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2007-04-27 10:00:00 CEST 2007-04-27 10:00:00 CEST REGULATED INFORMATION HK Ruokatalo Group Oyj - Quarterly reportHK RUOKATALO GROUP'S INTERIM REPORT FOR 1 JANUARY TO 31 MARCH 2007HK Ruokatalo Group Oyj STOCK EXCHANGE RELEASE 27 Apr.2007, at 11am HK RUOKATALO GROUP'S INTERIM REPORT FOR 1 JANUARY TO 31 MARCH 2007 * FINANCIAL PERFORMANCE DEVELOPS AS ANTICIPATED IN Q1 * MUCH EFFORT AHEAD IN SWEDEN TO IMPROVE PROFITABILITY The group's net sales for the first three months of the year came to EUR 498.6 million (EUR 455.8m, Q1 pro forma in 2006). Net sales increased in all market areas. Operating profit came to EUR 9.2 million compared to a pro forma figure of EUR 4.7 million a year earlier. An operating loss of EUR 1.9 million in Sweden is included in the comparison figure for 2006. In the Baltics, operating profit came to 7.9 percent of net sales while the figure in Finland was 3.8 percent and in Poland 2.2 percent. The result for the period includes non-recurring charges of EUR 0.9 million relating to restructuring in Finland. Comparable operating profit thus came to roughly EUR 10.1 million. Operations in Sweden were just barely in the red. The modest profitability of Swedish operations was anticipated and is emblematic of the need for substantial performance improvement measures in Sweden in the coming years. The Pozmeat operations launched in Poland showed a loss as expected. Business was once again most profitable in the Baltics. Inventories held by group companies have increased in most markets in the first quarter of 2007. Besides seasonal preparation, another reason underlying the rise in inventory levels is marketdeterioration, especially in the export sales of pork. However, inventories at the end of the current year will not reach the levels seen at the end of 2006. During the period under review, three-year collective agreements for the sector were signed in both Sweden and Finland. MARKET AREA: FINLAND Net sales in Q1 in Finland came to EUR 155.5 million, an increase of EUR 17.8 million or 12.9% on the comparable period in 2006. Operating profit came to EUR 5.9 million, an increase of EUR 2.6 million or 80.1% from a year earlier. Operating profit amounted to 3.8% of net sales (2.4% for Q1 of 2006). On the whole, business was on target in Finland in the first months of the year, especially with regard to the poultry and processed meat and convenience food businesses. Much remains to be done in the meat business, where profitability remains inadequate. The trend in business development in Finland is nonetheless correct. Customer deliveries were backed up at times in February and March due to occasional problems with the logistics systems deployed in the early part of the year. Addressing these problems is an issue of considerable urgency, as delivery reliability is a critical competitive factor for a seller of fresh produce. The new products launched on the market in early 2007 exceeded commercial targets and represent an important first step in the long- term development of our product range. Exports from Finland remained brisk throughout the first quarter but failed to reach the level of profitability enjoyed in autumn 2006 due to lower export prices. Increased foreign supply has pushed down prices in Russia as well. The industrial restructuring programme launched in Finland in January 2006 has reached midpoint. When implemented, it signals the closure of production in Turku and Tampere and the relocation of operations mainly to Vantaa and Forssa. The programme is progressing as planned. Statutory employer-employee negotiations under the Act on Cooperation within Undertakings were completed in Turku in April, after the end of the period under review. MARKET AREA: SWEDEN In Sweden, net sales in Q1 were EUR 264.5 million, up by EUR 22.2 million (+9.2%) on the corresponding figure in Q1/2006. Operating profit came to EUR -0.3 million (EUR -1.9m for Q1 of 2006). EBIT in Q1 thus came to -0.1% of net sales. The rise in net sales is mainly explained by Scan AB acquisition SLP Pärsons AB being consolidated into Scan's figures in June 2006 and thus not yet being included in the comparison figures from Q1 of 2006. The