2013-02-15 07:00:01 CET
2013-02-15 07:00:24 CET
REGULATED INFORMATION
HKScan Oyj - Financial Statement Release
HKScan Group’s financial statement release 1 January — 31 December 2012: Still low profit but cash flow improving
HKScan Corporation FINANCIAL STATEMENT RELEASE
15 February 2013, at 08:00 am
HKScan Group's financial statement release 1 January — 31 December 2012: Still
low profit but cash flow improving
* Net sales rose to EUR 2 546.8 (2 491.3) million: up by 2.2%.
* Reported EBIT was EUR 41.3 (39.6) million. Comparable EBIT excluding
non-recurring items came in at EUR 34.9 (39.6) million. The corresponding
comparable EBIT margin was 1.4 (1.6) per cent.
*Cash flow before debt service improved to EUR 65.8 (14.3) million.
* Profit for the year was EUR 16.4 (12.2) million.
* EPS was EUR 0.28 (0.18).
* Net financial expenses were EUR -31.7 (-30.9) million.
* Net debt decreased to EUR 440.9 (455.8) million, and net gearing improved to
101.8 (107.2) per cent.
* Outlook for 2013: EBIT is estimated to improve from 2012.
* Board's proposal for dividend is EUR 0.10 (0.17) per share.
KEY FIGURES, Q4 and the entire year
(EUR million) Q4/2012 Q4/2011 2012 2011
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Net sales 673.5 649.8 2 546.8 2 491.3
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EBIT *) 21.5 17.6 41.3 39.6
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- % of net sales 3.2 2.7 1.6 1.6
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Share of associates' result 0.9 0.6 3.0 2.5
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Financial income and expenses, net -7.3 -9.1 -31.7 -30.9
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Profit before taxes 15.1 9.1 12.6 11.3
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- % of net sales 2.2 1.4 0.5 0.5
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Income tax -0.1 -0.7 3.8 1.0
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Profit for the period 15.0 8.3 16.4 12.2
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- % of net sales 2.2 1.3 0.6 0.5
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*) EBIT, excluding non-recurring income and 15.1 17.6 34.9 39.6
expenses
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- % of net sales 2.2 2.7 1.4 1.6
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Profit attributable to:
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- Equity holders of the parent company 14.4 7.5 15.1 10.1
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− Non-controlling interests 0.6 0.8 1.3 2.1
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Total 15.0 8.3 16.4 12.2
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EPS, EUR 0.27 0.14 0.28 0.18
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Cash flow before debt service 31.7 4.7 65.8 14.3
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Cash flow before financing activities 31.6 6.3 33.8 -5.4
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Equity ratio, % 34.6 33.6
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Net debt 440.9 455.8
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Gearing, % 115.6 119.6
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Net gearing, % 101.8 107.2
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GROUP OVERVIEW
OCTOBER-DECEMBER 2012
The Group's net sales totalled EUR 673.5 (649.8) million. Reported EBIT was EUR
21.5 (17.6) million. Comparable EBIT excluding non-recurring items came in at
EUR 15.1 (17.6) million.
Underlying financial performance in the fourth quarter of 2012 was slightly
lower than in the corresponding period in 2011, but the non-recurring income
improved the reported result. A positive exception among the Group's market
areas was again Poland, where the quarter was good, like the whole year. Cash
flow was strong during the last quarter as cash was freed up, mainly from
inventories and trade receivables.
Raw material prices kept rising during the quarter, driven by significantly
higher feed prices since summer. Sales price increase actions were actively
taken and they are continuing to compensate for the rise in costs. The sales of
Christmas ham in Finland and Sweden as well as the seasonal offering in the
Baltics performed well. The recovery programme after the fire at the Vinderup
plant in Denmark in June was completed successfully and production restarted in
Vinderup at the beginning of December.
YEAR 2012
The Group's total performance in 2012 was below expectations. Poland was the
main market area to show clear improvement over the previous year. The
profitability of the business in Finland improved during the year compared to
the corresponding period in 2011, but performance was still at a low level.
Stable development of business could be seen in the Baltics. The business in
Sweden showed an initial stabilisation towards year end after the very bad
first half of 2012. The recovery programme after the fire at the Vinderup plant
in June in Denmark was managed successfully.
The reported result includes non-recurring income and expenses related to the
fire in Vinderup, Denmark and restructuring in Sweden. The net profit impact of
the non-recurring items was EUR 6.4 million positive because of the property
insurance compensation and the write-off of the destroyed assets (EUR 13.8
million) in Denmark, and the restructuring expenses (EUR 7.4 million) in
Sweden.
The revised strategy published in August 2012 focuses on improving
profitability by building brand value and demand, improving operational
efficiency, actively managing the dynamics of future business, and by
developing its capital structure and Group reporting. The strategy
implementation continued assertively. The new operating model aiming to
harmonise, simplify and enhance internal processes is also going forward as
planned. The most significant changes in the Group's top management took place
during the year.
At the beginning of April, the Group launched an extensive development
programme to be implemented by the end of 2013. The target is to achieve annual
profit improvements exceeding EUR 20 million and a considerable reduction in
capital employed. As part of the programme, a plan concerning restructuring of
the business in Sweden was published in August and further specified in early
October. The plans related to Sweden aim to improve annual profit by EUR 10
million before one-time restructuring costs, and the changes are to be
implemented by the middle of 2013. The development programme proceeded as
planned during 2012.
In early January 2013 and according to the development programme, HKScan also
announced the start of labour negotiations as part of plans to reorganise the
structures and functions of its Finnish operations. The planned actions aim to
improve profit by approximately EUR 5 million annually, and they are planned to
be mainly carried out by the end of 2013. More detailed information about this
is under “Events after the reporting period” in this report.
Additionally, some restructuring of companies' legal structures was completed
in Finland and in Sweden; see “Changes in Group Structure” later in this
report.
HANNU KOTTONEN, CEO, COMMENTS THE YEAR 2012:
- The business in all of our home markets was hit suddenly by higher feed
prices after the second quarter. The raw material cost increases have been and
will be passed to sales prices with different delays. - The 2012 result was not
as good as expected but there are some highlights to be reported. In Finland,
for example, one of the most positive events during 2012 was the National
Health Award granted to HK Ruokatalo in November. HK Rypsiporsas® (“Rapeseed
Pork”) also continued its commercial success in Finland. The similar concept in
Sweden, Svensk Rapsgris, was successfully launched on the AfH market in March
and to retail in September. The recovery of production after the fire was well
handled in Vinderup in Denmark. However, the challenge now is to gain back the
momentum we had in the Danish and Swedish fresh poultry business before the
fire.
- HKScan launched a new strategy, operating model and organisation of the
Group's senior management in August. The strategy and operating model
implementation is going on in the Group. In accordance with the new operating
model, the organisations of the Away from Home (AfH) Business as well as
Group-level functions, including the new Technology & Operations Development
function (T&OD), were established during the third quarter of 2012. Overall,
the goal is to get synergies in use for the Group.
- To improve competitiveness of the primary production, a new cooperation model
for producers was planned and introduced both in Finland and Sweden. The
implementation will start during 2013.
- HKScan Group and the company's biggest owner, LSO Osuuskunta, are celebrating
their 100th anniversary this year, which will be visible in communication,
sales and marketing actions in Finland throughout the year.
MARKET AREA: FINLAND
--------------------------
(EUR million) Q4/2012 Q4/2011 2012 2011
------------------------------------------------
------------------------------------------------
Net sales 226.6 217.6 842.6 812.4
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EBIT 7.4 7.2 18.4 12.1
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- EBIT margin, % 3.3 3.3 2.2 1.5
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In Finland, net sales in 2012 were EUR 842.6 (812.4) million. EBIT was EUR 18.4
(12.1) million. The EBIT margin for the year improved slightly: from 1.5 per
cent in 2011 to 2.2 per cent in 2012.
As for the fourth quarter, net sales amounted to EUR 226.6 (217.6) million.
EBIT for the period was EUR 7.4 (7.2) million.
Net sales grew in 2012 compared to 2011 thanks to a better product mix and
sales price increases. Profitability in Finland improved somewhat during the
year, but the EBIT for the whole year remained still at a modest level. The low
profitability was mainly attributable to continuously rising raw material
prices and other cost increases, which were difficult to pass on to the sales
prices at the same pace as the cost inflation.
