2015-02-11 07:00:00 CET
2015-02-11 07:00:05 CET
REGULATED INFORMATION
HKScan Oyj - Financial Statement Release
HKScan Group’s financial statements release 1 January—31 December 2014: Fourth-quarter EBIT stronger than the previous year – restructuring completed
HKScan Corporation Financial Statements Release, 11 February 2015 at 8:00
am
HKScan Group's financial statements release 1 January—31 December 2014:
Fourth-quarter EBIT stronger than the previous year - restructuring completed
* Net sales were EUR 1 988.7 (2 113.2) million for January-December, and EUR
523.2 (547.9) million in the fourth quarter.
* Reported EBIT for January-December was EUR 55.5 (11.7) million, and the EBIT
margin was 2.8 (0.6) per cent. Comparable EBIT excluding non-recurring items
for the year was EUR 12.4 (11.2) million, and the corresponding EBIT margin was
0.6 (0.5) per cent.
For the fourth quarter, reported EBIT was EUR 7.1 (10.9) million, and the EBIT
margin was 1.4 (2.0) per cent. Comparable EBIT excluding non-recurring items
for the quarter was EUR 13.4 (6.7) million, and the corresponding EBIT margin
was 2.6 (1.2) per cent.
* Cash flow before debt service was EUR 201.7 (86.8) million in 2014 and EUR
28.2 (86.2) million in the fourth quarter.
* Profit before taxes was EUR 51.2 (6.7) million in 2014 and EUR 4.3 (7.7)
million in the fourth quarter.
* EPS was EUR 1.05 (0.16) in 2014 and EUR 0.09 (0.10) in the fourth quarter.
* Net financial expenses were EUR 15.5 (23.6) million in 2014.
* Net debt was EUR 141.5 (335.3) million, and net gearing was 31.8 (82.0) per
cent in 2014.
* Outlook for 2015: HKScan expects the operating profit (EBIT) excluding
non-recurring items to improve from 2014, and anticipates the last quarter to
be the strongest.
* The Board's proposal for dividend is EUR 0.10 (0.10) per share. The Board
proposes also an additional dividend of EUR 0.39 per share.
Hannu Kottonen, HKScan's President and CEO, comments on the fourth quarter and
2014:
“Last year saw excellent progress of HKScan's strategic transformation process,
which started at the end of 2012. We have streamlined our production set-up and
simplified the Group structure to a great extent. The major strategic reviews
and restructuring of our operational footprint have now been completed.
Divestments and working capital improvement actions have strengthened the
balance sheet substantially. As a result, HKScan's financial position is now
strong and financial expenses have decreased significantly. In addition,
refinancing was supported by a bond issuance balancing the debt portfolio.
The process of building One HKScan continued and was supported by the HKScan
brand identity renewal. Company names were harmonized across all home markets.
HKScan's first Group brand, Flodins®, was launched as an outcome of the brand
strategy implementation. The Flodins brand complements the existing strong
local brands.
In general, the business environment in 2014 was turbulent. Markets and demand
were weak throughout the whole year and led to tough sales price competition in
all market areas. Sales volumes declined and the product mix followed consumer
behaviour favouring lower price products. Russia's embargo on EU pork imports
was followed by a further ban on the agricultural goods from the west. The
export bans resulted in global pork oversupply, which negatively impacted
directly and especially our sales, profits and volumes, both on our home
markets and in exports.
Despite the challenging circumstances, the Group strategy implementation
advanced well and I am pleased to recognize that our restructuring efforts and
Group-wide operational work improved our financial results in our biggest
market areas, Sweden and Finland. This played a key role in doubling
year-on-year Group EBIT in the fourth quarter.
The Baltics and Denmark in particular posted a disappointing result, with EBIT
declining on the previous year. The Baltics suffered most from Russia's
embargo. Denmark continued to suffer from a structural imbalance, and the
situation will remain challenging into 2015. In January 2015, we initiated
statutory negotiations at the Skovsgaard plant regarding plans to centralize
poultry slaughtering and cutting at the Vinderup facility in Denmark. The
negotiations were concluded at the end of January. This is an important move
toward building a profitable business structure in the future.
The profit development programme for 2014 proceeded as planned, and we met our
target of achieving an annual cost reduction exceeding EUR 20 million and a
reduction of over EUR 50 million in net debt. The development programme was
essential in mitigating sales and margin shortfalls. Work to improve our
operational profit will continue as part of our continuous improvement efforts.
We will continue building synergies between our home markets, focusing on
improving productivity and investing in our top brands. Last autumn we
initiated feasibility studies in preparation for major investment programmes in
Finland and Estonia. The investments are targeted at consolidating the Group's
foothold in value-added product categories and growing segments. Our strategic
target is profitable growth.”
KEY FIGURES, Q4 AND THE WHOLE YEAR 2014
(EUR million) Q4/2014 Q4/2013 2014 2013
--------------------------------------------------------------------------------
Net sales 523.2 547.9 1 988.7 2 113.2
--------------------------------------------------------------------------------
EBIT 7.1 10.9 55.5 11.7
--------------------------------------------------------------------------------
- % of net sales 1.4 2.0 2.8 0.6
--------------------------------------------------------------------------------
Profit/loss before taxes 4.3 7.7 51.2 6.7
--------------------------------------------------------------------------------
- % of net sales 0.8 1.4 2.6 0.3
--------------------------------------------------------------------------------
Profit/loss for the period 5.2 6.6 57.1 9.8
--------------------------------------------------------------------------------
- % of net sales 1.0 1.2 2.9 0.5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EBIT, excluding non-recurring income and 13.4 6.7 12.4 11.2
expenses
--------------------------------------------------------------------------------
- % of net sales 2.6 1.2 0.6 0.5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EPS, EUR 0.09 0.10 1.05 0.16
--------------------------------------------------------------------------------
Cash flow before debt service (mEUR) 28.2 86.2 201.7 86.8
--------------------------------------------------------------------------------
Cash Flow Before Financing Activities (mEUR) 32.1 81.4 198.9 75.3
--------------------------------------------------------------------------------
Return on capital employed (ROCE) before 9.7 4.0
taxes, %
--------------------------------------------------------------------------------
Net debt (mEUR) 141.5 335.3
--------------------------------------------------------------------------------
Gearing % 35.5 98.9
--------------------------------------------------------------------------------
Net Gearing % 31.8 82.0
--------------------------------------------------------------------------------
OCTOBER - DECEMBER 2014
Net sales for the fourth quarter declined from the same period the previous
year. EBIT meanwhile improved thanks to Sweden's and Finland's improved
performance. Denmark and the Baltics fell behind due to the tough business
environment. The Russian ban on EU pork imports was a major factor accounting
for oversupply and low market prices. Sales prices and volumes were
dissatisfactory in Denmark due to extremely tough competition.
Christmas sales in both Sweden and Finland were good. However, overall demand
in the fourth quarter still favoured lower priced products, with private label
products continuing to gain market share. Other than for beef, animal purchase
prices kept decreasing in all market areas, reflecting market price trends in
Europe. Lower animal raw material costs failed to offset the decline in sales
prices, however.
The fourth quarter being the strongest of the year further strengthened the
balance sheet. A successful bond issuance of EUR 100 million was completed in
November. The funding arrangement balanced the maturity structure of HKScan's
interest-bearing debt portfolio. Financial expenses were clearly lower than
they were the previous year.