changeover from cooperative Swedish Meats to Scan AB put into progress in January 2007 also marked a revision of the company's brand strategy, where greater emphasis in the form of increased visibility in marketing and business in general will be given to the Scan brand. Margins remain slim in processed foods and there has been no change in sales volumes from a year earlier. However, Scan has also launched new premium products with higher margins, and demand for premium products is rising in Sweden. In March 2007, Scan joined Ugglarp Slakteri AB in a Skåne-based joint venture seeking to capitalise on Ugglarp's local slaughterhouse in the slaughtering of beef cattle and sheep. When implemented, the cooperation will improve Scan's cost-effectiveness in southern Sweden while also allowing the company to avoid increasing its excess industrial capacity. Improving profitability is the key concern and also the most challenging task in Sweden for the near future. The efficiency measures already decided at Scan and the restructuring currently in progress will result in cuts in the number of locations. A cutting plant in Visby and the Malmö unit specialising in consumer-packed meats were closed down during Q1. The decisions are essential to the achievement of financial and business objectives. MARKET AREA: THE BALTICS First-quarter net sales in the Baltics improved from the EUR 28.6 million in 2006 to EUR 31.8 million (+11.2%). Operating profit came to EUR 2.5 million, an increase of EUR 1.0 million or 63.6% from the comparable period a year earlier. EBIT thus came to 7.9% of net sales (5.4% in Q1 of 2006). Q1 in the Baltics was a continuation of the previous quarters' consistently sound group performance. Three main factors accounted for the good early part of the year: (1) increased sales by Rakvere and Tallegg and especially Rigas Miesnieks in Latvia, (2) retained margins thanks to price increases corresponding to the rise in costs, and (3) the success of the winter season's product range. Costs have risen in the Baltics at a considerable rate. For example fixed wages are up by 15 percent and transportation costs by 28 percent from early 2006. There have been some indicators of the rate of increase normalising; yet rigorous cost discipline remains a key success factor. The summer season is important also in the Baltics, and customer response to summer products will provide indications as to full-year performance in 2007. MARKET AREA: POLAND Half of Sokolów's Q1 revenue, i.e. EUR 51.9 million, was consolidated into HK Ruokatalo Group, an increase of EUR 2.9 million or 5.8% from Q1 in 2006. Operating profit came to EUR 1.1 million (EUR 1.8m for Q1 of 2006) and equalled 2.2% of net sales (3.7% in Q1 of 2006). Price competition in Poland came to a head in autumn 2006, pushing the industry to adopt unhealthy pricing practices in places. Despite Sokolów's decision to refrain from the extremes of the predatory competition, the market situation along with the embezzlement discovered in August 2006 brought a temporary halt to the company's long-running earnings development. The rapidly changing market situation in Poland notwithstanding, Sokolów successfully increased both sales volume and sales value in the first quarter of the year. The company also returned to the growth track in “modern retail”, which presented challenges in the last quarter of 2006. The operations of Pozmeat S.A. acquired in autumn 2006 in the vicinity of the city of Poznan were launched in early 2007. Q1 performance in Poland was eroded by the losses of roughly EUR 0.9 million incurred in starting up the Pozmeat production facilities. Were it not for this negative impact, Sokolów's operating profit would have come to ca. EUR 2.0 million. CAPITAL EXPENDITURE AND FINANCE The acquisition of Swedish Meats was completed on 29 January 2007. The purchase price of Scan AB shares inclusive of transaction costs, i.e. EUR 163.3 million, is included in the figures for Q1. Goodwill in the amount of EUR 52 million was recognised on the acquisition. Allocation of the purchase price is underway. The current view is that purchase price will be allocated to intangible assets under brands. The group's ordinary gross