Compared to the corresponding quarter in 2011, the fourth quarter of 2012
showed a positive development in net sales. However, profitability remained
flat. The traditionally good Christmas season was commercially a bit weaker
than usual. Sales of Christmas ham were good.
Meat producers were affected by record-high price increases in the most central
raw materials, such as feed, especially after the summer. HK Rypsiporsas®
(“Rapeseed Pork”) continued to sell well throughout the year. The tasty HK
Rypsiporsas® has contributed to improving the healthier image of pork and its
sales in Finland. In November, the National Institute for Health and Welfare in
Finland granted HK Ruokatalo the annual public health award for 2012 for the
nationally significant promotion of public health. The award was given for
long-term product development following HK Ruokatalo's corporate responsibility
programme and work done to reduce salt and saturated (hard) fat in products
during recent years.
Measures to improve the productivity and profitability of the business in
Finland continued in 2012. Streamlining of the legal structure in Finland,
announced in June, was completed by year end.
HK Ruokatalo divested its Säkylä property and operations to the affiliate
Kivikylän Kotipalvaamo at the end of December, and sold its share of Best-In
before Christmas. These matters are discussed in more detail under “Changes in
the Group structure” in this report.
After the reporting period, at the beginning of January 2013, HKScan announced
plans to reorganise the operating structures and functions of HKScan's Finnish
operations. The planned actions aim to develop the productivity and efficiency
of the business to improve profit by approximately EUR 5 million annually. This
is discussed in more detail under “Events after the reporting period” in this
report.
MARKET AREA: BALTICS
--------------------------
(EUR million) Q4/2012 Q4/2011 2012 2011
------------------------------------------------
------------------------------------------------
Net sales 45.1 44.9 176.7 173.3------------------------------------------------
EBIT 1.5 2.8 8.9 9.8
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- EBIT margin, % 3.3 6.2 5.1 5.6
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In the Baltics, net sales in 2012 were EUR 176.7 (173.3) million. EBIT was EUR
8.9 (9.8).million. EBIT margin for the year was 5.1 (5.6) per cent.
In the fourth quarter, net sales amounted to EUR 45.1 (44.9) million. EBIT for
the period was EUR 1.5 (2.8) million. The decline in EBIT in the fourth quarter
compared to the corresponding period was caused mainly by the change in
valuation of the biological assets of primary production, and continuous rises
in feed and energy costs. Sales during the Christmas season were traditionally
strong in Estonia.
As for the whole of 2012, sales development was stable in the Baltics. Estonia
and Latvia improved their performance during the latter part of the year.
However, in Lithuania profitability declined towards the end of the year.
Profitability decreased because of weak demand in the EU, and low exports to
the Far East. Actions by the authorities stopped sales of live pigs from the EU
to Russia.
Sales of HKScan's local brands in the Baltics developed well during 2012. In
Estonia, Rakvere successfully launched the new “Lihakas” products in April
2012. Tallegg's barbeque sales reached a new record despite the poor weather in
the summer. In Latvia, the profitability of Rigas Miesnieks and Jelgava branded
products improved through better balanced portfolios, price and campaign
management. The Klaipedos Maistas brand in Lithuania gained market share, while
its main strength is still in the value added end of the market and its
profitability is therefore more vulnerable.
Several projects aimed at improving efficiency were carried out in the Baltics.
Among these were the organisational streamlining of all companies under one
management, a renovation project for meat processing, and centralisation of
warehousing operations, as well as energy-saving projects in both pig primary
production and meat production.
The most important project was the merger and reorganisation of sales,
logistics and call-centre functions in Estonia. This streamlining project
increased efficiency from the very start, and will improve supply reliability
and give additional savings in the coming years. In December, a farm complex
was opened in Kaarma in order to enable chicken production to be increased in
the Baltics. Renovation of the main fattener building of the Ekseko and Kulli
layer farms also took place during the year.
MARKET AREA: SWEDEN
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(EUR million) Q4/2012 Q4/2011 2012 2011
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Net sales 278.0 275.6 1 040.6 1 045.7
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EBIT -1.2 7.4 -7.6 17.2
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- EBIT margin, % -0.4 2.7 -0.7 1.6
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EBIT excluding non-recurring expenses 6.2 7.4 -0.2 17.2
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- EBIT margin, % 2.2 2.7 0.0 1.6
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In Sweden, net sales in 2012 were EUR 1 040.6 (1 045.7) million. Comparable
EBIT excluding non-recurring expenses was EUR -0.2 (17.2) million.
In the fourth quarter, net sales amounted to EUR 278.0 (275.6) million.
Comparable EBIT for the period excluding non-recurring expenses was EUR 6.2
(7.4) million. Non-recurring expenses consist of the restructuring expenses of
EUR 7.4 million related to the development programme covering both redundancy
costs and the impairment of the asset of the closed operations.
The fourth quarter of 2012, measured in net sales, was at the same level as the
corresponding period in 2011. Christmas ham sold well in Sweden.
Throughout 2012, the business in Sweden was challenged by high raw material
prices and lower availability of domestic beef and pork. Swedish primary
production decreased further during the year. The volumes of imported meat
increased in the market during the whole year. This development was supported
by the strong Swedish krona. Higher sales prices improved the profitability in
Sweden during the latter part of the year, however. The private label continued
its growth in retail. The Swedish rapeseed pork, Svensk Rapsgris, was
successfully launched on the market in March for AfH customers and in September
to retail. Sales of cold cuts under the Pärsons brand succeeded well in 2012.
In August and October, HKScan announced efficiency measurement plans concerning
restructuring of the business in Sweden. The measurements proceeded according
to plan during 2012. The number of employees was reduced by 125 people in 2012.
In addition to this, a reduction of 100 employees in 2013 was announced. The
year was also challenging for HKScan's affiliates. The strategic review is
continuing in Sweden.
MARKET AREA: DENMARK
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(EUR million) Q4/2012 Q4/2011 2012 2011
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Net sales 50.9 54.3 211.7 228.1
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EBIT 12.7 -1.3 15.4 -3.7
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- EBIT margin, % 24.9 -2.4 7.3 -1.6
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EBIT excluding non-recurring income and expenses -1.1 -1.3 1.5 -3.7
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- EBIT margin, % -2.2 -2.4 0.7 -1.6
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In Denmark, net sales in 2012 were EUR 211.7 (228.1) million. Comparable EBIT
excluding non-recurring income and expenses was EUR 1.5 (-3.7) million.
In the fourth quarter, net sales amounted to EUR 50.9 (54.3) million.
Comparable EBIT for the period excluding non-recurring income and expenses was
EUR -1.1 (-1.3) million. Non-recurring items consist of the property insurance
compensation income of EUR 19.3 million and the write-off of the destroyed
asset of EUR 5.5 million due to the fire in Vinderup.
The year started promisingly in Denmark, but the good development of sales and
business was dramatically hit by the fire in the Vinderup plant in early June.
The recovery of the business after the fire became the key focus area in
Denmark. The recovery programme was managed successfully.
Sales of fresh poultry products in the Danish market continued recovering in
the fourth quarter. Close-to-full production levels at the Vinderup plant were
achieved in early December in terms of tonnage, when production moved from the
interim production setup to the rebuilt part of the plant. Some production
lines, however, will be taken into full use in the first quarter of 2013.
Some new poultry products were launched on the domestic market during the
autumn, despite the impact of the fire. In the European poultry market,
quotations for live birds were high due to increased feed costs. Raw material
prices increased during the year and also at the beginning of the fourth
quarter. These were passed on to sales prices with some delay.
The insurance is estimated to cover both the property damage and the loss of
profit, as well as additional costs caused by the interruption to the business.
The insurance compensation income based on the property and business insurance
agreement is posted as other operating income in the income statement. The
postings are based on the received and agreed insurance payments reflecting
occurred costs, write-offs, investment expenses and loss of profit. The rebuilt
part of the plant started production in December. The posted capital
expenditure related to the fire amounted to EUR 19.3 million in the period. The
insurance case will continue in 2013.
MARKET AREA: POLAND
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(EUR million) Q4/2012 Q4/2011 2012 2011
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*)
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Net sales 87.7 73.9 343.7 298.9
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EBIT 4.3 3.5 15.8 12.7
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- EBIT margin, % 4.9 4.7 4.6 4.2
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*) The figures refer to HKScan's share (50%) of the Sokolów Group's figures.