The profit development programme for 2014 proceeded as planned and all targets
were met. As part of the Group's development programme and strategy review,
minor divestments were finalized in Sweden. With production restructuring also
completed, the structure in Sweden is now in place. In addition, HKScan
announced plans to divest its Estonian egg business and become a minor
shareholder in hatcheries in Finland. Once all these rearrangements and
production restructuring is completed in Denmark, the structure is in place to
contribute to the Group's profitable growth. Planned investments in new
production facilities in Estonia and Finland at an investment expense range of
EUR 55-85 million in total would further strengthen the production set-up.
The marketing, sale and business development of non-food bio-products were
centralized under the umbrella of a new business line: Biotech. Technology
development and the systematic improvement of resource efficiency have opened
up new, higher-value applications for many meat industry by-products, which
also improves material efficiency and reduces waste.
JANUARY- DECEMBER 2014
Net sales for the reported period were down six per cent on the corresponding
period the previous year. Improved profitability in the fourth quarter lifted
the full-year EBIT slightly over the previous year. Due to the good fourth
quarter, Sweden and Finland improved on last year, but the converse applied to
Denmark and the Baltics. Considering the circumstances, pleasing progress was
made in inventory management throughout the whole year, with stocks clearly
lower than the previous year.
Retail market demand showed negative growth whereas demand was more stable in
away from home markets. HKScan won some market share with its branded products,
but in general, private label products increased their market share. Both value
but especially volume decreased, with both domestic and export markets being
affected by pork oversupply. The continuing Russian ban on pork imports from
the EU countries increased the surplus in the pork meat balance globally. Pork
meat inventories remained high throughout Europe, and global market prices
remained dissatisfactory.
Animal purchasing prices continued to decrease, but this failed to offset the
deficit in sales prices. The rebalancing of volume to meet a more profitable
volume level continued in all market areas except the Baltics, where there was
some growth in volume. The lowered volume supported decrease of unprofitable
export sales.
The revised strategy for profitable growth advanced to the implementation
stage. The Group's strategic must-win-battles are to be modified to place a
sharper focus on profitable growth in the coming years. The execution of the
strategy calls for a greater emphasis on value-added products, continuous
improvement and new, innovative ways to meet customer and consumer
expectations.
Feasibility studies announced in October concerning new production facilities
in Finland and in Estonia are to be carried out during next summer. The
prospective investments are estimated to total EUR 55-85 million depending on
the scale of the chosen options.
The development programme for 2014 was completed as planned and the annual
profit improvement target of over EUR 20 million and reduction target of over
EUR 50 million in net debt by 2015 were achieved. This includes production
restructuring programmes in Sweden and Finland, where cost savings will exceed
EUR 11 million from 2015 onwards. These measures and programmes were necessary
to mitigate the negative impact of challenging business environment.
The Group's financial position grew significantly stronger in 2014. The Group
sold its 50% stake in Saturn Nordic Holding AB, owner of Sokołów S.A., to
Danish Crown A/S in June. Net financial expenses decreased following the
repayment of syndicated term loans in the second quarter. The maturity
structure of the interest-bearing debt was also rebalanced by a successful bond
issuance of EUR 100 million in November.
Group marketing was strengthened with the merging of Group Marketing and Group
New Product Development. The new function was renamed Group Strategic Marketing
and Innovation. One of its top priorities is to build the common Group-level
product brand Flodins®, which was launched in three product categories.
Flodins® is a significant step in the Group's brand strategy to clarify and
strengthen the HKScan Group brand and to update its product and concept brand
portfolio for wider markets.
The Corporate Responsibility programme launched in 2013 was integrated with
HKScan's strategy and operations in 2014. In the second quarter, the Group
deepened its understanding of stakeholder expectations through a comprehensive
stakeholder dialogue conducted in five countries. In the third quarter, the
Group conducted its first-ever Group-wide Employee Engagement Survey, providing
important information on organizational strengths and development areas.
HKScan further developed its sustainable meat value chain - a key focus area of
the Corporate Responsibility programme - by becoming a member of the Round
Table on Responsible Soy Association (RTRS). The Group is now committed to an
ethically responsible soy supply chain.
The ‘One HKScan' initiative gained visibility with the renewal of the Group
identity and revision of the Group mission, vision, values and visual identity.
Also, the legal entity naming structure was harmonized.
MARKET AREA: FINLAND
(EUR million) Q4/2014 Q4/2013 2014 2013
------------------------------------------------------------------
------------------------------------------------------------------
Net sales 213.8 210.1 787.2 804.1
------------------------------------------------------------------
EBIT 6.6 1.7 -4.5 3.2
------------------------------------------------------------------
- EBIT margin, % 3.1 0.8 -0.6 0.4
------------------------------------------------------------------
------------------------------------------------------------------
EBIT excluding non-recurring items 8.0 1.7 8.9 6.9
------------------------------------------------------------------
- EBIT margin, % 3.8 0.8 1.1 0.9
------------------------------------------------------------------
In Finland, net sales were EUR 787.2 (804.1) million and EBIT excluding
non-recurring items was EUR 8.9 (6.9) million in 2014.
As for the fourth quarter, net sales amounted to EUR 213.8 (210.1) million.
EBIT excluding non-recurring items for the period was EUR 8.0 (1.7) million.
The total market volume for Finland decreased in 2014. The retail business
sector suffered most. Russia's ban on EU pork imports further weakened the
overall demand. Oversupply led to the tough sales price competition in both the
domestic and export market.
Despite the low level of demand, some market share was gained in branded
products and in total. Christmas sales were good, to which Kivikylän products
contributed pleasingly. Volumes and the product mix were adapted to match
decreased demand and altered consumer behaviour, which showed a preference for
lower value products. Demand and supply, customer delivery and inventory
management improved. As a result, financial performance improved towards the
end of the year, resulting in better year-on-year profit for the fourth quarter
and the full year.
Statutory negotiations concerning the white-collar organization were completed
at the end of September. As a result of that and statutory negotiations at the
Mellilä plant as well as other savings measures, a cost reduction of EUR 5
million is to be achieved in 2015.
Chinese authorities conducted audits at Finnish pig slaughterhouses including
HKScan's Forssa facility in the third quarter. The authorities have announced
that the Forssa facility is going to gain export certification from the Chinese
food authorities for direct pork exports from Finland to China.
In the second quarter HKScan decided to change and align its chicken breed in
Finland with other market areas and to tackle related quality and cost issues.
It was also announced that HK Rypsiporsas® rapeseed pork is completely GMO-free
as of September 2014.
On top of the re-launch of improved Rypsiporsas® rapeseed pork, several new
products were launched in 2014, such as a range of HK barbeque sausages and
Kariniemen “Poppis®” chicken nuggets. One highlight was ‘HK Meat School' (HK
Lihakoulu®), which was arranged in several cities to provide information on
meat handling, especially Rypsiporsas® rapeseed pork.
The common Group identity was adopted in Finland under a new legal name, HKScan
Finland Oy (formerly HK Ruokatalo Oy) in the first quarter.
MARKET AREA: BALTICS
(EUR million) Q4/2014 Q4/2013 2014 2013
---------------------------------------------------------------------
---------------------------------------------------------------------
Net sales 43.8 44.7 173.0 175.1
---------------------------------------------------------------------
EBIT -2.1 1.9 2.8 7.7
---------------------------------------------------------------------
- EBIT margin, % -4.7 4.2 1.6 4.4
---------------------------------------------------------------------
---------------------------------------------------------------------
EBIT excluding non-recurring expenses 0.0 1.9 4.8 7.7
---------------------------------------------------------------------
- EBIT margin, % 0.0 4.2 2.8 4.4
---------------------------------------------------------------------
In the Baltics, net sales were EUR 173.0 (175.1) million and EBIT excludingnon-recurring items was EUR 4.8 (7.7) million in 2014. In the fourth quarter,
net sales were EUR 43.8 (44.7) million. EBIT excluding non-recurring items for
the period was EUR 0.0 (1.9) million.
