------------------------------------------------
3. CHANGES IN GOODWILL
(EUR million)
Q1/2011 Q1/2010 2010
---------------------------------------------------------------
Carrying amount at beginning of period 100.4 88.2 88.2
---------------------------------------------------------------
Translation differences -0.5 2.1 4.2
---------------------------------------------------------------
Increase 0.3 0.0 1.3
---------------------------------------------------------------
Increase (acquisitions) 0.0 0.0 6.8
---------------------------------------------------------------
Decrease 0.0 0.0 0.0
---------------------------------------------------------------
Depreciation and impairment 0.0 0.0 0.0
---------------------------------------------------------------
Transfer to other balance sheet item 0.0 0.0 0.0
---------------------------------------------------------------
Carrying amount at end of period 100.2 90.3 100.4
---------------------------------------------------------------
4. CHANGES IN PROPERTY, PLANT AND EQUIPMENT
(EUR million)
Q1/2011 Q1/2010 2010
---------------------------------------------------------------
Carrying amount at beginning of period 537.8 469.1 469.1
---------------------------------------------------------------
Translation differences 0.6 10.0 17.4
---------------------------------------------------------------
Increase 13.8 17.0 71.6
---------------------------------------------------------------
Increase (acquisitions) 1.0 0.0 43.0
---------------------------------------------------------------
Decrease -1.1 -2.3 -2.4
---------------------------------------------------------------
Depreciation and impairment -17.3 -14.4 -59.5
---------------------------------------------------------------
Transfer to other balance sheet item -0.1 0.0 -1.5
---------------------------------------------------------------
Carrying amount at end of period 534.7 479.4 537.8
---------------------------------------------------------------
5. INVENTORIES
(EUR million)
Q1/2011 Q1/2010 2010
----------------------------------------------------
Materials and supplies 101.7 82.6 88.8
----------------------------------------------------
Unfinished products 10.8 7.8 8.8
----------------------------------------------------
Finished products 54.6 29.6 45.7
----------------------------------------------------
Goods 0.0 0.1 0.0
----------------------------------------------------
Other inventories 7.5 3.9 6.2
----------------------------------------------------
Prepayments for inventories 4.5 2.4 2.6
----------------------------------------------------
Live animals, IFRS 41 7.9 7.2 7.6
----------------------------------------------------
Total inventories 187.1 133.5 159.9
----------------------------------------------------
6. NOTES TO EQUITY
Share capital Number of Share Share RIUE Treasury Tot.
and share outstanding capital premium shares
share premium shares reserve
reserve
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1.1.2011 54 972 788 66.8 72.9 151.1 0.0 290.8
--------------------------------------------------------------------------------
31.3.2011 54 972 788 66.8 72.9 151.1 0.0 290.8
--------------------------------------------------------------------------------
RIUE = Reserve for invested unrestricted equity
DERIVATIVE INSTRUMENT LIABILITIES
(EUR million)
31.3.2011 31.3.2010 31.12.2010
--------------------------------------------------------------------------
Nominal values of derivative instruments
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Foreign exchange derivatives 77.6 * 136.5 149.9
--------------------------------------------------------------------------
Interest rate derivatives 246.9 206.8 247.0
--------------------------------------------------------------------------
Electricity derivatives 10.3 11.1 10.2
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Fair values of derivative instruments
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Foreign exchange derivatives 0.9 -0.7 -0.3
--------------------------------------------------------------------------
Interest rate derivatives -12.4 -14.7 -16.8
--------------------------------------------------------------------------
Electricity derivatives 1.3 -1.0 2.2
--------------------------------------------------------------------------
* the figure includes EUR 35.5 million in foreign exchange derivatives maturing
in early April 2010 and already extended
CONSOLIDATED OTHER CONTINGENT LIABILITIES
(EUR million)
31.3.2011 31.3.2010 31.12.2010
---------------------------------------------------------------------
Debts secured by
---------------------------------------------------------------------
pledges or mortgages
---------------------------------------------------------------------
- loans from financial institutions 37.9 35.6 56.1
---------------------------------------------------------------------
---------------------------------------------------------------------
Given as security
---------------------------------------------------------------------
- real estate mortgages 61.9 53.1 48.9
---------------------------------------------------------------------
- pledges 6.3 32.4 20.8
---------------------------------------------------------------------
- floating charges 44.8 21.4 47.3
---------------------------------------------------------------------
---------------------------------------------------------------------
For associates
---------------------------------------------------------------------
- guarantees 5.3 5.0 5.3
---------------------------------------------------------------------
---------------------------------------------------------------------
For others
---------------------------------------------------------------------
- guarantees and pledges 13.8 11.7 13.8
---------------------------------------------------------------------
---------------------------------------------------------------------
Other contingencies
---------------------------------------------------------------------
Leasing commitments 25.7 20.6 25.5
---------------------------------------------------------------------
Rent liabilities 64.5 41.7 56.3
---------------------------------------------------------------------
Other commitments 20.3 6.1 6.5
---------------------------------------------------------------------
BUSINESS TRANSACTIONS WITH RELATED PARTIES
(EUR million)
Q1/2011 Q1/2010 2010
---------------------------------------------------
Sales to associates 15.9 9.2 40.4
---------------------------------------------------
Purchases from associates 13.0 9.2 35.1
---------------------------------------------------
Trade and other receivables 2.0 2.0 1.8
---------------------------------------------------
Trade and other payables 8.3 9.1 8.8
---------------------------------------------------
The figures presented in the interim report are unaudited.
Vantaa, 6 May 2011
HKScan Corporation
Board of Directors
Further information is available from CEO Matti Perkonoja. Please leave any
messages for him to call with Marjukka Hujanen on +358 (0)10 570 6218.
HKScan is one of the leading food companies in northern Europe with home
markets in Finland, Sweden, Denmark, the Baltic countries and Poland. HKScan
manufactures, sells and markets pork and beef, poultry products, processed
meats and convenience foods under several well-known local brand names. Its
customers are retail, the HoReCa sector, industry and export customers. HKScan
is active in nine countries and has some 11,000 employees. It had net sales of
EUR 2.1 billion in 2010.
DISTRIBUTION:
NASDAQ OMX Helsinki
Main media
www.hkscan.com
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