2011-02-18 07:00:00 CET
2011-02-18 07:00:10 CET
REGULATED INFORMATION
HKScan Oyj - Financial Statement Release
HKSCAN GROUP'S FINANCIAL STATEMENT RELEASE FOR THE FINANCIAL YEAR OF 1 JANUARY − 31 DECEMBER 2010
HKScan Corporation STOCK EXCHANGE RELEASE 18 Feb 2011 at 8am
HKSCAN GROUP'S FINANCIAL STATEMENT RELEASE FOR THE FINANCIAL YEAR OF 1 JANUARY
− 31 DECEMBER 2010
* The HKScan Group's net sales in 2010 remained at the level of the previous
year and were EUR 2 113.9 million (EUR 2 124,7 m). EBIT came in at EUR 48.0
million (EUR 55.1 m).
* Group profit before taxes, EUR 36.5 million, remained almost unchanged (EUR
EUR 37.3 m).
* In Finland and Sweden, the year was affected by numerous exceptional internal
supply chain problems, which caused substantial costs and loss of income. EBIT
was improved by the gains on the disposal of properties in Sweden amounting to
some EUR 8 million.
* Profitability remained good in the Baltics and improved particularly in
Poland.
* In Sweden, the increasing import of cheaper meat has significantly weakened
the competitiveness of production based on Swedish meat raw material.
* At the end of November the transaction concerning the Danish poultry company
Rose Poultry A/S was completed, making HKScan a leading player in the poultry
market in northern Europe.
HKSCAN CONSOLIDATED INCOME STATEMENT, Q4 and the entire year
(EUR million)
Q4/2010 Q4/2009 2010 2009
----------------------------------------------------------------------
----------------------------------------------------------------------
Net sales 595,7 557,5 2 113,9 2 124,7
----------------------------------------------------------------------
EBIT 15,7 18,4 48,0 55,1
----------------------------------------------------------------------
- as % of net sales 2,6 3,3 2,3 2,6
----------------------------------------------------------------------
Share of associates' result -0,1 0,6 2,2 2,0
----------------------------------------------------------------------
Financial income and expenses, net -4,5 -3,6 -13,8 -19,7
----------------------------------------------------------------------
Profit before taxes 11,1 15,4 36,5 37,3
----------------------------------------------------------------------
- as % of net sales 1,9 2,8 1,7 1,8
----------------------------------------------------------------------
Income taxes -2,4 -1,6 -5,7 -4,9
----------------------------------------------------------------------
Profit for the period 8,7 13,8 30,8 32,5
----------------------------------------------------------------------
- as % of net sales 1,5 2,5 1,5 1,5
----------------------------------------------------------------------
----------------------------------------------------------------------
Profit attributable to:
----------------------------------------------------------------------
- Equity holders of the parent 8,0 13,2 27,9 29,9
----------------------------------------------------------------------
− Non-controlling interests 0,7 0,6 2,9 2,6
----------------------------------------------------------------------
Total 8,7 13,8 30,8 32,5
----------------------------------------------------------------------
----------------------------------------------------------------------
EPS, undiluted, EUR 0,15 0,28 0,52 0,64
----------------------------------------------------------------------
EPS, diluted, EUR 0,15 0,28 0,52 0,64
----------------------------------------------------------------------
Q4/2010, OCTOBER-DECEMBER
* The Group's net sales in last quarter of the year were EUR 595.7 million (EUR
557.5 m). EBIT came in at EUR 15.7 million (EUR 18.4 m).
− In Finland, net sales came to EUR 198.2 million (EUR 185.4 m) and EBIT to EUR
4.7 million (EUR 6.4 m). Earnings were eroded especially by the weakened pork
profitability.
- In Sweden, the Christmas season did not entirely meet expectations and the
restructuring programme has given rise to additional expenditure. Net sales
were EUR 275.0 million (EUR 278.3 m) and earnings EUR 8.0 million (EUR 9.1 m).
− In the Baltics, business progressed according to plan. Net sales came to EUR
42.0 million (EUR 38.1 m) and EBIT to EUR 1.8 million (EUR 2.0m).
− In Poland, Sokolów further strengthened its position in modern retail. Net
sales were EUR 72.6 million (EUR 65.1 m) and EBIT came in at EUR 3.0 million
(EUR 2.9 m).