The Baltic market suffered the most acutely from Russia's ban on EU pork
imports. The market situation caused pork oversupply and a decline in sales
prices, which decreased profitability despite lower costs in primary
production. On a positive note, poultry and branded value added products showed
profit improvement. In accordance with IFRS, the revaluation of biological
assets in primary production had a negative profit impact of EUR 1.3 million on
the full-year profit compared to the previous year.
The market position was maintained and further strengthened on the part of
branded products, but continuing difficulties were encountered in exports.
Despite the difficult market situation, demand and supply were managed well and
frozen stock kept under control.
African Swine Fever was detected in Estonia in the third quarter, posing an
external business risk. The high-level mitigation actions implemented in all
pork primary production locations have been effective.
New product launches included premium poultry cutlets, such as Cheese pockets,
Kiev cutlets and Cordon Bleu, as well as the new Group brand Flodins® in three
product categories.
AS Rakvere Lihakombinaat and AS Tallegg were merged to form AS HKScan Estonia
in the second quarter as part of the legal entity renaming process. Company
names were also harmonized in Latvia and Lithuania.
MARKET AREA: SWEDEN
(EUR million) Q4/2014 Q4/2013 2014 2013
------------------------------------------------------------------
------------------------------------------------------------------
Net sales 240.5 256.2 911.0 966.5
------------------------------------------------------------------
EBIT 8.1 3.5 1.7 8.0
------------------------------------------------------------------
- EBIT margin, % 3.4 1.4 0.2 0.8
------------------------------------------------------------------
------------------------------------------------------------------
EBIT excluding non-recurring items 8.5 5.8 13.4 10.2
------------------------------------------------------------------
- EBIT margin, % 3.6 2.3 1.5 1.1
------------------------------------------------------------------
In Sweden, net sales were EUR 911.0 (966.5) million and EBIT excluding
non-recurring items was EUR 13.4 (10.2) million in 2014.
In the fourth quarter, net sales amounted to EUR 240.5 (256.2) million. EBIT
excluding non-recurring items for the period was EUR 8.5 (5.8) million.
Total market demand showed negative growth in the latter part of 2014. As a
whole, some market share was lost to private label products in Sweden. However,
Christmas sales were reasonable, and market share was gained with branded
products in certain processed meat and convenience food categories.
The declining market and oversupply drove down sales prices, a trend that was
especially marked in red meat and cold cuts. Sales of Svensk Rapsgris® (Swedish
rapeseed pork) and fresh chicken progressed well, but frozen chicken products
did not perform as well as expected.
Frozen stock levels were clearly below the prior year, which was supported by
lowered pork sourcing volumes in line with the rebalancing plan. Production
efficiency continued to improve.
Production restructuring designed to improve operational efficiency and
competitiveness was completed as planned. Production has now been centralized
and integrated at four key locations: in Kristianstad, Linköping, Halmstad and
Skara. The new production set-up targets an annualized profit improvement in
excess of EUR 7 million. Strategic reviews have now been finalized in Sweden.
In June, HKScan and Sweden's Lantmännen signed a letter of intent (LOI) for
initiating a strategic partnership offering innovative feed solutions and
advisory services to Swedish pig producers.
A five-year framework agreement for ongoing cooperation was signed with Coop
Sverige AB, which operates 700 retail stores, holding over 21 per cent of the
Swedish grocery retail sector. The deal brings stability both to HKScan and the
entire Swedish meat industry.
New products in Sweden included Scan's fresh sausages and premium beef burger.
As part of the new common Group identity, the Swedish business adopted a new
legal name, HKScan Sweden AB (former Scan AB).
MARKET AREA: DENMARK
(EUR million) Q4/2014 Q4/2013 2014 2013
------------------------------------------------------------------
------------------------------------------------------------------
Net sales 46.2 52.3 204.3 225.3
------------------------------------------------------------------
EBIT -3.6 6.4 -11.9 3.6
------------------------------------------------------------------
- EBIT margin, % -7.9 12.2 -5.8 1.6
------------------------------------------------------------------
------------------------------------------------------------------
EBIT excluding non-recurring items -1.3 0.0 -4.4 -2.8
------------------------------------------------------------------
- EBIT margin, % -2.8 -0.1 -2.1 -1.2
------------------------------------------------------------------
In Denmark, net sales were EUR 204.3 (225.3) million and EBIT excluding
non-recurring items was EUR -4.4 (-2.8) million in 2014.
Net sales in Denmark in the fourth quarter amounted to EUR 46.2 (52.3) million.
EBIT excluding non-recurring items for the period was EUR -1.3 (0.0) million.
The market and competition remained tough for the whole of 2014. Fresh chicken
products generated satisfactory margins, but lower volumes than expected for
2014 mainly due to sales price increases that did not go through as planned.
Frozen products continued to face sales price competition and some low margin
products were lost leading to a lower production volume. Challenges to adjust
the supply chain decreased the margin on these competitive products. These
imbalances have been addressed in the ongoing restructuring of the production
set-up, and HKScan Denmark has now reached a production level on which to build
the profitable growth strategy.
The renewed Rose® brand design and packages were launched in the first quarter
to strengthen brand recognition and sales of branded products. The target is to
update the product portfolio with innovative new concepts. New products
included Majs Kylling corn-fed chicken.
Short- and long-term turnaround efforts are in progress driven by the new
management team. The announced restructuring of the production set-up, which
involves the discontinuation of slaughtering and cutting in Skovsgaard, aims to
achieve cost savings and profit improvement of more than EUR 5 million
annually. The restructuring centralizes poultry slaughtering and cutting at the
modernized Vinderup facility.
The new legal name of the Danish business, HKScan Denmark A/S (former Rose
Poultry A/S), was adopted as part of new common Group identity.
INVESTMENTS
The Group's net investments in 2014 came to EUR 48.7 (42.2) million. Their
breakdown by market area was as follows:
(EUR million) Q4/2014 Q4/2013 2014 2013
-------------------------------------------
Finland 4.9 4.4 14.7 15.2
-------------------------------------------
Baltics 2.4 1.2 11.7 8.7
-------------------------------------------
Sweden 4.0 2.6 7.6 6.1
-------------------------------------------
Denmark 1) 6.2 6.8 14.7 12.1
-------------------------------------------
Total 17.5 15.0 48.7 42.2
-------------------------------------------
1) The 2013 investments include rebuilding of the Vinderup plant.
A substantial proportion of investment planned and executed in 2014 focused on
improving productivity and efficiency. In Sweden, the majority of investment
focused on the successful restructuring of operational footprint, resulting in
the centralization of operations at four focused production plants and
substantial efficiency improvements. In Denmark, good progress was made in
efficiency upgrades and automation in the latter part of the year. Operational
efficiency programmes were executed in Finland and the Baltics, with further
headway made in the upgrade of Rakvere Farmid. Additionally, a Group-wide
quality & food safety investment programme was initiated and the first
strategic investments were made in added value production.
FINANCING
The Group's interest-bearing debt at year-end stood at EUR 158.1 (404.4)
million. Net debt decreased to EUR 141.7 (335.7) million mostly due to the
closing of the Sokołów divestment in June, when HKScan repaid all syndicated
loans amounting to approximately EUR 190 million.