investments totalled EUR 22.2 million (EUR 14.6m during Q1 of 2006). The sum breaks down as follows in production- related investments: market area Finland EUR 13.4 million, market area Sweden EUR 4.5 million and market area the Baltics EUR 2.4 million. In Poland, Sokolów's investments were EUR 3.6 million, of which HK Ruokatalo Group's contribution was EUR 1.8 million. The Group's interest-bearing debt stood at EUR 477.2 million at 31 March 2007, compared to EUR 196.7 million a year earlier. As part of the Swedish business acquisition, the group assumed liability for interest-bearing debts in the amount of EUR 188 million which switched over from Swedish Meats to Scan AB. The cash consideration of EUR 76 million for the deal was financed through a loan of corresponding value. The group's equity ratio only came to 30.6 percent at 31 March 2007 (44.8%) owing to the lower equity ratio of the acquired company and the additional indebtedness arising from the transaction. The equity ratio in the pro forma calculations at 31 December 2006 stood at 31 percent. In the period under review, the company's commercial paper programme was converted into a principal lenders' joint programme valued at EUR 100 million. INCREASE IN SHARE CAPITAL The Board of HK Ruokatalo Group decided on 29 January 2007 to exercise the authorisation granted to it by the Extraordinary Meeting of Shareholders on 22 December 2006 and effected the directed issue of 4 843 000 Series A Shares to Swedish Meats as part of the Swedish Meats business acquisition. The subscription period was 29 January 2007 and the issue price was EUR 15.55 per share. The company's share capital was increased by EUR 8 233 100.00 to the current EUR 66 820 528.10. The increase was entered in the Trade Register on 5 February 2007. The new shares are first entitled to full dividend for the 2007 financial year. NOTICES REGARDING CHANGE OF OWNERSHIP PURSUANT TO THE SECURITIES MARKETS ACT On 8 February 2007 Danish Crown announced that its holding in HK Ruokatalo Group was diluted to 8.89 percent of the shares and 2.46 percent of the votes as a consequence of the increase of HK Ruokatalo Group's share capital. Swedish Meats announced on 15 February 2007 that the conditional agreement notified by it on 13 November 2006 had been executed. Swedish Meats' holding in HK Ruokatalo Group was thus confirmed at 12.32 percent of the shares and 3.41 percent of the votes. The holding of Danish Crown in HK Ruokatalo Group was reduced to 1.00 percent of the share capital and 0.28 percent of the votes as a result of the sale of shares to institutional investors on 7 March 2007. EMPLOYEES The group employed an average of 7 680 persons during the first quarter of 2007 (4 301 in Q1 of 2006). The increase is attributable to the inclusion of Scan AB and its subsidiaries. The average number of employees in each market area was as follows: Finland 2 373, Sweden 3 462 and the Baltics 1 845. In addition, Sokolów had an average of 4 908 employees. EVENTS TAKING PLACE SINCE 31 MARCH 2007 The Annual General Meeting held on 20 April 2007 resolved to change the company's business name to HKScan Oyj. Marcus H. Borgström, Markku Aalto, Tiina Varho-Lankinen and Heikki Kauppinen were reappointed to the Board of Directors along with new Board members Johan Mattsson and Karsten Slotte. Mr Borgström and Mr Aalto were reappointed as chairman and deputy chairman respectively. The AGM authorised the Board to decide on acquiring a maximum of 3 500 000 Series A shares as treasury shares, equal to ca. 8.9% of total registered shares and ca. 10.3% of total A Shares. Treasury shares may only be acquired using unrestricted shareholders' equity. 