CEO MATTI PERKONOJA:
“The year 2010 was a strong year of development within the HKScan Group. In
Finland and Sweden new programmes to streamline the structure of the industry
and improve productivity were launched. In addition, the Group had a number of
development programmes relating to, among other things, the harmonization of
management systems and operational models as well as to the strategy process
and responsibility.
In Finland, preparation for the amendment of the poultry marketing directive
increased price competition. In addition, industrial action by the food
industry weakened earnings in the first half of the year. The ban on pork
exports to Russia, which lasted from July to December, the resultant growth in
stocks and costs, and the low price level of alternative sales channels
hindered business at the end of the year.
In Sweden, the strengthening of the Swedish krona has weakened the
competitiveness of production based on Swedish meat raw material significantly.
At the same time, imported foreign meat has increased competition and squeezed
the price level. In Sweden, earnings were affected by the substantial
exceptional costs relating to the efficiency programme too.
In Denmark, the acquisition concerning the Danish poultry company Rose Poultry
A/S was completed at the end of the year, making HKScan a leading player in the
poultry market in northern Europe. Rose Poultry's strategic suitability for
HKScan is excellent.
In the Baltic countries, the HKScan Group's position as an industry leader was
strengthened. In Latvia, the market share rose to almost a third with the
acquisition of Jelgavas Galas Kombinats by Rigas Miesnieks. In Estonia, AS
Rakvere Lihakombinaat is a market leader with its market share of some 31
percent.
In Poland, Sokolów performed excellently. In line with its plans, Sokolów has
strengthened its position in modern retail chains.
In Finland, HK Ruokatalo's unique and extensive Rapeseed pork development
project has progressed to launching the products to consumers. This is the most
impressive innovation affecting the nutritional and organoleptic quality of
pork in decades.
The profitability of the business did not meet expectations, but development
programmes relating to the business and strengthening of market positions in
all market areas are providing confidence in the future.”
MARKET AREA: FINLAND
(EUR million)
Q4/2010 Q4/2009 2010 2009
------------------------------------------------
------------------------------------------------
Net sales 198,2 185,4 718,5 732,5
------------------------------------------------
EBIT 4,7 6,4 10,7 27,0
------------------------------------------------
- EBIT margin, % 2,4 3,5 1,5 3,7
------------------------------------------------
In Finland, net sales in 2010 were EUR 718.5 million(EUR 732.5 m). EBIT for the
whole year remained at EUR 10.7 million (EUR 27.0 m).
Earnings development was weakened in particular by industrial action and price
competition in poultry meat during the early part of the year. In addition,
there are challenges in the red meat business, where the profitability of pork,
especially, is currently weak.
The industrial action during the spring are estimated to have caused loss of
earnings amounting to at least EUR 7 million. In addition, the ban on pork
exports to Russia lasting from July to December caused growth in stocks. The
excess pork stock will be cleared in the first half of 2011.
The summer's barbecue season and Christmas sales succeeded well. With respect
to poultry meat, the year improved towards the end remaining as a whole,
however, short of its target. After difficulty in the early part of the year,
HK Ruokatalo was able to maintain its market position, and HKScan Finland's
associates were successful too.
In September, a new productivity improvement programme was announced. The
programme aims to deliver annual productivity benefits of EUR 12 million. Of
this amount, approximately EUR 6 million are expected to be achieved during
2011. Employer-employee negotiations with HK Ruokatalo's industrial process
staff relating to the programme began in November 2010. They were completed in
January 2011.
In order to strengthen demand for meat raw material in Finland, HK Ruokatalo Oy
entered into cooperation in the early part of 2010 with Kivikylän Kotipalvaamo
Oy, a family business based in western Finland. Cooperation is being supported
by a 49 percent minority shareholding.
In October, the Finnish Competition Authority approved the plan of HKScan
Finland and Osuuskunta Karjaportti to establish a new corporate entity that
will continue the production of processed meats at Portti's plant located in
Tikkala in the town of Mikkeli. The new company, Järvi-Suomen Portti Oy, began
operations on 1 January 2011. HKScan Finland Oy is a majority shareholder in
the new company with a 90 percent holding.