In Poland, net sales in 2012 totalled EUR 343.7 (298.9) million. EBIT for the
period was EUR 15.8 (12.7) million. The EBIT margin for the year was 4.6 (4.2)
per cent.
In the fourth quarter, net sales amounted to EUR 87.7 (73.9) million. EBIT for
the period was EUR 4.3 (3.5) million.
Net sales of Sokolów continued to develop well in the fourth quarter as a
result of increased sales of processed products, successful new product
launches and the high recognition of the Sokolów brand. Export sales were
strong, though the strengthened Polish currency continued to reduce margins.
During 2012, economic growth weakened in Poland, and the year was also
difficult for the Polish meat industry. More strict regulation and intensified
activity of large pig slaughterhouses led to bankruptcies of small and
medium-sized pig and cattle slaughterhouses. Polish primary production is also
weakening and consolidating. Development may accelerate throughout 2013.
The price competition in modern retail chains in Poland continued to be fierce.
Sales of private brands are increasing and consolidations in retail are
continuing.
As for the whole of 2012, Sokolów improved its operations by, for example,
investments in production technology, such as the slicing plant in Sokolów
Podlaski, the beef slaughter line at the Tarnow plant and four new lines for
smoked and cooked products at the Kolo plant. New cold cut products were
introduced to the market, and the product offering was enlarged with new
alginate casing products and frankfurters. Demand for sliced products and
convenience food continued to grow.
INVESTMENTS
The Group's investments in 2012 totalled EUR 76.6 (61.0) million. They were
divided by market area as follows:
(EUR million) Q4/2012 Q4/2011 2012 2011
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Finland 4.7 5.0 11.8 17.3
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Baltics 2.2 3.9 10.5 12.4
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Sweden 2.2 2.2 7.4 8.9
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Denmark 1) 24.6 3.5 33.0 7.8
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Poland 2) 2.1 4.8 14.0 14.5
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Total 35.9 19.5 76.6 61.0
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1) The investments in 2012 include EUR 19.3 million related to the rebuilding of
the Vinderup plant.
2) HKScan's share (50%) of Sokolów investments.
In Finland, the investments concerned mainly normal repair and maintenance of
the production lines. In the Baltics, the investments involved energy savings
and primary production as well the programme for restructuring of poultry
production in Estonia. In Sweden, the investments were made in process
development both in Kristianstad and Linköping, the Svensk Rapsgris concept,
and energy savings. In Poland, the investments concerned production technology
in the Sokolów Podlaski and Tarnow plants, as well as four new production lines
and development of processing facilities at the Kolo plant.
FINANCING AND TAXES
Group interest-bearing debt at year-end stood at EUR 499.7 (504.2) million. Net
debt decreased to EUR 440.9 (455.8) million. The strong Swedish krona increased
debt by EUR 8.5 million. In addition, 1 000 000 of the Company's own shares
were repurchased due to the terms of the acquisition of Rose Poultry A/S. Net
financial expenses stayed at EUR -31.7 (-30.9) million.
The Group's liquidity was good throughout the year. Undrawn committed credit
facilities at 31 December 2012 were EUR 177.4 (204.0) million. In addition, the
Group had other undrawn overdraft and other facilities of EUR 28.8 (26.4)
million. The EUR 200 million commercial paper programme had been drawn to the
amount of EUR 120.0 (109.3) million.
Group signed a EUR 250 million secured multi-currency credit facility agreement
with a Nordic banking group in March. The loan facility comprises a EUR 100
million five-year amortizing term loan and a EUR 150 million five-year credit
limit. The arrangement will refinance the part of the syndicated loan facility
established in 2007 which matures in 2013.
Group taxes were EUR 3.8 (1.0) million positive, of which EUR 3.4 million was
due to a regulatory change in the corporate income tax rate in Sweden.
RESEARCH AND DEVELOPMENT
Research and development in the HKScan Group mainly involves the development of
new products over a span of one to two years and the updating of products
already on the market. A total of EUR 10.5 (11.2) million was spent on R&D in
2012, equal to 0.4 per cent of net sales.
HK Rypsiporsas® (“Rapeseed Pork”) continued its success in Finland. There are
approximately 130 Rapeseed Pork products on the market. Thanks to the healthier
fat content in these products, in 2012 Finns ate over 170 000 kg less saturated
fat compared to 2007. For decreasing the saturated fat together with long-term
salt reductions in every product category, HK Ruokatalo was acknowledged by the
National health award in Finland in November 2012. In Sweden, Svensk Rapsgris
was launched on the AfH market in March and to retail in September.
In Estonia, a new product line, “Lihakas”, was launched successfully in the
second quarter of 2012. The Lihakas products were acknowledged with the first
prize in the “Best Estonian food product 2012” contest for the pork roast with
rye bread topping. Additionally, the title “Best Food for Health” was given to
the company's products for the second consecutive year.
HKScan is participating in a development project focusing on improving the
financial viability of pork primary production. The project was started in
2012. The target group comprises pig producers in the Western Finland area. The
aim is to improve the producers' ways of working and competitiveness through
production development by consulting, for example. The project is divided into
three categories: responsible and documented production, structural solutions,
and feeding development. The project is being carried out in cooperation with
the producers in order to bring them direct benefits from the results.
SUSTAINABILITY
The year 2012 focused on ensuring sustainable business continuity by actions
improving profitability. With the new operating model and development
programme, the Group is aiming for profitable business that lays the foundation
for sustainable operations adding value to the company and its stakeholders.
Efforts have been made to ensure a well-planned restructuring process as well
as an environmentally, economically and socially responsible outcome. Special
attention has been paid to change management and communications processes.
As part of continuous improvement of its operations, HKScan is actively
involved in industry-wide research and development projects. In product
development, HKScan is investing in high-quality, nutritionally balanced
products. HKScan has also promoted healthier products, e.g. “Rapeseed Pork”
products and healthy lifestyles. The use of more environmentally-friendly and
renewable packaging materials is increasing gradually.
The Group has proceeded with stakeholder cooperation, for example by planning a
new cooperation model for primary production to enhance collaboration,
information flow and profitability in the entire value chain.
The health and welfare of production animals are the prerequisite for the
ethical operations and profitability of the entire meat chain. HKScan monitors
the welfare of production animals and develops its measurement. In 2012, animal
welfare officers for slaughterhouses were nominated and trained according to
new EU legislation. Studies and projects aimed at enhancing animal welfare
progressed in all market areas.
HKScan operates on the principle of causing minimum adverse environmental
impact during production. The company seeks to improve energy and water
efficiency to reduce waste and emissions into water and the air, and to improve
recycling. In 2012, HKScan has participated in climate work, and made life
cycle assessment studies and carbon footprint calculations in Sweden and
Finland. Energy-saving activities progressed in all market areas. The
production is also a source of biogas material and HKScan uses by-products
efficiently, e.g. in feed production. Most of the plants have environmental
management compliant with the ISO 14001 standard. The Swinoujscie plant in
Poland was certified in 2012.
HKScan's Board approved a new Code of Conduct for the Group. The Code of
Conduct will be implemented during 2013.
ANNUAL GENERAL MEETING 2012
The Annual General Meeting of HKScan Corporation, held on 25 April 2012,
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 2011.
The AGM resolved that a dividend of EUR 0.17 per share be paid for 2011. The
dividend record date was 30 April 2012, and the payment date was 8 May 2012.
Board members Juha Kylämäki, Niels Borup, Tero Hemmilä and Henrik Treschow were
re-elected, and Gunilla Aschan and Teija Andersen were elected as new Board
members. At the organizational meeting after the AGM, the Board re-elected Juha
Kylämäki as Chairman and Niels Borup as Vice Chairman.
The AGM resolved that the annual remuneration payable to the members of the
Board of Directors remained unchanged from 2011, i.e. EUR 21 000 to Board
members, EUR 25 800 to the Vice Chairman of the Board and EUR 51 600 to the
Chairman of the Board. The Chairmen of the Board committees (Audit, Nomination
and Compensation Committees) would be paid a new annual remuneration of EUR 4
800. In addition, compensation of EUR 500 per meeting would be paid for
attendance at Board and Board committee meetings, as before. Travel expenses
would be compensated for according to company travel policy.