The Group's liquidity has been good throughout the financial year. Undrawn
committed credit facilities at 31 December 2014 stood at EUR 136.5 (161.5)
million. In addition, the Group had other uncommitted overdraft and other
facilities of EUR 22.3 (22.6) million. The EUR 200.0 million commercial paper
programme had been drawn to the amount of EUR 11.0 (129.0) million.
HKScan issued an unsecured five-year bond of EUR 100 million during the last
quarter.
Net financial expenses decreased significantly due to the lower loan sum and
were EUR -3.7 (-7.6) million in the last quarter and EUR -15.5 (-23.6) million
in 2014. Costs in the fourth quarter include a EUR 1.1 million loan receivable
write-down in a Swedish associated company. In addition, costs in the second
quarter include one-time financial restructuring expenses of EUR 1.1 million.
RESEARCH AND DEVELOPMENT
Research and development in 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 3.7 (3.2) million was spent on R&D, equal to 0.2
(0.2) per cent of net sales.
Delivering on the Group innovation strategy, work to streamline Group processes
and develop common platforms continued in 2014. The Group Marketing and Group
New Product Development functions were merged and the new function was renamed
Group Strategic Marketing and Innovation. A significant outcome of the enhanced
internal cooperation, and of executing the Group's brand strategy, was the
launch of HKScan's first Group brand, Flodins® in three convenience food
product categories for both home markets and exports. Target is to
substantially intensify innovation and marketing efforts along the new strategy
implementation.
HKScan R&D is based on sharing information in a collaborative and networking
model, and the Group's cooperation with research institutes will continue in
order to expand expertise in developing new meat-based concepts.
Research and development of the rapeseed pork (HK Rypsiporsas® in Finland and
Svensk Rapsgris® in Sweden) concept continued in 2014, and as of September
2014, Rypsiporsas® rapeseed pork has been completely GMO-free. On top of the
re-launch of improved Rypsiporsas® rapeseed pork and Flodins®, several other
new products were launched in 2014.
CORPORATE RESPONSIBILITY
In 2014, HKScan integrated its corporate responsibility programme launched in
2013 into strategy and operations. The most important areas of corporate
responsibility at HKScan are economic responsibility, social responsibility,
animal welfare and environment. Furthermore, the Group wants to ensure
transparency and sustainability of its supply chain, as well as efficient
stakeholder cooperation and communication.
Economic sustainability refers to the long-term profitability of HKScan and its
stakeholders. In 2014, HKScan improved its economic standing significantly.
A key social responsibility issue is maintenance of strict standards in food
safety. All HKScan production sites in Finland, Sweden and Denmark are
certified under internationally recognized food safety management systems by an
independent third party, and these systems were further developed in 2014.
As a major employer in multiple countries, the well-being, engagement, equality
and diversity of the personnel is essential high priority. In 2014, the Group
conducted a Group-wide Employee Engagement Survey. The results will be utilized
to identify organizational strengths and potential areas for improvement.
In 2014, HKScan promoted animal health and welfare by continuing proactive
assessment of animal diseases and their possible effects on the supply chain
both internally and globally. Also the use of antibiotics was systematically
monitored.
HKScan continually monitors its impacts on the environment, focusing on energy
efficiency, water consumption, chemical use, and waste management. In 2014, the
Group began monitoring greenhouse gas emissions under the Greenhouse Gas (GHG)
Protocol, Scope 1 and 2. Also wastewater treatment, recycling and minimization
of landfill were improved. The Group invested in renewable energy in Sweden,
partly replacing oil and LPG to district heating and biogas. Investment in
environmental responsibility is also promoted by the new Group Biotech Business
Line, which aims to reduce waste and further optimize recycling of biomass.
An important tool promoting the transparency of the supply chain and
traceability is the evaluation of the Group's suppliers in the areas of food
safety, quality, sourcing processes, as well as other corporate responsibility
matters. HKScan regularly implements its own audits at supplier slaughterhouses
and only collaborates with those that meet the requirements. In 2014, HKScan
became a member of the Roundtable on Responsible Soy (RTRS), committing itself
to using only responsibly sourced soy in animal feed in 2015 in Sweden and by
the end of 2018 across the whole Group. The process of joining the Roundtable
for Sustainable Palm Oil (RSPO) was kicked off.
Stakeholder cooperation and communication was enhanced through a comprehensive
stakeholder dialogue conducted in five countries to verify HKScan's corporate
responsibility focus areas.
SHARES AND SHAREHOLDERS
Shares
HKScan Group's registered and fully paid-up share capital at the beginning and
end of 2014 was EUR 66 820 528. 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 capitalization at the end of the year stood at EUR 176.5
(202.9) million based on the closing price of the last trading day of the
period. The Series A shares had a market value of EUR 158.8 (182.6) million,
and the unlisted Series K shares EUR 17.7 (20.3) million correspondingly.
In 2014, a total of 13 990 124 of the company's shares, with a total value of
EUR 52 494 495, were traded. The highest price quoted was EUR 4.49 and the
lowest EUR 3.12. The average price was EUR 3.74. At the end of 2014, the
closing price was EUR 3.27.
Shareholders
At the end of 2014, the shareholder register maintained by Euroclear Finland
Ltd included 11 423 (12 159) shareholders. Nominee-registered and foreign
shareholders held 20.1 (20.2) per cent of the company's shares.
Notifications of changes in holdings
On 1 April 2014, Varma Mutual Pension Insurance Company submitted notification
that as a result of a share sale and purchase concluded on 1 April 2014, its
holding in HKScan had fallen under 5 per cent of all shares in the company.
Treasury shares
At the beginning and end of the financial year 2014, HKScan held 1 053 734
treasury A Shares. At the end of 2014, they had a market value of EUR 3.45
million and accounted for 1.92% of all shares and 0.67% of all votes.
Share-based incentive scheme
HKScan has a share-based incentive plan for the Group's key personnel for
2013-2015. The aim of the plan is to align the objectives of shareholders and
key personnel in order to enhance the company's value, to commit 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.
ANNUAL GENERAL MEETING AND BOARD OF DIRECTORS' AUTHORIZATIONS
The Annual General Meeting of HKScan Corporation held on 10 April 2014 in
Helsinki adopted the parent company's and consolidated financial statements and
discharged the members of the Board of Directors and the CEO from liability for
2013. The AGM resolved that a dividend of EUR 0.10 per share be paid for 2013.
The existing Board members, Juha Kylämäki, Niels Borup, Teija Andersen, Gunilla
Aschan, Tero Hemmilä and Henrik Treschow, were re-elected and Mikko Nikula and
Per Nilsson were re-elected as deputy members. At the organizational meeting
after the AGM, the Board re-elected Juha Kylämäki as Chairman and Niels Borup
as Vice Chairman.
PricewaterhouseCoopers Oy, an audit firm chartered by the Central Chamber of
Commerce, with APA Jouko Malinen as the main auditor, was elected as the actual
auditor until the close of the next Annual General Meeting. The remuneration of
the auditor will be paid in accordance with the auditor's invoice approved by
the company.
The AGM gave the following two authorizations to the Board: The Board of
Directors was authorized to decide on share issue, as well as issue of option
rights and other special rights entitling to shares, pursuant to Chapter 10 of
the Companies Act. The authorization is effective until 30 June 2015 and it
revokes that granted on 24 April 2013 by the Annual General Meeting to the
Board of Directors to acquire the company's own Series A shares and/or to
accept as pledge.
During 2014, the Board did not exercise the authorizations given by the AGM.
The resolutions of the Annual General Meeting have been published in full in a
stock exchange release on 10 April 2014, and they are also available on the web
at www.hkscan.com.
PERSONNEL
In 2014, HKScan had an average of 7 662 (7 774) personnel.