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 Board of Directors shall resolve upon the method of purchase. Among other means, derivatives may be utilised in purchasing the shares. The shares may be purchased in a proportion other than that of the shares held by the shareholders (directed purchase). The authorisation is valid until 30 June 2008. In addition, the AGM 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 Companies Act. The Board was authorised to resolve on the issue of a maximum of 5 500 000 A Shares, corresponding to ca. 14.0% of all registered shares in the company. The Board may 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 is valid until 30 June 2008. The Board of Directors has decided on the share incentive scheme's criteria for performance in the 2007 earning period. The number of shares under the scheme, which concerns some 20 key employees, shall not exceed 180 000 A Shares in HK Ruokatalo Group. THE FUTURE The company retains its estimate presented in the financial statement bulletin of expecting the group's operating profit to improve in Finland, Sweden and Poland. Operating profit enhancement in Poland is hampered by costs relating to the start-up of Pozmeat. In the Baltics, the company seeks to retain profits at the good level enjoyed in 2006. The following figures are derived from group accounting and do not include pro forma information. The accounts of Scan AB and its subsidiaries have been consolidated into the financial statements as of 1 January 2007. CONSOLIDATED INCOME STATEMENT (EUR mill.) 1-3/2007 1-3/2006 1-12/2006 --------------------------------------------------------------------- Net sales 498.6 213.5 934.3 Operating profit 9.2 6.6 40.4 - % of net sales 1.8 3.1 4.3 Share of associates' results 0.5 0.3 0.0 Financial income and expenses -4.2 -1.7 -6.8 Profit before taxes 5.5 5.2 33.6 Taxes -1.5 -1.0 -5.8 Profit for the period 4.0 4.2 27.8 --------------------------------------------------------------------- Attributable to Shareholders of parent company 3.5 3.9 27.2 Minority interests 0.5 0.3 0.6 Total 4.0 4.2 27.8 Earnings per share (EPS), undiluted, EUR 0.09 0.11 0.79 EPS, diluted, EUR 0.09 0.11 0.79 CONSOLIDATED BALANCE SHEET (EUR mill.) 31.3.2007 31.3.2006 31.12.2006 ---------------------------------------------------------------------- ASSETS Non-current assets Intangible assets 18.4 4.0 4.0 Goodwill 105.3 46.7 53.9 Property, plant and equipment 444.3 272.4 294.5 Financial assets 28.2 5.7 5.8 Deferred tax assets 2.6 1.9 2.2 Other long-term receivables 10.1 4.3 4.0 Total non-current assets 609.0 335.0 364.4 Current assets Inventories 139.4 70.3 58.4 Trade and other receivables 256.8 104.4 114.7 Cash and bank 23.0 11.0 12.1 Total current assets 419.2 185.8 185.1 ---------------------------------------------------------------------- TOTAL ASSETS 1 028.1 520.8 549.5 EQUITY AND LIABILITIES Equity attributable to holders of the parent 311.6 222.7 236.4 Minority interests 3.0 10.8 0.6 Total shareholders' equity 314.6 233.6 237.1 Non-current liabilities Deferred tax liability 16.5 12.7 12.2 Long-term liabilities, interest-bearing 194.6 83.6 87.1 Long-term zero-interest liabilities 8.0 - - Pension obligations 5.2 4.2 5.2 Non-current provisions 9.2 0.0 0.0 Total non-current liabilities 233.5 100.4 104.4 Current liabilities Current liabilities, interest-bearing 282.6 114.2 109.6 Trade payables and other current liabilities 196.7 71.9 97.7 Current provisions 0.7 0.7 0.6 Total current liabilities 480.0 186.8 208.0 ---------------------------------------------------------------------- TOTAL EQUITY AND LIABILITIES 1 028.1 520.8 549.5 CASH FLOW STATEMENT (EUR mill.) 1-3/2007 1-3/2006 1-12/2006 --------------------------------------------------------------------- OPERATING ACTIVITIES Cash flow from operating activities 22.4 13.6 70.4 Change in net working capital -14.5 -21.1 6.3 Financing items and taxes -5.8 -2.7 -12.3 Net cash flow from operating activities 2.1 -10.2 64.4 Investing activities Net cash flow from investing activities -86.3 -12.8 -76.2 Financing activities Change in loans 95.1 21.2 20.4 Dividends paid - - -9.3 Share issue - - - Net cash flow from financing activities 95.1 21.2 11.1 Change in liquid assets 10.9 -1.8 -0.7 --------------------------------------------------------------------- ANALYSIS BY SEGMENT(EUR million) Net sales and operating profit by main market area 1-3/2007 1-3/2006 1-12/2006 ------------------------------------------------------------ Net sales -Finland 155.5 137.7 608.0 -Sweden 264.5 - - -The Baltics 31.8 28.6 130.8 -Poland 51.9 49.0 203.6 -Between segments -5.1 -1.8 -8.2 Total 498.6 213.5 934.3 Operating profit -Finland 5.9 3.3 21.8 -Sweden -0.3 - - -The Baltics 2.5 1.5 12.6 -Poland 1.1 1.8 6.0 -Between segments 