PricewaterhouseCoopers Oy, with Johan Kronberg, APA, as responsible auditor,
and Petri Palmroth, APA, were elected as the Company's auditors, and that Mika
Kaarisalo, APA, and Jari Viljanen, APA, were elected as deputy auditors. It was
also decided that the remuneration of the auditor would be paid according to
the auditor's invoice accepted by the company.
The AGM gave the following three authorisations to the Board:
(1) The Board of Directors was authorized to decide on share issue as well as
the issue of option rights and other special rights entitling holders to
shares. The shares issued under the authorization are new Series A shares of
the Company. Under the authorization, a maximum of 2 500 000 Series A shares,
which corresponds to approximately 4.50 per cent of all of the shares in the
Company and approximately 5.00 per cent of all the Series A shares in the
Company, can be issued. The shares, option rights or other special rights
entitling holders to shares can be issued in one or more tranches.
(2) The Board of Directors was authorized to decide on the purchase of the
Company's own Series A shares and/or on the acceptance the Company's own Series
A shares as pledge as follows. The aggregate number of own Series A shares to
be acquired and/or accepted as pledge shall not exceed 2 500 000 Series A
shares in total, which corresponds to approximately 4.50 per cent of all of the
shares in the Company and approximately 5.00 per cent of all the Series A
shares in the Company. However, the Company, together with its subsidiaries,
cannot at any moment own and/or hold as pledge more than 10 per cent of all the
shares in the Company.
(3) The Board of Directors was authorized to decide on the transfer of the
Company's own shares. Under the authorization, a maximum of 2 500 000 Series A
Shares, which corresponds to approximately 4.50 per cent of all of the shares
in the Company and approximately 5.00 per cent of all the Series A shares in
the Company, can be transferred. The Company's own shares may be transferred in
one or several tranches. The Board of Directors decides on all the conditions
of the transfer of the Company's own shares. For the avoidance of doubt, this
authorization does not invalidate any other authorizations decided in the
meeting.
All the authorisations given to the Board are effective until 30 June 2013.
During 2012, the Board exercised the above authorisations in conjunction to the
share repurchase of 1 000 000 shares in August. Further information about the
repurchase can be found in the section “Repurchase of own shares” in this
report.
MANAGEMENT TEAM
The Management Team of HKScan is as follows: Hannu Kottonen, CEO; Aki Laiho,
COO responsible for the development of technology and production; Tuomo
Valkonen, CFO; Anne Mere, EVP responsible for the consumer business in Finland
and the Baltics; Göran Holm, EVP responsible for the consumer business in
Scandinavia; Jukka Nikkinen, EVP of Away from Home Business; and Markku
Suvanto, EVP Legal and Administration, who also acts as the Management Group's
secretary.
Additionally, on 29 January 2013, HKScan announced that Sari Suono, EMBA,
Master of Laws, was appointed EVP HR and a member of the Management Team,
effective no later than 2 April 2013.
CHANGES IN THE GROUP STRUCTURE
The mergers of HKScan Finland Oy and its wholly owned subsidiaries Järvi-Suomen
Portti Oy and Helanderin Teurastamo Oy with HK Ruokatalo Oy were announced on
29 June and completed by the end of 2012. In December, HK Ruokatalo divested
its Säkylä property and operations to the co-owned Kivikylän Kotipalvaamo, and
sold its share of Best-In.
On 10 August 2012, HKScan announced its aim to clarify and streamline the
structure of the business in Sweden in line with the Group's operating model.
According to the plan, the wholly-owned subsidiaries belonging to the subgroup
in Sweden will be merged into a single legal entity. In addition, HKScan's
commercial, production and logistics organisations and other operations
supporting the business in Sweden will be merged. The restructuring proceeded
according to plan.
SHARES AND SHAREHOLDERS
Shares
The HKScan Group's registered and fully paid-up share capital at the beginning
and the end of 2012 was EUR 66 820 528.10. The total number of shares issued
was 55 026 522, and it 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.
According to the Articles of Association, each A Share conveys one vote, and
each K Share 20 votes. Each share gives equal entitlement to a dividend. The
shares have no nominal value.
HKScan's market capitalisation at the end of the year stood at EUR 199.7
million. The Series A shares had a market value of EUR 180.1 million and the
unlisted Series K shares a calculated market value of EUR 19.6 million.
In 2012, a total of 9 084 494 of the company's shares, with a total value of
EUR 40 218 018, were traded. The highest price quoted was EUR 6.40 and the
lowest EUR 3.17. The median price was EUR 4.34. At the end of 2012, the closing
price was EUR 3.63.
HKScan has a market-making agreement with FIM Pankkiiriliike Oy which meets the
requirements of NASDAQ OMX's Liquidity Providing (LP) operation.
Shareholders
At the end of 2012, the shareholder register maintained by Euroclear Finland
Ltd included 12 254 shareholders. Nominee-registered and foreign shareholders
held 19.6 (20.1) per cent of the company's shares.
Notifications of changes in holdings
HKScan did not receive any notifications of changes in holdings during 2012.
Treasury shares
At the beginning of the financial year 2012, HKScan held 53 734 treasury A
Shares. The company acquired 1 000 000 A shares on 6 August 2012. The
repurchase pertains to the share purchase agreement of the Danish company Rose
Poultry A/S, announced on 9 September 2010 and specified on 4 June 2012.
At year end, HKScan held 1 053 734 treasury A Shares. They had a market value
of EUR 3.80 million and accounted for 1.91% of all shares and 0.67% of all
votes at year-end.
Share-based incentive schemes
HKScan announced in December a new share-based incentive plan for the Group key
personnel. The aim of the new plan is to combine the objectives of the
shareholders and the key personnel in order to develop the value of the
company, to commit the key personnel to the company, to increase their share
ownership in the company, and to offer them a competitive reward plan based on
earning and holding the company's shares. The incentive plan and conditions are
described in detail in the stock exchange release dated 20 December 2012.
PERSONNEL
In 2012, HKScan, excluding Sokolów in Poland, had an average personnel of 7 763
(8 287).
The number of employees in Finland increased, mainly due to the intake of
outsourced cutting operations. In the Baltics, Sweden and Denmark, the numbers
of employees decreased as a consequence of the on-going efficiency programmes.
The average number of personnel in each market area was as follows:
2012 2011
---------------------
Finland 2 794 2 750
---------------------
Baltics 1 742 1 881
---------------------
Sweden 2 428 2 789
---------------------
Denmark 799 867
---------------------
Total 7 763 8 287
---------------------
In addition, the Sokolów Group employed during the year an average of 6 310 (6
191) persons
At year end HKScan, excluding Sokolów in Poland, had an average personnel of 7
475 (7 882).
Division of personnel by market area at year end was as follows
31.12.2012 31.12.2011
-------------------------------
Finland 2 592 2 568
-------------------------------
Baltics 1 700 1 803
-------------------------------
Sweden 2 339 2 704
-------------------------------
Denmark 844 807
-------------------------------
Total 7 475 7 882
-------------------------------
Additionally, the Sokolów Group had 6 491 (6 175) employees at the end of the
year.
The HKScan Group's European Works Council (EWC) continued its activities during
2012. The Council functions as a cooperation body for discussion between the
Group's management and personnel in issues that are significant and, due to
their scope, transnational. The EWC convenes biannually in one of countries
within HKScan's field of activities. In 2012, EWC meet in Sweden and in
Finland.
HKSCAN AND HK RUOKATALO SUBJECT TO AN ACTION FOR DAMAGES BY OY PRIMULA AB'S
BANKRUPTCY ESTATE
According to a stock exchange release of 7 September 2012, HKScan Corporation
and HK Ruokatalo 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 process costs.
HKScan and HK Ruokatalo find the action to be unjustified, and the companies
are going to dispute the claim in its entirety in the pending trial. Therefore,
the action did not give raise to any provisions in the consolidated financial
statements.
SHORT-TERM RISKS AND UNCERTAINTY FACTORS
The most significant uncertainty factors in the HKScan Group's business are
connected — through price increases for feed raw material in particular and
other production inputs related to primary production — to the price
development and availability of local meat raw material, as well as to the
adequacy of increases in the sales prices for the products in relation to cost
development. Uncertainty factors specific to market areas have to do with the
implementation of the business development programmes.
The risks of animal diseases in the food industry's raw meat supplies or
eventual international or regional food scandals impacting the overall
consumption outlook can never be fully excluded.