HK Ruokatalo merged its meat procurement and primary production as well as feed
trade into a single company at the beginning of 2011. The duties of the feed
company Lounaisfarmi and the chicken production chain of HK Ruokatalo were
transferred to LSO Foods, the name of which changed at the same time to HK
Agri.
In line with the HKScan Group's policies, issues pertaining to responsibility
and risk management, too, rose to a centre role in developing business
operations in 2010. As part of its corporate responsibility scheme, HK
Ruokatalo announced in February 2011 the launch of a new kind of healthier and
tastier pork, HK Rapeseed pork, in which the fat becomes compatible with
nutritional recommendations in a natural way.
MARKET AREA: SWEDEN
(EUR million)
Q4/2010 Q4/2009 2010 2009
--------------------------------------------------
--------------------------------------------------
Net sales 275,0 278,3 997,1 1 037,4
--------------------------------------------------
EBIT 8,0 9,1 20,4 16,7
--------------------------------------------------
- EBIT margin, % 2,9 3,3 2,0 1,6
--------------------------------------------------
Scan AB's net sales in 2010 amounted to EUR 997.1 million (EUR 1 037.4 m). EBIT
came in at EUR 20.4 million (EUR 16.7 m). In Sweden, EBIT in 2010 was increased
by the EUR 7.9 million non-recurring gains on the disposal of the production
facilities in Uppsala and Visby recognized for the third quarter. In 2009,
non-recurring charges totalled EUR 10.3 million.
The benefits of the original three-year efficiency programme initiated in 2009
are overdue. In September 2010, it was decided to expand the programme in order
to secure the previously announced development benefits of EUR 30 million by
2012. In terms of scale, Scan's efficiency programme is the largest development
project that meat companies in the company's market areas have implemented
during recent decades. The implementation of large-scale projects within a
tight schedule alongside routine business operations has caused problems in
cost management. Implementation of the programme has involved exceptional
expenditure of some EUR 10 million during the year.
As part of the restructuring programme, Scan AB signed in early June an
agreement to sell its production facility in Visby on the island of Gotland to
a new company, Gotlands Slagteri AB. Scan AB holds 25 percent of the company
and Svenskt Butikskött 75 percent. The arrangement ensured continuation of the
production facility's operations in Visby.
On 30 December 2010, on the basis of previous agreements, Scan AB purchased
Falkbolagen Produktion AB, which operates in Malmö, Sweden. The company cuts
hams for Pärsons AB and has a permanent staff of approximately 20. Previously,
Falkbolagen Produktion has carried out cutting operations as freight work for
the Scan Group.
On 30 December 2010 Scan AB increased, in accordance with a previous agreement,
its shareholding in Bertil Erikssons Slakteri AB to a full 100 percent. The
fairly small slaughterhouse employing a staff of 14 located in Krylbo, central
Sweden, slaughters beef for Scan and it has a significant role in ensuring the
procurement of beef in central Sweden. Scan AB's holding before the transaction
at the end of the year was 35 percent. This share was acquired in autumn 2008.
Scan AB and KLS Ugglarps AB, owned by the Danish company, Danish Crown, signed
a cooperation agreement on the slaughtering of pork at Scan's Skara production
facility in Sweden as from the beginning of 2011. The efficiency of operations
at the Skara production facility will be significantly enhanced with increase
in the utilization rate.
Scan AB concluded in the year under review an agreement to supply the Swedish
retail chain, Coop, with consumer-packed meat. The agreement enabled a
consumer-packed meat production line investment in Linköping. In the summer a
new logistics centre was completed in Linköping and in the autumn a modern beef
cutting line. The strategy period also includes centralization of the
production of Scan's food sausages, enhancement of the efficiency of production
of Pärsons's semi-finished products as well as the combination of head office
and administration functions.
The strengthened Swedish krona has increased the amount of imported raw
material and at the same time significantly weakened the competitiveness of
production based on Swedish meat raw material.
Sales of the Pärsons brand of cold cuts have developed as planned. The
competitiveness of the brand has not declined as much as the other main brand,
Scan.
MARKET AREA: DENMARK
(EUR million)
Q4/2010 Q4/2009 2010 2009
----------------------------------------------
----------------------------------------------
Net sales 21,8 -- 21,8 --
----------------------------------------------
EBIT -0,0 -- -0,0 --
----------------------------------------------
- EBIT margin, % 0,0 -- 0,0 --
----------------------------------------------
At the end of November 2010, the acquisition of the Danish company, Rose
Poultry A/S, was completed and the company has been consolidated into the
HKScan Group since 29 November 2010. The Danish market is reported within
HKScan as a separate segment.