0.0 0.0 0.0 Total 9.2 6.6 40.4 ------------------------------------------------------------ STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY (EUR million) Share Share Hedg- I Other Transl. Re- Tot. capital premium ing U res. diff. tained reserve re- E earnings serve F*) ---------------------------------------------------------------------- SHAREHOLDERS' EQUITY 1.1.2007 58.6 72.9 0.1 0.0 8.9 5.4 90.5 236.4 Cash flow hedging Amount transferred to shareholders' equity during the period 2.0 2.0 Change in translation difference -5.2 -5.2 Other change 0.0 Transfers between items1.1 -1.1 0.0 ---------------------------------------------------------------------- Net profit/loss recognised directly in shareholders' equity 1.1 2.0 -5.2 -1.1 -3.2 Profit for the period 3.5 3.5 ---------------------------------------------------------------------- Total profits and losses 1.1 2.0 -5.2 2.4 0.3 Dividend distribution 0.0 Share issue 8.2 67.1 75.3 Share-based Transactions payable in equity -0.4 -0.4 ---------------------------------------------------------------------- SHAREHOLDERS' EQUITY TOT. 31.3.2007 66.8 74.1 2.1 67.1 8.9 0.2 92.5 311.6 ---------------------------------------------------------------------- *) IUEF= Invested unrestricted equity fund Share Share Hedging Other Transl. Retained Tot. capital premium reserve reserv. diff. earnings reserve ---------------------------------------------------------------------- SHAREHOLDERS' EQUITY 1.1.2006 58.6 72.9 1.0 8.6 4.8 73.2 219.1 Cash flow hedging Amount transferred to shareholders' equity during the period 0.5 0.6 Change in translation difference -0.7 -0.7 Other change -0.1 -0.1 ---------------------------------------------------------------------- Net profit/loss recognised directly in shareholders' equity 0.5 -0.8 -0.3 Profit for the period 3.9 3.9 ---------------------------------------------------------------------- Total profits and losses 0.5 -0.8 3.9 3.6 Dividend distribution 0.0 ---------------------------------------------------------------------- SHAREHOLDERS' EQUITY TOT. 31.3.2006 58.6 72.9 1.5 8.6 4.0 77.1 222.7 ---------------------------------------------------------------------- KEY INDICATORS 31.3.2007 31.3.2006 31.12.2006 EPS, diluted 0.09 0.11 0.79 Equity per share at 31 March, EUR 1) 7.93 6.46 6.86 Equity ratio, % 30.6 44.8 43.7 Adjusted average number of shares 37 422 786 34 463 193 34 463 193 Gross capital expenditure, EUR million 22.2 14.6 82.6 Employees, end of month average 7 680 4 301 4 418 1) Excluding minority's share of equity. CONSOLIDATED CONTINGENT LIABILITIES (EUR mill.) 31.3.2007 31.3.2006 31.12.2006 Debts secured by pledges or mortgages - pension plan loans 0.0 0.0 0.0 - loans from financial institutions 51.9 65.9 50.4 Given as security - real estate mortgages 53.6 33.8 47.9 - pledges 13.5 12.0 13.5 - floating charges 13.8 4.7 10.6 For associates - guarantees 3.6 4.0 3.6 Security for debts - guarantees and pledges 12.7 19.9* 8.3 Other contingencies Leasing commitments 6.1 4.1 1.1 Other liabilities 0.0 0.0 0.0 Derivative instrument liabilities Nominal values of derivatives Foreign exchange derivatives - forward exchange contracts 8.9 1.6 4.2 Commodity derivatives - electricity derivatives 6.2 4.3 6.5 Interest-rate derivatives 107.0 0.0 0.0 Fair values of derivative instruments Foreign exchange derivatives - forward exchange contracts -0.1 0.0 0.0 Commodity derivatives - forward electricity contracts -0.1 2.2 0.2 Interest-rate derivatives 0.0 0.0 0.0 *) Includes guarantee for debts of participating interests The figures in this report are unaudited The group's financial reporting has been IFRS-compliant since the start of 2005. This interim report and comparison information has been prepared in compliance with IFRS recognition and measurement principles except for IAS 34, which has not been observed in full. Vantaa, 27 April 2007 HK Ruokatalo Group Oyj Board of Directors Kai Seikku CEO Further information is available from CEO Kai Seikku. Please leave any message for him to call with Marjukka Hujanen, tel. +358 (0)10 570 6218 or Katja Backman, tel. +358 (0)10 570 2428. DISTRIBUTION: Helsinki Exchanges Main media www.hkruokatalo.fi |
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