EVENTS AFTER THE REPORTING PERIOD
On 7 January 2013, HKScan published a stock exchange release on starting labour
negotiations to reorganize the structures and functions in its Finnish
operations as part of the plans based on the Group's strategy, and to develop
the productivity and profitability of the business. The planned actions aim to
improve profit by approximately EUR 5 million annually, and they are planned to
be carried mainly out by the end of 2013.The plans include investments and
non-recurring costs, the amount of which will be specified during the
negotiation process.
OUTLOOK FOR 2013
HKScan expects the business environment to remain tough as both animal supply
and consumer purchasing power are estimated to tighten further. At the same
time, demand for meat in general is expected to develop steadily. The Group
focuses on managing future business dynamics by tight control on costs and
capital spending, balancing demand and supply, and being more proactive in
sales pricing.
The revised strategy, new operating model and organisation will contribute to
profit improvement. The financial benefits of the development and the
profitability improvement programmes are estimated to accelerate the profit
aggregation towards the latter part of the year 2013 and onwards. Group EBIT
for the entire year is estimated to improve from 2012.
BOARD OF DIRECTORS' PROPOSAL ON DISTRIBUTION OF PROFIT
The parent company's distributable assets stand at EUR 198.0 million including
the reserve for invested unrestricted equity (RIUE), which holds EUR 143.1
million. The Board of Directors recommends that the company pays a dividend of
EUR 0.10 per share for 2012, i.e. a total of approximately EUR 5.4 million.
There have been no material changes in the company's financial standing since
the end of the year under review. The company maintains good liquidity and the
recommended distribution of dividend will not, in the Board's estimation,
compromise the company's solvency.
ANNUAL GENERAL MEETING 2013
HKScan Corporation's Annual General Meeting will be held at 11 am on 24 April
2013 in Turku (at the Turku Fair and Congress Centre). To be eligible to attend
the Annual General Meeting, shareholders should be registered by 12 April 2013
in HKScan Corporation's shareholder register maintained by Euroclear Finland
Ltd. Notice to the meeting and Board proposals to the Annual General Meeting
will be published at a later date.
CONSOLIDATED FINANCIAL STATEMENTS 1 JANUARY — 31 DECEMBER 2012
CONSOLIDATED INCOME STATEMENT
(EUR million) Note 2012 2011
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NET SALES 2 546.8 2 491.3
--------------------------------------------------------------------------------
Change in inventories of finished goods and work in -6.0 16.1
progress
--------------------------------------------------------------------------------
Work performed for own use and capitalized 1.6 1.3
--------------------------------------------------------------------------------
Other operating income 1. 57.6 9.2
--------------------------------------------------------------------------------
Share of associates' results -0.1 1.1
--------------------------------------------------------------------------------
Materials and services 1. -1 843.7 -1 740.8
--------------------------------------------------------------------------------
Employee benefits expenses 1. -381.7 -379.3
--------------------------------------------------------------------------------
Depreciation and amortization 1. -85.9 -72.3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Other operating expenses 1. -247.3 -286.9
--------------------------------------------------------------------------------
EBIT 41.3 39.6
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial income 5.4 7.4
--------------------------------------------------------------------------------
Financial expenses -37.1 -38.3
--------------------------------------------------------------------------------
Share of associates' results 3.0 2.5
-------------------
PROFIT/LOSS BEFORE TAXES 12.6 11.3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Income tax 3.8 1.0
--------------------------------------------------------------------------------
PROFIT/LOSS FOR THE PERIOD 16.4 12.2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PROFIT/LOSS FOR THE PERIOD ATTRIBUTABLE TO:
--------------------------------------------------------------------------------
Equity holders of the parent company 15.1 10.1
--------------------------------------------------------------------------------
Non-controlling interests 1.3 2.1
--------------------------------------------------------------------------------
Total 16.4 12.2
--------------------------------------------------------------------------------
Earnings per share calculated on profit attributable to equity holders of the
parent company:
--------------------------------------------------------------------------------
-
EPS, undiluted, continuing operations, EUR/share 0.28 0.18
--------------------------------------------------------------------------------
EPS, diluted, continuing operations, EUR/share 0.28 0.18
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 1 JANUARY — 31 DECEMBER
(EUR million) 2012 2011
----------------------------------------------------------------------
Profit/loss for the period 16.4 12.2
----------------------------------------------------------------------
----------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME (after taxes):
----------------------------------------------------------------------
Exchange differences on translating 8.7 -2.5
foreign operations
----------------------------------------------------------------------
Cash flow hedging 0.2 -7.4
----------------------------------------------------------------------
Revaluation 0.0 -
----------------------------------------------------------------------
TOTAL OTHER COMPREHENSIVE INCOME 8.8 -9.8
----------------------------------------------------------------------
----------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME FOR 25.2 2.4
THE PERIOD
----------------------------------------------------------------------
----------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME FOR
THE PERIOD ATTRIBUTABLE TO:
----------------------------------------------------------------------
Equity holders of the parent company 23.8 0.3
----------------------------------------------------------------------
Non-controlling interests 1.4 2.1
----------------------------------------------------------------------
Total 25.2 2.4
----------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
(EUR million) Note 31.12.2012 31.12.2011
--------------------------------------------------------------------------------
ASSETS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NON-CURRENT ASSETS
--------------------------------------------------------------------------------
Intangible assets 2. 77.7 76.6
--------------------------------------------------------------------------------
Goodwill 3. 101.5 101.0
--------------------------------------------------------------------------------
Tangible assets 4. 504.6 516.5
--------------------------------------------------------------------------------
Shares in associates 34.7 29.9
--------------------------------------------------------------------------------
Trade and other receivables 37.4 31.1
--------------------------------------------------------------------------------
Available-for-sale investments 12.9 13.0
--------------------------------------------------------------------------------
Deferred tax assets 27.5 21.1
--------------------------------------------------------------------------------
NON-CURRENT ASSETS 796.2 789.2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CURRENT ASSETS
--------------------------------------------------------------------------------
Inventories 5. 176.3 190.2
--------------------------------------------------------------------------------
Trade and other receivables 216.5 223.8
--------------------------------------------------------------------------------
Income tax receivable 0.9 1.5
--------------------------------------------------------------------------------
Other financial assets - 0.4
--------------------------------------------------------------------------------
Cash in hand and at bank 58.9 48.0
--------------------------------------------------------------------------------
CURRENT ASSETS 452.6 463.8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ASSETS 1 248.8 1 253.0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUITY
--------------------------------------------------------------------------------
Share capital 6. 66.8 66.8
--------------------------------------------------------------------------------
Share premium reserve 73.4 73.4
--------------------------------------------------------------------------------
Treasury shares 0.0 0.0
--------------------------------------------------------------------------------
Fair value reserve and other reserves 155.0 153.2
--------------------------------------------------------------------------------
Translation differences 6.6 -1.9
--------------------------------------------------------------------------------
Retained earnings 122.1 117.9
--------------------------------------------------------------------------------
Equity attributable to equity holders of the 423.9 409.3
parent company
--------------------------------------------------------------------------------
Non-controlling interests 8.6 12.2
--------------------------------------------------------------------------------
EQUITY 432.5 421.5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NON-CURRENT LIABILITIES
--------------------------------------------------------------------------------
Deferred tax liability 34.5 36.9
--------------------------------------------------------------------------------
Non-current interest-bearing liabilities 312.9 333.5
--------------------------------------------------------------------------------
Non-current non-interest bearing liabilities 2.0 3.0
--------------------------------------------------------------------------------
Non-current provisions 0.1 0.1
--------------------------------------------------------------------------------
Pension obligations 3.9 3.7
--------------------------------------------------------------------------------
NON-CURRENT LIABILITIES 353.4 377.1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CURRENT LIABILITIES
--------------------------------------------------------------------------------
Current interest-bearing liabilities 186.8 170.6
--------------------------------------------------------------------------------
Trade and other payables 275.0 282.9
--------------------------------------------------------------------------------
Income tax liability 0.5 0.1
--------------------------------------------------------------------------------
Current provisions 0.7 0.7
--------------------------------------------------------------------------------
CURRENT LIABILITIES 463.0 454.4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES 1 248.8 1 253.0
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN CONSOLIDATED
EQUITY
(EUR 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.
million)
--------------------------------------------------------------------------------
EQUITY AT 66.8 73.4 -13.9 143.5 23.5 -1.9 0.0 117.9 409.3 12.2 421.5
1.1.2012
--------------------------------------------------------------------------------
Result for - - - - - - - 15.1 15.1 1.3 16.4
the
financial
period
--------------------------------------------------------------------------------
Other
comprehens
ive
income (+)
/
expense
(-)
--------------------------------------------------------------------------------
Transl. - - - - - 8.5 - - 8.5 0.2 8.7
diff.