The aim is to develop Rose Poultry's product range for HKScan's through strong
fresh produce know-how and further strengthen the company's position in its
home market in Denmark, in Sweden and in the UK.
MARKET AREA: BALTICS
(EUR million)
Q4/2010 Q4/2009 2010 2009
------------------------------------------------
------------------------------------------------
Net sales 42,0 38,1 160,4 156,9
------------------------------------------------
EBIT 1,8 2,0 8,7 9,8
------------------------------------------------
- EBIT margin, % 4,3 5,1 5,4 6,3
------------------------------------------------
In the market area of the Baltics, net sales came to EUR 160.4 million (EUR
156.9 m) and EBIT to EUR 8.7 million (EUR 9.8 m).
The business environment in the Baltics continues to present a challenge due to
the state of the region's economies, although the situation has somewhat
stabilized. Weak consumer purchasing power was in evidence in all the Baltic
countries. Rakvere Lihakombinaat and Tallegg handled the situation as a whole
well and consolidated their market positions.
The Rakvere Group's Latvia-based subsidiary AS Rigas Miesnieks acquired during
the year a total of 98.8 percent of AS Jelgavas Galas Kombinats, a Latvian
company specializing in smoked meat products. At the end of the year, the sales
and logistics functions of Rigas Miesnieks and Jelgavas Galas Kombinats were
consolidated in order to streamline operations. The consolidation of functions
incurred exceptional costs totalling EUR 0.4 million. Most of the companies'
production-related activities will be centralized in Jelgava's new and
efficient plant during the current year. The company's dispatching department
and administration will remain in Riga.
In Latvia, the Group's market share has risen to almost a third with the
acquisition of Jelgavas Galas Kombinats. With the transaction, the Group has
become an even more significant player in Latvia.
MARKET AREA: POLAND
(EUR million)
*) Q4/2010 Q4/2009 2010 2009
------------------------------------------------
------------------------------------------------
Net sales 72,6 65,1 279,3 251,7
------------------------------------------------
EBIT 3,0 2,9 15,5 9,3
------------------------------------------------
- EBIT margin, % 4,1 4,4 5,6 3,7
------------------------------------------------
*) The figures refer to HKScan's share (50%) of the Sokolów Group's figures.
In Poland, Sokolów's net sales grew compared with the previous year, amounting
to EUR 279.3 million (EUR 251.7 m). EBIT was up significantly standing at EUR15.5 million (EUR 9.3 m).
The improvement in profitability in 2010 was based on focused strengthening of
the company's position in modern retail chains, profitable export growth and
tight cost control. In Poland, the European economic recession has hardly been
evident at all in food consumption or consumer purchasing decisions. The good
utilization rate of industrial production capacity and positive development in
sales volumes are a strong platform for maintaining and enhancing the
profitability of the business.
INVESTMENTS
Acquisition of the leading Danish poultry company, Rose Poultry A/S
HKScan and the owners of the Danish company, Rose Poultry A/S − Vinderup
Poultry A/S, Skovsgaard Fjerkræslagteri A/S and Hedegaard A/S − signed in
September an agreement according to which Denmark's largest poultry company
will be acquired by HKScan. The transaction was completed on 29 November 2010.
The final purchase price of the shares in Rose Poultry was EUR 23.4 million.
The purchase price consisted of a cash payment of EUR 15.4 million and 1 000
000 HKScan Series A shares. In connection with the transaction, HKScan also
assumed Rose Poultry's interest bearing net debt, amounting to approximately
EUR 45 million.
On 9 December 2010, HKScan's Board of Directors decided on a share issue
directed at Rose Poultry shareholders on the basis of the share issue
authorisation granted to it by the Annual General Meeting held on 23 April
2010.
Rose Poultry's shareholders were offered as part of the purchase price 1 000
000 HKScan Series A shares, which were subscribed on 9 December 2010. The
subscription price was EUR 8.00 per Series A share and it was paid with Rose
Poultry shares. The new Series A shares now issued entitle to the same
shareholder rights as existing Series A shares. The share issue is explained in
more detail under "Share issue" below.