The average number of employees in each market area was as follows:
2014 2013
---------------------
Finland 2 771 2 685
---------------------
Baltics 1 769 1 761
---------------------
Sweden 2 305 2 459
---------------------
Denmark 817 869
---------------------
Total 7 662 7 774
---------------------
Division of personnel by market area at year end is as follows:
31.12.2014 31.12.2013
-------------------------------
Finland 2 644 2 572
-------------------------------
Baltics 1 766 1 760
-------------------------------
Sweden 2 152 2 248
-------------------------------
Denmark 765 838
-------------------------------
Total 7 327 7 418
-------------------------------
GROUP MANAGEMENT TEAM
The Management Team of the Group is as follows: Hannu Kottonen, CEO; Aki Laiho,
COO; Tuomo Valkonen, CFO; Samuli Eskola, EVP Consumer Business in Finland and
the Baltics; Göran Holm, EVP Consumer Business in Scandinavia; Jukka Nikkinen,
EVP Away from Home Business; Sari Suono, EVP HR; Anne Mere, CMO; and Markku
Suvanto, EVP Legal and Administration, who also acts as the Group Management
Team's secretary.
CHANGES IN THE GROUP STRUCTURE
In order to minimize administration and promote internal process harmonization,
HKScan continued streamlining and clarifying its corporate structure.
In February, HKScan signed an agreement to sell all its shares (50%) in Saturn
Nordic Holding AB to Danish Crown A/S. The transaction was finalized in June.
Saturn Nordic Holding AB holds 100% of the shares in Sokołów S.A. As a result,
HKScan no longer holds an indirect stake in Sokołów.
In December, HKScan signed an agreement to sell its Estonia's egg business, OÜ
Koks Munatootmine, to Danish DAVA Foods Holding A/S. The divestment is subject
to the approval of the competition authorities. Furthermore, HKScan Finland Oy
signed an agreement with Danish DanHatch AS involving the sale of HKScan
Finland's hatchery business and related property to DanHatch Finland Oy in
which HKScan will have a 20 per cent stake.
In June, HKScan merged its Estonian subsidiaries AS Rakvere Lihakombinaat and
AS Tallegg, creating one company, AS HKScan Estonia.
Several divestments were executed in Sweden, including HKScan's small
wholly-owned subsidiary Bertil Erikssons Slakteri AB and a share in Nyhléns &
Hugosons Chark AB. HKScan owns a 24 per cent share in Svenska Köttföretagen
Holding AB, a newly established industry organization which comprises several
small businesses which HKScan divested.
Other changes in the Group structure are described in the events after the
reporting period.
CLAIM BY OY PRIMULA AB'S BANKCRUPTCY ESTATE
As announced in a stock exchange release published on 7 September 2012, HKScan
Corporation and HK Ruokatalo Oy (now HKScan Finland Oy) were notified that Oy
Primula Ab's bankruptcy estate has submitted an action for damages to the
District Court of Finland Proper concerning the companies. The claim amounts to
about EUR 16.3 million, plus claims related to interest and legal costs.
In February 2015, the District Court of Southwest Finland issued its
interlocutory ruling by which it rejected as patently unfounded an action for
damages submitted against HKScan Corporation and HKScan Finland Oy.
SHORT-TERM RISKS AND UNCERTAINTY FACTORS
The most significant uncertainty factors in HKScan Group's business are
connected - through price increases for feed raw material in particular and
other production inputs related to primary production - to price trends and the
availability of local meat raw material, as well as to the adequacy of sales
price increases in relation to cost trends.
The risks include various unexpected actions by the authorities that may impose
restrictions on the business. The risk of animal diseases in the food
industry's raw meat supply or any international or regional food scandals
impacting on the overall consumption outlook can never be fully excluded.
EVENTS AFTER THE REPORTING PERIOD
On January 5, HKScan announced that the Group aims to improve operational
efficiency by restructuring its production capacity in Denmark. Poultry
slaughtering and cutting will be centralized at the Vinderup facility, and
packaging and warehousing will remain in Skovsgaard. The targeted annualized
cost reduction and profit improvement is in excess of EUR 5 million from the
second quarter 2015 onwards. On January 28, HKScan announced that the related
statutory employee negotiations were concluded, resulting in a net headcount
reduction of 88 positions.
On 16 January, HKScan announced that it will soon begin exporting Finnish pork
to China. HKScan Finland's pork slaughtering facility in Forssa is going to
gain export certification from the Chinese food authorities following
inspections carried out in August 2014.
On 26 January, HKScan announced that statutory employee negotiations at its
Mellilä pig slaughtering house in Finland were concluded, resulting in a
headcount reduction of 23 positions. The negotiations were related to the
increased surplus in pork meat due to the continuing Russian ban on pork
imports from the EU countries.
On 2 February, HKScan announced that the District Court of Southwest Finland
had issued its interlocutory ruling by which it rejected as patently unfounded
an action for damages submitted against HKScan Corporation and HKScan Finland
Oy by the bankruptcy estate of Oy Primula Ab.
OUTLOOK FOR 2015
HKScan expects operating profit (EBIT) excluding non-recurring items to improve
from 2014, and anticipates the last quarter to be the strongest.
HKScan expects the economic and demand outlook and, accordingly, sales price
competition to remain tough in 2015. However, the Group's strategy work,
restructuring and development programmes together with active sales margin
management should contribute to better financial performance.
BOARD OF DIRECTORS' PROPOSAL ON DISTRIBUTION OF PROFIT
The parent company's distributable equity stands at EUR 302.4 million including
the reserve for invested unrestricted equity, which holds EUR 143.1 million.