--------------------------------------------------------------------------------
Cash flow - - 0.2 - - - - - 0.2 - 0.2
hedging
--------------------------------------------------------------------------------
Revaluatio - - - - 0.0 - - - 0.0 - 0.0
n.
--------------------------------------------------------------------------------
Total - - 0.2 - 0.0 8.5 - 15.1 23.8 1.4 25.2
compreh.
income for
the
period
--------------------------------------------------------------------------------
Direct - - - - - - - 0.2 0.2 - 0.2
recognit.
in ret.
earnings
--------------------------------------------------------------------------------
Transfers - - - - 1.7 - - -1.7 0.0 - 0.0
betw.
items
--------------------------------------------------------------------------------
Dividend - - - - - - - -9.3 -9.3 -0.9 -10.2
distribut
.
--------------------------------------------------------------------------------
Other - - - - 0.0 - - 0.0 0.0 -4.2 -4.2
change
--------------------------------------------------------------------------------
EQUITY AT 66.8 73.4 -13.7 143.5 25.2 6.6 0.0 122.1 423.9 8.6 432.5
31.12.2012
--------------------------------------------------------------------------------
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.
--------------------------------------------------------------------------------
EQUITY AT 66.8 73.4 -6.5 143.5 17.4 0.6 0.0 124.4 419.6 11.1 430.6
1.1.2011
--------------------------------------------------------------------------------
Result for - - - - - - - 10.1 10.1 2.1 12.2
the
financial
period
--------------------------------------------------------------------------------
Other
comprehens
ive
income (+)
/
expense
(-)
--------------------------------------------------------------------------------
Transl. - - - - - -2.5 - - -2.5 0.0 -2.5
diff.
--------------------------------------------------------------------------------
Cash flow - - -7.4 - - - - - -7.4 - -7.4
hedging
--------------------------------------------------------------------------------
Revaluat. - - - - 0.0 - - - 0.0 - 0.0
--------------------------------------------------------------------------------
Total - - -7.4 - 0.0 -2.5 - 10.1 0.3 2.1 2.4
compreh.
income for
the
period
--------------------------------------------------------------------------------
Direct - - - - - - - 1.5 1.5 - 1.5
recognit.
in ret.
earnings
--------------------------------------------------------------------------------
Transfers - - - - 6.1 - - -6.1 - - -
betw.
items
--------------------------------------------------------------------------------
Dividend 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -12.1 -12.1 -0.9 -13.0
distribut
.
--------------------------------------------------------------------------------
Other - - - - 0.0 - - - 0.0 -0.1 -0.1
change
--------------------------------------------------------------------------------
EQUITY AT 66.8 73.4 -13.9 143.5 23.5 -1.9 0.0 117.9 409.3 12.2 421.5
31.12.2011
--------------------------------------------------------------------------------
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) 2012 2011
---------------------------------------------------------------
Operating activities
---------------------------------------------------------------
Cash flow from operating activities 140.5 79.9
---------------------------------------------------------------
Financial items and taxes -33.7 -26.1
---------------------------------------------------------------
Net cash flow from operating activities 106.8 53.9
---------------------------------------------------------------
---------------------------------------------------------------
Investments
---------------
Gross investments in property, plant and -76.9 -60.4
equipment
---------------------------------------------------------------
Disposals of property, plant and equipment 1.5 1.9
---------------------------------------------------------------
Investments in subsidiary - -
---------------------------------------------------------------
Shares in associates purchased -0.2 -1.0
---------------------------------------------------------------
Shares in associates sold 3.9 0.0
---------------------------------------------------------------
Loans granted -1.9 -1.8
---------------------------------------------------------------
Repayments of loans receivable 0.5 2.1
---------------------------------------------------------------
Net cash flow from investment activities -73.0 -59.2
---------------------------------------------------------------
---------------------------------------------------------------
Cash flow before financing activities 33.8 -5.4
---------------------------------------------------------------
---------------------------------------------------------------
Financing activities
---------------------------------------------------------------
Current borrowing raised 25.5 76.8
---------------------------------------------------------------
Current borrowing repaid -52.7 -98.3
---------------------------------------------------------------
Non-current borrowing raised 125.0 159.4
---------------------------------------------------------------
Non-current borrowing repaid -102.7 -142.4
---------------------------------------------------------------
Dividends paid -9.9 -12.7
---------------------------------------------------------------
Repurchase of own shares -8.0 -
---------------------------------------------------------------
---------------------------------------------------------------
Net cash flow from financing activities -22.7 -17.2
---------------------------------------------------------------
---------------------------------------------------------------
Change in cash and cash equivalents 11.1 -22.5
---------------------------------------------------------------
---------------------------------------------------------------
Cash and cash equivalents at 1.1. 48.4 73.4
---------------------------------------------------------------
Effect of changes in exchange rates on cash and -0.6 -2.5
cash equivalents
---------------------------------------------------------------
Cash and cash equivalents at 31.12. 58.9 48.4
---------------------------------------------------------------
FINANCIAL INDICATORS
2012 2011
-------------------------------------------------------------------
Net sales, EUR mill. 2 546.8 2491.3
-------------------------------------------------------------------
Operating profit/loss (EBIT), EUR million 41.3 39.6
-------------------------------------------------------------------
- % of net sales 1.6 1.6
-------------------------------------------------------------------
Profit/loss before taxes, EUR million 12.6 11.3
-------------------------------------------------------------------
- % of net sales 0.5 0.5
-------------------------------------------------------------------
Return on equity (ROE), % 3.8 2.9
-------------------------------------------------------------------
Return on capital employed (ROCE) before taxes, % 5.5 4.8
-------------------------------------------------------------------
Equity ratio, % 34.6 33.6
-------------------------------------------------------------------
Gearing ratio, % 115.6 119.6
-------------------------------------------------------------------
Net gearing ratio, % 101.8 107.2
-------------------------------------------------------------------
Gross investments, EUR million 76.6 61.0
-------------------------------------------------------------------
- % of net sales 3.0 2.4
-------------------------------------------------------------------
R&D expenses, EUR million 10.5 11.2
-------------------------------------------------------------------
- % of net sales 0.4 0.4
-------------------------------------------------------------------
Average no. of employees 7 763 8 287
-------------------------------------------------------------------
PER SHARE DATA
2012 2011
-------------------------------------------------------------------
Earnings per share (EPS), undiluted, EUR 0.28 0.18
-------------------------------------------------------------------
Earnings per share (EPS), diluted, EUR 0.28 0.18
-------------------------------------------------------------------
Equity per share, EUR 7.85 7.67
-------------------------------------------------------------------
-------------------------------------------------------------------
Dividend per share, EUR 0,10* 0.17
-------------------------------------------------------------------
Dividend payout ratio, undiluted, % 36,2* 92.1
-------------------------------------------------------------------
Dividend payout ratio, diluted, % 36,2* 92.1
-------------------------------------------------------------------
Effective dividend yield, % 2,8* 3.0
-------------------------------------------------------------------
Price/earnings ratio (P/E)
-------------------------------------------------------------------
- undiluted 13.1 30.6
-------------------------------------------------------------------
- diluted 13.1 30.6
-------------------------------------------------------------------
Lowest trading price, EUR 3.17 4.08
-------------------------------------------------------------------
Highest trading price, EUR 6.40 7.98
-------------------------------------------------------------------
Middle price, EUR 4.34 6.05
-------------------------------------------------------------------
Closing price on year, EUR 3.63 5.64
-------------------------------------------------------------------
Market capitalization, EUR million 199.7 310.3
-------------------------------------------------------------------
Shares traded, 1 000 9 084 11 765
-------------------------------------------------------------------
- % of average number 16.7 21.4
-------------------------------------------------------------------
Adjusted number of outstanding shares in thousands
-------------------------------------------------------------------
- average during the financial year 54 556 54 973
-------------------------------------------------------------------
- at end of financial year 53 973 54 973
-------------------------------------------------------------------
- fully diluted 53 973 54 973
-------------------------------------------------------------------
* Based on the Board of Directors' dividend proposal
CALCULATION OF FINANCIAL INDICATORS
Profit
Return on equity (%) --------------------------------------- x 100
Total equity (average)
Profit before tax + interest and
other financial expenses
Return on capital employed --------------------------------------- x 100
(ROCE) before tax (%) Balance sheet total - non-
interest-bearing liabilities
(average)
Total equity
Equity ratio (%) --------------------------------------- x 100
Balance sheet total - advances
received
Interest-bearing liabilities
Gearing ratio (%) --------------------------------------- x 100
Total equity
Net interest-bearing liabilities
Net gearing ratio (%) --------------------------------------- x 100
Total equity
Profit for the period
attributable to equity holders of
the parent
Earnings per share (EPS) ---------------------------------------
Average number of outstanding
shares during period
Equity attributable to holders of
the parent
Equity per share ---------------------------------------
Number of outstanding shares at
end of period
Dividend distribution
Dividend per share ---------------------------------------
Number of outstanding shares at
end of period
Dividend per share
Dividend payout ratio (%) --------------------------------------- x 100
Earnings per share
Dividend per share
Effective dividend yield (%) --------------------------------------- x 100
Closing price on the last trading
day of the financial year
Closing price on the last trading
day of the financial year
P/E ratio ---------------------------------------
Earnings per share
Market capitalization The number of outstanding shares at the end of
period x the closing price on the last trading
day of
the financial year
Cash flow before debt service Cash flow before financing activities and
financial
items
Employee numbers Average of workforce figures calculated
at the end of calendar months
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES
HKScan Corporation's financial statement release for 1 January — 31 December
2012 has been prepared in compliance with IAS 34 Interim Financial Reporting.
The consolidated financial statements have been prepared in compliance with the
International Financial Reporting Standards (IFRS) and the IAS and IFRS
standards and SIC and IFRIC interpretations effective at 31 December 2012.
The consolidated financial statements have been prepared in compliance with the
same accounting policies as in 2011. Due to the rounding of the figures to the
nearest million euros, some totals may not agree with their constituent parts.
There are no IFRS standards or IFRIC interpretations that have become effective
in the financial year that would have a material impact on the Group.
The Group has yet to apply the following new or revised standards and
interpretations published by the IASB. These will be applied as of the
effective date of each standard and interpretation or, if the effective date
does not fall on the first day of the financial year, as of the start of the
financial year first beginning after the effective date.
- Change to IAS 1 Financial statements (applies to financial periods starting
on 1 July 2012 or later). The main change is the requirement to group other
extensive profit groups according to whether they are possibly later
transferred to have an impact on profit if specific terms are met. The change
to the standard will not have a significant impact on the Group's financial
statements.
- Change to IAS 19 Fringe benefits (applies to financial periods starting on 1
January 2013 or later). The main changes to the standard are that all insurance
mathematical profit and loss shall be immediately entered in the other items of
the extensive profit calculation, i.e. the pipe method will be discontinued and
the funding cost will be defined on the basis of net funding. The Group is
currently assessing the impact, but it will affect the Group's figures.
- IFRS 9 Funding instruments and changes to it (applies to financial periods
starting on 1 January 2015 or later). Once completed, the originally
three-phase IASB project will replace the current standard IAS 39 Funding
instruments: entry and valuation. The first section of IFRS 9, which provides
instructions for funding asset categorisation and valuation, depends on the
characteristic features of contract-based cash flow and the business model of
the company. The second section, released in October 2010, covers the
categorisation and valuation of funding debt, and is mainly based on the
current IAS 39 requirements. However, IASB is still considering the
implementation of limited changes to the already-published IFRS 9 instructions
for funding asset categorisation and valuation. Other matters in progress
concern value depreciation and general hedge accounting. IASB has specified the
macro hedge accounting section as a separate project. Due to sections being in
progress, the standard's final impact on the Group's financial statements
cannot be evaluated at the moment. The standard has not yet been accepted to be
applied in the EU.
- IFRS 10 Consolidated financial statements (applies to financial periods
starting on 1 January 2013 or later). According to the valid principles, the
standard defines authority as a key factor when it is decided whether an
organisation should be included in the consolidated financial statements or
not. In addition, the standard issues additional instructions for specifying
authority when it is difficult to evaluate it. The impact of IFRS 10 is
currently being evaluated, and the Group intends to introduce it in 2014.
- IFRS Joint arrangements (applies to financial periods starting on 1 January
2013 or later). In the accounting processing of joint arrangements, the
standard emphasises the resulting rights and obligations to a greater extent
than the legal form. There are two kinds of joint arrangements: joint
operations and joint companies. In addition, the standard requires a single
method for the reporting of joint companies, i.e. the capital share method, and
the previous method (relative combination) is no longer allowed. Applying the
standard will become compulsory in the EU in 2014. The new standard will
substantially change the Group's figures and the processing of the Polish
segment. The Group intends to introduce the standard in 2014.
- IFRS 12 Financial statements information about shares in other organisations
(applies to financial periods starting on 1 January 2013 or later). The
standard includes the reference information requirements for different shares
in other companies, including partnership companies, joint arrangements,
companies established for a specific purpose, and other companies excluded from
the balance sheet. Applying the standard will become compulsory in the EU in
2014. The impact of IFRS 12 is currently being evaluated, and the Group intends
to introduce it in 2014.
- IFRS Market value specification (applies to financial periods starting on 1
January 2013 or later). The purpose of the standard is to increase consistency
and make things simpler because it provides an accurate definition of market
value and includes requirements for defining the market value, and for the
necessary reference information. The use of market value has not been expanded,
but instructions for using it are issued when its use is allowed, or when it is
required by another standard. The standard has not yet been accepted for
application in the EU.
- IAS 27 (updated in 2011) Separate financial statements (applies to financial
periods starting on 1 January 2013 or later). The new standard includes the
requirements for separate financial statements, which remain when the sections
concerning authority have been included in the new IFRS 10. Updating the
standard will not have a significant impact on the Group's financial
statements.
- IAS 28 (updated in 2011) Shares in partnerships and joint companies (applies
to financial periods starting on 1 January 2013 or later). The updated standard
includes requirements for the processing of partnerships and joint companies
with the capital share method due to the release of IFRS 11.
- Change to IAS 32 Funding instruments: financial statements information
(applies to financial periods starting on 1 January 2013 or later). The change
further specifies the rules for the net presentation of funding assets and
debt, and increases the number of application instructions concerning the
subject. The change to the standard will not have a significant impact on the
Group's financial statements. The change has not yet been accepted for
application in the EU.
- Change to IFRS 7, Funding instruments: financial statements information
(applies to financial periods starting on 1 January 2013 or later). The change
further specifies the reference information requirements which apply to funding
instruments and general net arrangements or similar contracts presented as a
net sum in the balance sheet. The change will not have a significant impact on
the Group's financial statements. The change has not yet been accepted for
application in the EU.
- Annual improvements to IFRSs 2009-2011, May 2012, applies to financial
periods starting on 1 January 2013 or later). Through the Annual Improvements
procedure, minor and less urgent changes to the standards are compiled into a
package and implemented once per year. The changes included in the project
apply to a total of five standards. The impact of the changes varies by
standard, but the changes do not have a significant impact on the Group's
financial statements. The changes have not yet been accepted for application in
the EU.