The Board of Directors recommends that the company pays a dividend of EUR 0.10
per share for 2014, and an additional dividend of EUR 0.39 per share, i.e. a
total of approximately EUR 26.4 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 2015
HKScan Corporation's Annual General Meeting 2015 will be held at 11 am on 14
April 2015 in Turku. To be eligible to attend the Annual General Meeting,
shareholders should be registered by 31 March 2015 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 2014
CONSOLIDATED INCOME STATEMENT
(EUR million) Note Q4/2014 Q4/2013 2014 2013
--------------------------------------------------------------------------------
Net sales 523.2 547.9 1 988.7 2 113.2
--------------------------------------------------------------------------------
Cost of goods sold 1. -487.7 -520.8 -1 905.2 -2 014.8
--------------------------------------------------------------------------------
Gross Profit 35.5 27.1 83.5 98.4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Other operating items total 1. 2.7 14.8 94.1 33.4
--------------------------------------------------------------------------------
Sales and marketing costs 1. -15.4 -15.3 -62.1 -58.1
--------------------------------------------------------------------------------
General administration costs 1. -15.7 -15.7 -60.1 -62.0
--------------------------------------------------------------------------------
Operating Profit 7.1 10.9 55.5 11.7
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial income and expenses -3.7 -7.6 -15.5 -23.6
--------------------------------------------------------------------------------
Share of profit/loss in associates 0.9 4.5 11.2 18.6
--------------------------------------------------------------------------------
Profit/loss before taxes 4.3 7.7 51.2 6.7
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Income tax 0.9 -1.2 5.9 3.1
--------------------------------------------------------------------------------
Profit/loss for the period 5.2 6.6 57.1 9.8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Non-controlling interests -0.6 -0.9 -0.5 -1.1
--------------------------------------------------------------------------------
Profit/loss for the period 4.6 5.6 56.7 8.7
--------------------------------------------------------------------------------
Earnings per share calculated on profit attributable to equity holders
of the parent:
-----------------------------------------------------------------------
EPS, undiluted, continuing operations. 0.09 0.10 1.05 0.16
EUR/share
--------------------------------------------------------------------------------
EPS, diluted, continuing operations, 0.09 0.10 1.05 0.16
EUR/share
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF COMPEREHENSIVE INCOME
(EUR million) Q4/2014 Q4/2013 2014 2013
--------------------------------------------------------------------------------
Profit/loss for the period 5.2 6.5 57.1 9.8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME (after taxes):
--------------------------------------------------------------------------------
Exchange differences on translating foreign -3.4 0.6 -8.3 -3.4
operations
--------------------------------------------------------------------------------
Cash flow hedging -0.4 -1.3 -1.9 2.8
--------------------------------------------------------------------------------
Actuarial gains or losses -4.9 1.6 -4.9 1.6
--------------------------------------------------------------------------------
TOTAL OTHER COMPREHENSIVE INCOME -8.7 0.9 -15.1 1.0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD -3.5 7.4 42.1 10.8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
ATTRIBUTABLE TO:
--------------------------------------------------------------------------------
Equity holders of the parent -4.1 6.5 41.6 9.7
--------------------------------------------------------------------------------
Non-controlling interests 0.6 0.9 0.5 1.1
--------------------------------------------------------------------------------
Total -3.5 7.4 42.1 10.8
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
(EUR million) Note 31.12.2014 31.12.2013
--------------------------------------------------------------------------------
ASSETS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Intangible assets 2. 144.3 152.1
--------------------------------------------------------------------------------
Tangible assets 3. 369.7 411.5
--------------------------------------------------------------------------------
Holdings 35.9 149.9
--------------------------------------------------------------------------------
Other non-current assets 40.8 30.6
--------------------------------------------------------------------------------
TOTAL NON-CURRENT ASSETS 590.7 744.1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Inventories 4. 125.4 152.5
--------------------------------------------------------------------------------
Current receivables 122.4 137.0
--------------------------------------------------------------------------------
Cash and cash equivalents 16.4 68.7
--------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 264.3 358.1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Assets of disposal group classified as held for 9.4 0.0
sale
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL ASSETS 864.3 1 102.2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUITY 5. 445.2 409.0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Non-current loans, interest-bearing 121.8 245.1
--------------------------------------------------------------------------------
Non-current liabilities, non interest-bearing 40.8 36.5
--------------------------------------------------------------------------------
TOTAL NON-CURRENT LIABILITIES 162.6 281.6
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Current loans, interest-bearing 36.4 159.3
--------------------------------------------------------------------------------
Current liabilities, non interest-bearing 219.4 252.3
--------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 255.8 411.6
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Liabilities of disposal group classified as held 0.8 0.0
for sale
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL EQUITY AND LIABILITIES 864.3 1 102.2
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN CONSOLIDATED EQUITY
----------------
(EUR 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.
million)
--------------------------------------------------------------------------------
EQUITY AT 66,8 73,5 -10,8 143,5 32,0 2,0 0,0 93,0 400,0 9,0 409,0
1.1.2014
--------------------------------------------------------------------------------
Result - - - - - - - 56,7 56,7 0,5 57,1
for the
financial
period
--------------------------------------------------------------------------------
Other
comprehen
sive
income
(+) /
expense
(-)
--------------------------------------------------------------------------------
Transl. - - - - - -8,3 - - -8,3 - -8,3
diff.
--------------------------------------------------------------------------------
Cash flow - - -1,9 - - - - - -1,9 - -1,9
hedging
--------------------------------------------------------------------------------
Actuarial - - - - - - - -4,9 -4,9 - -4,9
gains or
losses
--------------------------------------------------------------------------------
Total - - -1,9 - - -8,3 - 51,8 41,6 0,5 42,1
compreh.
income
for the
period
--------------------------------------------------------------------------------
Direct - - - - 0,1 - - 0,2 0,2 - 0,2
recognit
. in
retained
earnings
--------------------------------------------------------------------------------
Transfers - -0,6 - - -21,9 - - 22,5 0,0 0,0 0,0
between
items
--------------------------------------------------------------------------------
Dividend - - - - - - - -5,4 -5,4 -0,7 -6,1
distribu
t.
--------------------------------------------------------------------------------
EQUITY AT 66,8 72,9 -12,7 143,5 10,1 -6,2 0,0 162,1 436,5 8,7 445,2
31.12.201
4
--------------------------------------------------------------------------------
(EUR 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.
million)
--------------------------------------------------------------------------------
EQUITY AT 66,8 73,3 -13,7 143,5 26,4 5,4 0,0 93,7 395,4 8,6 404,0
1.1.2013
--------------------------------------------------------------------------------
Result - - - - - - - 8,7 8,7 1,1 9,8
for the
financial
period
--------------------------------------------------------------------------------
Other
comprehen
sive
income
(+) /
expense
(-)
--------------------------------------------------------------------------------
Transl. - - - - - -3,4 - - -3,4 - -3,4
diff.
--------------------------------------------------------------------------------
Cash flow - - 2,8 - - - - - 2,8 - 2,8
hedging
--------------------------------------------------------------------------------
Actuarial - - - - - - - 1,6 1,6 - 1,6
gains or
losses
--------------------------------------------------------------------------------
Total - - 2,8 - - -3,4 - 10,3 9,7 1,1 10,8
compreh.
income
for the
period
--------------------------------------------------------------------------------
Direct - - - - - - - -0,1 -0,1 - -0,1
recognit
. in
retained
earnings
--------------------------------------------------------------------------------
Transfers - - - - 5,6 - - -5,5 0,1 -0,1 0,0
between
items
--------------------------------------------------------------------------------
Dividend - - - - - - - -5,4 -5,4 -0,6 -6,0
distribu
t.
--------------------------------------------------------------------------------
Other - 0,2 - - - - - - 0,2 - 0,2
change
--------------------------------------------------------------------------------
EQUITY AT 66,8 73,5 -10,8 143,5 32,0 2,0 0,0 93,0 400,0 9,0 409,0
31.12.201
3
--------------------------------------------------------------------------------
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) 2014 2013
---------------------------------------------------------------
Cash flow before change in net working capital 52.6 76.4
---------------------------------------------------------------
Change in net working capital 14.2 46.2
---------------------------------------------------------------
Financial items and taxes -3.6 -11.8
---------------------------------------------------------------
CASH FLOW FROM OPERATING ACTIVITIES 63.3 110.8
---------------------------------------------------------------
---------------------------------------------------------------
Cash flow from investing activities 135.7 -35.6
---------------------------------------------------------------
CASH FLOW AFTER INVESTING ACTIVITIES 198.9 75.3
---------------------------------------------------------------
---------------------------------------------------------------
Change in loans -244.1 -55.9
---------------------------------------------------------------
Dividends paid -6.1 -5.9
---------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES -250.2 -61.8
---------------------------------------------------------------
---------------------------------------------------------------
NET CASH FLOW -51.2 13.5
---------------------------------------------------------------
---------------------------------------------------------------
Cash and cash equivalents at beginning of period 68.7 55.6
---------------------------------------------------------------
Translation differences -1.0 -0.4
---------------------------------------------------------------
Cash and cash equivalents at end of period 16.4 68.7
---------------------------------------------------------------
---------------------------------------------------------------
FINANCIAL INDICATORS
31.12.2014 31.12.2013
-------------------------------------------------------------------
Earnings per share (EPS), undiluted, EUR 1.05 0.16
-------------------------------------------------------------------
Earnings per share (EPS), diluted, EUR 1.05 0.16
-------------------------------------------------------------------
Equity per share, EUR 8.1 7.4
-------------------------------------------------------------------
Equity ratio, % 51.5 37.1
-------------------------------------------------------------------
Adjusted average number of shares, mill. 54.0 54.0
-------------------------------------------------------------------
Gross capital expenditure on PPE, EUR mill. 48.7 42.2
-------------------------------------------------------------------
Employees, end of month average 7 662 7 774
-------------------------------------------------------------------
CALCULATION OF FINANCIAL INDICATORS
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
Market capitalisation 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 interim report for 1 January - 31 December 2014 has been
prepared in compliance with IAS 34 Interim Financial Reporting standards. The
same accounting principles have been applied in the interim report as in the
annual financial statements for 2013, with the exception of the new IFRS 10
(Consolidated Financial Statements) and IFRS 11 (Joint arrangements) standards
(effective as of 1 January 2014). In addition, costs incurred by centralized
Group services such as Group Technology and Operations Development are to be
invoiced individually by Market Areas as of January 1, 2014. The Group's
financial reporting in 2014 will be in line with these changes. The quarterly
Group and market area information for 2013 has been restated accordingly. Due
to the rounding of the figures to the nearest million euros in the interim
report, some totals may not agree with the sum of their constituent parts.
Accounting principles are explained in the financial statements for 2014.
IASB has published the following new or revised standards and interpretations
that the Group has not yet adopted. The Group will adopt these standards as of
the effective date of each of the standards, or if the effective date is not
the first day of the reporting period, as of the beginning of the next
reporting period following the effective date.
IFRS 9, ‘Financial instruments', addresses the classification, measurement and
recognition of financial assets and financial liabilities. The complete version
of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that
relates to the classification and measurement of financial instruments. IFRS 9
retains but simplifies the mixed measurement model and establishes three
primary measurement categories for financial assets: amortised cost, fair value
through OCI and fair value through P&L. The basis of classification depends on
the entity's business model and the contractual cash flow characteristics of
the financial asset. Investments in equity instruments are required to be
measured at fair value through profit or loss with the irrevocable option at
inception to present changes in fair value in OCI not recycling. There is now a
new expected credit losses model that replaces the incurred loss impairment
model used in IAS 39. For financial liabilities there were no changes to
classification and measurement except for the recognition of changes in own
credit risk in other comprehensive income, for liabilities designated at fair
value through profit or loss. IFRS 9 relaxes the requirements for hedge
effectiveness by replacing the bright line hedge effectiveness tests. It
requires an economic relationship between the hedged item and hedging
instrument and for the ‘hedged ratio' to be the same as the one management
actually use for risk management purposes. Contemporaneous documentation is
still required but is different to that currently prepared under IAS 39. The
standard is effective for accounting periods beginning on or after 1 January
2018. Early adoption is permitted. The group is yet to assess IFRS 9's full
impact. The standard has not yet been endorsed for application in the EU.
IFRS 15, ‘Revenue from contracts with customers' deals with revenue recognition
and establishes principles for reporting useful information to users of
financial statements about the nature, amount, timing and uncertainty of
revenue and cash flows arising from an entity's contracts with customers.
Revenue is recognised when a customer obtains control of a good or service and
thus has the ability to direct the use and obtain the benefits from the good or
service. The standard replaces IAS 18 ‘Revenue' and IAS 11 ‘Construction
contracts' and related interpretations. The standard is effective for annual
periods beginning on or after 1 January 2017 and earlier application is
permitted. The group is assessing the impact of IFRS 15. The standard has not
yet been endorsed for application in the EU.
There are no other IFRSs or IFRIC interpretations that are not yet effective
that would be expected to have a material impact on the Group.
ANALYSIS BY SEGMENT
Net sales and EBIT by market area
------------------------------------
(EUR million) Q4/2014 Q4/2013 2014 2013
--------------------------------------------------------------
NET SALES
--------------------------------------------------------------
- Finland 213.8 210.1 787.2 804.1
--------------------------------------------------------------
- Baltics 43.8 44.7 173.0 175.1
--------------------------------------------------------------
- Sweden 240.5 256.2 911.0 966.5
--------------------------------------------------------------
- Denmark 46.2 52.3 204.3 225.3
--------------------------------------------------------------
- Between segments -21.1 -15.5 -86.8 -57.7
--------------------------------------------------------------
Group total 523.2 547.9 1 988.7 2 113.2
--------------------------------------------------------------
--------------------------------------------------------------
EBIT
--------------------------------------------------------------
- Finland 6.6 1.7 -4.5 3.2
--------------------------------------------------------------
- Baltics -2.1 1.9 2.8 7.7
--------------------------------------------------------------
- Sweden 8.1 3.5 1.7 8.0
--------------------------------------------------------------
- Denmark -3.6 6.4 -11.9 3.6
--------------------------------------------------------------
- Between segments - - - -
--------------------------------------------------------------
Segments total 9.0 13.5 -11.9 22.5
--------------------------------------------------------------
--------------------------------------------------------------
Group administration costs -1.9 -2.6 67.4 -10.7
--------------------------------------------------------------
Group total 7.1 10.9 55.5 11.7
--------------------------------------------------------------
NOTES TO THE INCOME STATEMENT
1. NON-RECURRING ITEMS
(EUR million) Q4/201 Q4/201 2014 2013
4 3
--------------------------------------------------------------------------------
Restructuring redundancy expenses COGS, Finland 1) -1.0 -0.1 -1.0 -1.5
--------------------------------------------------------------------------------
Restructuring redundancy expenses SGA, Finland 2) -0.4 - -0.4 -1.1
--------------------------------------------------------------------------------
Restructuring expenses for production set-up, - - - -1.0
Finland 1)
--------------------------------------------------------------------------------
Impairment of assets, Finland 1) - - -12.0 -
--------------------------------------------------------------------------------
Restructuring expenses for closed operations, -0.2 - -4.0 -
Sweden 1)
--------------------------------------------------------------------------------
Impairment of assets, Sweden 1) - - -6.7 -
--------------------------------------------------------------------------------
Impairment of assets, Sweden 3) - -2.3 - -2.3
--------------------------------------------------------------------------------
Impairment of inventory 2011-2012, Sweden 1) - - -0.8 -
--------------------------------------------------------------------------------
Losses on sales of holdings, Sweden 3) -0.2 - -0.2 -
--------------------------------------------------------------------------------
Property insurance compensation, Denmark 3) - 7.1 - 7.1
--------------------------------------------------------------------------------
Impairment of assets, Denmark 1) - - -5.2 -
--------------------------------------------------------------------------------
Restructuring expenses COGS, Denmark 1) -1.5 - -1.5 -
--------------------------------------------------------------------------------
Restructuring redundancy expenses SGA, Denmark 2) - -0.7 - -0.7
--------------------------------------------------------------------------------
Cover of loss in associated company based on SHA, -0.8 - -0.8 -
Denmark 3)
--------------------------------------------------------------------------------
Capital gain in sales of shares of Saturn Nordic - - 77.6 -
Holding Ab 3)
--------------------------------------------------------------------------------
Impairment of assets, Latvia 1) -2.1 - -2.1 -
--------------------------------------------------------------------------------
Non-recurring items Total -6.3 4.1 43.0 0.5
--------------------------------------------------------------------------------
1) Included in the Income Statement in the item ”COGS Total”
2) Included in the Income Statement in the item ”SGA Total”
3) Included in the Income Statement in the item ”Other operating items total”
NOTES TO THE STATEMENT OF FINANCIAL POSITION
2. CHANGES IN INTANGIBLE ASSETS
(EUR million) 2014 2013
----------------------------------------------
Opening balance 152.1 156.1
----------------------------------------------
Translation differences -5.5 -3.1
----------------------------------------------
Additions 1.4 2.1
----------------------------------------------
Additions, business acquisitions 0.8 0.0
----------------------------------------------
Disposals -0.1 0.0
----------------------------------------------
Depreciation and impairment -4.1 -3.2
----------------------------------------------
Reclassification between items -0.2 0.3
----------------------------------------------
Closing balance 144.3 152.1
----------------------------------------------
3. CHANGES IN TANGIBLE ASSETS
(EUR million) 2014 2013
----------------------------------------------
Opening balance 411.5 437.0
----------------------------------------------
Translation differences -3.5 -2.5
----------------------------------------------
Additions 51.3 40.5
----------------------------------------------