ANALYSIS BY SEGMENT
Net sales and EBIT by market area
------------------------------------
(EUR million) Q4/2012 Q4/2011 2012 2011
--------------------------------------------------------------
NET SALES
--------------------------------------------------------------
- Finland 226.6 217.6 842.6 812.4
--------------------------------------------------------------
- Baltics 45.1 44.9 176.7 173.3
--------------------------------------------------------------
- Sweden 278.0 275.6 1 040.6 1 045.7
--------------------------------------------------------------
- Denmark 50.9 54.3 211.7 228.1
--------------------------------------------------------------
- Poland 87.7 73.9 343.7 298.9
--------------------------------------------------------------
- Between segments -15.0 -16.4 -68.5 -67.1
--------------------------------------------------------------
Group total 673.5 649.8 2 546.8 2 491.3
--------------------------------------------------------------
--------------------------------------------------------------
EBIT
--------------------------------------------------------------
- Finland 7.4 7.2 18.4 12.1
--------------------------------------------------------------
- Baltics 1.5 2.8 8.9 9.8
--------------------------------------------------------------
- Sweden -1.2 7.4 -7.6 17.2
--------------------------------------------------------------
- Denmark 12.7 -1.3 15.4 -3.7
--------------------------------------------------------------
- Poland 4.3 3.5 15.8 12.7
--------------------------------------------------------------
- Between segments - - - -
--------------------------------------------------------------
Segments total 24.7 19.6 50.8 48.0
--------------------------------------------------------------
--------------------------------------------------------------
Group administration costs -3.2 -2.0 -9.5 -8.4
--------------------------------------------------------------
Group total 21.5 17.6 41.3 39.6
--------------------------------------------------------------
NOTES TO THE INCOME STATEMENT
1. NON-RECURRING ITEMS
(EUR million) Q4/2012 Q4/2011 2012 2011
--------------------------------------------------------------------------------
Property insurance compensation, 13.8 - 19.3 -
Denmark 1)
--------------------------------------------------------------------------------
Impairment of fixed assets 0.0 - -5.5 -
destroyed in the fire, Denmark 2)
--------------------------------------------------------------------------------
Restructuring layoff expenses, -4.0 - -4.0 -
Sweden 3)
--------------------------------------------------------------------------------
Restructuring expenses for closed -3.4 - -3.4 -
operations, Sweden 4)
--------------------------------------------------------------------------------
Non-recurring items Total 6.4 - 6.4 -
--------------------------------------------------------------------------------
1) Included in the Income Statement in the item “Other operating income”
2) Included in the Income Statement in the item “Depreciation and amortization”
3) Included in the Income Statement in the item “Employee benefits expenses”
4) Included in the Income Statement in the item “Materials and services”,
“Employee
benefits expenses”, “Depreciation and amortization” and “Other operating
expenses”
NOTES TO THE BALANCE SHEET
2. CHANGES IN INTANGIBLE ASSETS
(EUR million) 2012 2011
--------------------------------------------------------------------------------
Carrying amount at beginning of period 76.6 77.1
--------------------------------------------------------------------------------
Translation differences 2.5 0.3
--------------------------------------------------------------------------------
Increase 1.9 2.3
--------------------------------------------------------------------------------
Increase (acquisitions) - -
--------------------------------------------------------------------------------
Decrease -0.2 -0.3
--------------------------------------------------------------------------------
Depreciation and impairment -4.5 -4.0
--------------------------------------------------------------------------------
Transfer to other balance sheet item 1.4 1.1
--------------------------------------------------------------------------------
Carrying amount at end of period 77.7 76.6
--------------------------------------------------------------------------------
3. CHANGES IN GOODWILL
(EUR million) 2012 2011
--------------------------------------------------------------------------------
Carrying amount at beginning of period 101.0 100.4
--------------------------------------------------------------------------------
Translation differences 1.3 0.2
--------------------------------------------------------------------------------
Increase - 0.4
--------------------------------------------------------------------------------
Increase (acquisitions) - 0.0
--------------------------------------------------------------------------------
Decrease -0.9 -
--------------------------------------------------------------------------------
Depreciation and impairment - 0.0
--------------------------------------------------------------------------------
Transfer to other balance sheet item - -
--------------------------------------------------------------------------------
Carrying amount at end of period 101.5 101.0
--------------------------------------------------------------------------------
4. CHANGES IN PROPERTY, PLANT AND EQUIPMENT
---------------------------------------------------------
(EUR million) 2012 2011
--------------------------------------------------------------------------------
Carrying amount at beginning of period 516.5 537.8
--------------------------------------------------------------------------------
Translation differences 10.8 -7.9
--------------------------------------------------------------------------------
Increase 72.7 56.2
--------------------------------------------------------------------------------
Increase (acquisitions) - 1.3
--------------------------------------------------------------------------------
Decrease -11.5 -1.2
--------------------------------------------------------------------------------
Depreciation and impairment -82.5 -67.7
--------------------------------------------------------------------------------
Transfer to other balance sheet item -1.4 -1.8
--------------------------------------------------------------------------------
Carrying amount at end of period 504.6 516.5
-------------------------------------------------------------------------------- -------------------------------------
5. INVENTORIES
(EUR million) 2012 2011
--------------------------------------------------------------------------------
Materials and supplies 82.6 88.7
--------------------------------------------------------------------------------
Unfinished products 13.3 9.1
--------------------------------------------------------------------------------
Finished products 55.7 72.1
--------------------------------------------------------------------------------
Goods 0.0 0.0
--------------------------------------------------------------------------------
Other inventories 7.7 7.7
--------------------------------------------------------------------------------
Prepayments for inventories 8.0 4.5
--------------------------------------------------------------------------------
Live animals, IFRS 41 9.0 7.9
--------------------------------------------------------------------------------
Total inventories 176.3 190.2
--------------------------------------------------------------------------------
6. NOTES TO EQUITY
Share capital Number of Share Share Reserve for Treasury Total
and share outstanding capital premium invested
premium shares reserve unrestricted
reserve equity
---------------------------------------------------------------------------
1.1.2012 54 972 788 66,8 72,9 143,5 0,0 283,1
---------------------------------------------------------------------------
31.12.2012 53 972 788 66,8 72,9 143,5 0,0 283,1
---------------------------------------------------------------------------
DERIVATIVE INSTRUMENT LIABILITIES
(EUR million) 31.12.2012 31.12.2011
---------------------------------------------------------------------
---------------------------------------------------------------------
Nominal values of derivative instruments
---------------------------------------------------------------------
Foreign exchange derivatives 67.3 63.2
---------------------------------------------------------------------
Interest rate derivatives 275.3 283.8
---------------------------------------------------------------------
Electricity derivatives 10.7 11.1
---------------------------------------------------------------------
---------------------------------------------------------------------
Fair value of derivative instruments
---------------------------------------------------------------------
Foreign exchange derivatives -1.1 -0.5
---------------------------------------------------------------------
Interest rate derivatives -24.9 -23.0
---------------------------------------------------------------------
Electricity derivatives -1.3 -1.1
---------------------------------------------------------------------
CONSOLIDATED OTHER CONTINGENT LIABILITIES
(EUR million) 31.12.2012 31.12.2011
---------------------------------------------------------------------
---------------------------------------------------------------------
Debts, secured by pledges or mortgages
---------------------------------------------------------------------
- loans from financial institutions 370.3 34.1
---------------------------------------------------------------------
---------------------------------------------------------------------
Given as security
---------------------------------------------------------------------
- real estate mortgages 74.6 63.0
---------------------------------------------------------------------
- pledges 5.2 5.1
---------------------------------------------------------------------
- floating charges 16.7 22.8
---------------------------------------------------------------------
---------------------------------------------------------------------
Security for debts of participating interests
---------------------------------------------------------------------
- guarantees 7.5 5.2
---------------------------------------------------------------------
---------------------------------------------------------------------
For others
---------------------------------------------------------------------
- guarantees and pledges 12.9 14.0
---------------------------------------------------------------------
---------------------------------------------------------------------
Other contingencies
---------------------------------------------------------------------
Leasing commitments 21.8 26.2
---------------------------------------------------------------------
Other rental commitments 58.0 61.0
---------------------------------------------------------------------
Other commitments 7.8 7.8
---------------------------------------------------------------------
BUSINESS TRANSACTIONS WITH RELATED PARTIES
-------------------------------------------
(EUR million) 2012 2011
------------------------------------------------
Sales to associates 99.9 73.0
------------------------------------------------
Purchases from associates 54.9 47.3
------------------------------------------------
Trade and other receivables 3.2 2.8
------------------------------------------------
Trade and other payables 3.5 9.1
------------------------------------------------
NEXT FINANCIAL REPORT
The HKScan Group's interim report for January−March 2013 will be published on 7
May 2013.
Vantaa, 15 February 2013
HKScan Corporation
Board of Directors
Further information is available from HKScan Corporation's CEO, Hannu Kottonen
and CFO, Tuomo Valkonen. Please leave any messages for them with Marja Siltala,
tel. +358 10 570 2290 or with Marjukka Hujanen, tel. +358 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 strong brand names. Its customers are the
retail, food service, industrial and export sectors. In 2012, it had net sales
of EUR 2.5 billion and some 11 100 employees.
DISTRIBUTION:
NASDAQ OMX Helsinki,
Main media,
www.hkscan.com
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