Additions, business acquisitions 0.9 0.2
----------------------------------------------
Disposals -13.3 -5.5
----------------------------------------------
Depreciation and impairment -77.3 -58.1
----------------------------------------------
Reclassification between items 0.0 -0.1
----------------------------------------------
Closing balance 369.7 411.5
----------------------------------------------
4. INVENTORIES
(EUR million) 2014 2013
-------------------------------------------
Materials and supplies 73.2 85.8
-------------------------------------------
Semi-finished products 5.3 4.0
-------------------------------------------
Finished products 36.9 44.3
-------------------------------------------
Other inventories 1.8 6.6
-------------------------------------------
Inventories, advance payments 0.5 1.1
-------------------------------------------
Biological asset, IFRS 41 7.7 10.7
-------------------------------------------
Total inventories 125.4 152.5
-------------------------------------------
5. NOTES TO EQUITY
Share capital and Number of Share Share Reserve for Treasury Total
share outstandin capital premium invested
premium reserve g reserve unrestricte
shares d
equity
--------------------------------------------------------------------------------
1.1.2014 53 972 788 66.8 72.9 143.5 0.0 283.1
--------------------------------------------------------------------------------
31.12.2014 53 972 788 66.8 72.9 143.5 0.0 283.1
--------------------------------------------------------------------------------
DERIVATIVE INSTRUMENT LIABILITIES
(EUR million)
31.12.2014 31.12.2013
----------------------------------------------------------------
Nominal values of derivative instruments
----------------------------------------------------------------
----------------------------------------------------------------
Foreign exchange derivatives 70,5 78,3
----------------------------------------------------------------
Interest rate derivatives 157,6 211,6
----------------------------------------------------------------
Electricity derivatives 7,6 9,3
----------------------------------------------------------------
----------------------------------------------------------------
Fair values of derivative instruments
----------------------------------------------------------------
----------------------------------------------------------------
Foreign exchange derivatives 0,3 -0,8
----------------------------------------------------------------
Interest rate derivatives -15,7 -16,0
----------------------------------------------------------------
Electricity derivatives -1,7 -2,1
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
CONSOLIDATED OTHER CONTINGENT LIABILITIES
----------------------------------------------------------------
(EUR million)
----------------------------------------------------------------
31.12.2014 31.12.2013
----------------------------------------------------------------
Debts secured by
----------------------------------------------------------------
pledges or mortgages
----------------------------------------------------------------
- loans from financial institutions 29,5 273,7
----------------------------------------------------------------
----------------------------------------------------------------
On own behalf
----------------------------------------------------------------
- Mortgages given 10,7 12,4
----------------------------------------------------------------
- Assets pledged 3,2 9,3
----------------------------------------------------------------
----------------------------------------------------------------
On behalf of others
----------------------------------------------------------------
- guarantees 7,1 23,2
----------------------------------------------------------------
- other commitments 6,5 6,6
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
Other contingencies
----------------------------------------------------------------
Leasing commitments 14,7 17,2
----------------------------------------------------------------
Rent liabilities 39,8 49,4
----------------------------------------------------------------
THE FAIR VALUE DETERMINATION PRINCIPLES APPLIED BY THE GROUP ON FINANCIAL
INSTRUMENTS MEASURED AT FAIR VALUE
Derivatives
The fair values of currency derivatives are determined by using the market
prices for contracts of equal duration at the reporting date. The fair values
of interest rate swaps are determined using the net present value method
supported by the market interest rates at the reporting date. The fair value of
commodity derivatives are determined by using publicly quoted market prices.
31.12.2014 Level 1 Level 2 Level 3
--------------------------------------------------------------------------------
Assets measured at fair value
--------------------------------------------------------------------------------
Financial assets recognised at fair value
--------------------------------------------------------------------------------
through profit or loss
--------------------------------------------------------------------------------
- Trading securities - - - -
--------------------------------------------------------------------------------
- Trading derivatives
--------------------------------------------------------------------------------
- Interest rate swaps - - - -
--------------------------------------------------------------------------------
- Foreign exchange derivatives 0.4 0.0 0.4 0.0
--------------------------------------------------------------------------------
- Commodity derivatives - - - -
--------------------------------------------------------------------------------
Available-for-sale financial assets
--------------------------------------------------------------------------------
- Investments in shares 0.0 0.0 0.0 0.0
--------------------------------------------------------------------------------
Total 0.4 0.0 0.4 0.0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Liabilities measured at fair value
--------------------------------------------------------------------------------
Financial liabilities recognised at fair
value
--------------------------------------------------------------------------------
through profit or loss
--------------------------------------------------------------------------------
-Trading derivatives
--------------------------------------------------------------------------------
- Interest rate swaps -15.7 0.0 -15.7 0.0
--------------------------------------------------------------------------------
of which subject to cash flow hedging -15.5 0.0 -15.5 0.0
--------------------------------------------------------------------------------
- Foreign exchange derivatives -0.1 0.0 -0.1 0.0
--------------------------------------------------------------------------------
of which subject to net investment - - - -
hedging
--------------------------------------------------------------------------------
- Commodity derivatives -1.7 0.0 -1.7 0.0
--------------------------------------------------------------------------------
of which subject to cash flow hedging -1.7 0.0 -1.7 0.0
--------------------------------------------------------------------------------
Total -17.5 0.0 -17.5 0.0
--------------------------------------------------------------------------------
BUSINESS TRANSACTIONS WITH RELATED PARTIES
-------------------------------------------
(EUR million) 2014 2013
-------------------------------------------------
Sales to associates 65.9 106.5
-------------------------------------------------
Purchases from associates 40.2 55.1
-------------------------------------------------
Trade and other receivables 2.4 4.0
-------------------------------------------------
Trade and other payables 2.8 5.0
-------------------------------------------------
NEXT FINANCIAL REPORT
HKScan Group's interim report January - March 2015 will be published on 6 May
2015.
Vantaa, 11 February 2015
HKScan Corporation
Board of Directors
Further information is available from HKScan Corporation's President and CEO
Hannu Kottonen and CFO Tuomo Valkonen. Kindly submit a call-back request to
Marja-Leena Dahlskog, SVP Communications, firstname.surname@hkscan.com or tel.
+358 10 570 2142
HKScan is the leading Nordic meat expert. We produce, market and sell
high-quality, responsibly-produced pork, beef, poultry and lamb products,
processed meats and convenience foods under strong brand names. Our customers
are the retail, food service, industrial and export sectors, and our home
markets comprise Finland, Sweden, Denmark and the Baltics. We export to close
to 50 countries. In 2014, HKScan had net sales of approximately EUR 2.0 billion
and some 7 700 employees.
DISTRIBUTION:
NASDAQ OMX Helsinki
Main media
www.hkscan.com
© 2024 Nasdaq, Inc. All Rights Reserved |