With the transaction, HKScan's operations in the poultry market expanded to
Denmark and Sweden, and the company became a leading player in the poultry
market in northern Europe. Rose Poultry's strategic suitability for HKScan is
excellent, and its acquisition constitutes an important step in the development
of the company's poultry business. The acquisition was in line with the
strategy of the HKScan Group.
Rose Poultry produces annually more than 130 million kilos of poultry meat,
which is sold under the company's own Rose brand as well as under private
labels as fresh, frozen and processed products in the company's main markets in
Denmark, Sweden and the UK. Rose Poultry has three production facilities in
Denmark and the company employs approximately 1 000 people.
Production-related investments
The Group's production-related gross investments in 2010 totalled EUR 70.7
million (EUR 41.3 m). Breakdown of investments by market area: Finland EUR 20.2
million (EUR 8.0 m), Sweden EUR 27.5 million (EUR 18.5 m), Denmark EUR 0.7
million (EUR 0.0 m) and the Baltics EUR 14.5 million (EUR 7.3 m). HKScan's
share of Sokolów investments in Poland added a further EUR 7.8 million (EUR 7.5
m).
In Finland, the most important investments concerned the production line for
ground meat products completed in Vantaa and the start-up of the extension to
the beef slaughterhouse in Outokumpu. In Sweden, investments concerned, e.g.
Linköping's distribution centre, restructuring of beef cutting operations and
the consumer-packed meat production facility in Linköping as well as
centralizing pork cutting operations in Kristianstad. In the Baltics, Rakvere
invested in an animal waste processing unit and Tallegg in developing the
poultry slaughter process.
FINANCING
The Group's interest-bearing debt at year-end stood at 514.2 million (EUR 417.4
m). The growth in debt was affected by the considerable strengthening of the
Swedish crown (by approximately 12.5%) throughout the year, tying up of working
capital and the higher cash flow from investing activities following the
relatively low investment level the previous year. In addition, in conjunction
with the Rose Poultry transaction, liability was assumed for the
interest-bearing debt of Rose Poultry, which at 31 December 2010 amounted to
approximately EUR 52 million.
The Group's liquidity has been good throughout the year. Untapped credit
facilities at 31 December 2010 stood at EUR 203 million (EUR 207 m). In
addition, the Group has other untapped overdraft and other facilities of EUR 34
million (EUR 39 m). The EUR 100 million commercial paper programme had been
drawn in the amount of EUR 37 million (EUR 5 m).
The company has experienced no problems with re-financing and sees no
significant need for further financing before the year 2013. The company's
current loan agreements are subject to ordinary terms relating to profit and
balance sheet. The financial covenants are net gearing ratio and ratio of net
debt to EBITDA.
At the end of the year, the equity ratio stood at 34.0 percent (37.1%).
The interest rate remained throughout the financial year at a historical low.
The costs of hedging equity denominated in EEK declined clearly in conjunction
as Estonia approached joining the euro. In addition the amount of
interest-bearing loans during the early part of the year were significantly
lower than at the end of the year due to the share offering executed at the end
of 2009. These factors explain the clear decrease in net financial expenses at
an annual level compared with the previous year.
TAXES
The Group's taxes for January to December 2010 totalled EUR -5.7 million (EUR
-4.9 m). The effective tax rate was 15.6 percent (13.0%). The lower effective
tax rate was the result of a number of distinct factors, with the greatest
impact originating in the Baltics. In the Baltic operations, advantage was
taken of Estonia's zero tax rate on retained profits as, so far, the company
has not planned on distributing profits from the Baltics.
EFFECT OF CURRENCY EXCHANGE RATES
Of the Group's main currencies, the Swedish krona strengthened substantially
throughout the whole year. Overall, the currency strengthened by 12.5%. The
Polish zloty strengthened by some 3%. The Danish krone is tied to the euro with
a certain fluctuation margin.
The strong Swedish krona had a negative impact on the competitiveness of the
company's segment in Sweden, as the inexpensive and continuously increasing
imported raw material squeezed prices.
Fluctuations in currency exchange rates become visible upon the consolidation
of the figures of foreign business segments. At the closing date, an average of
two thirds of the equities of foreign subsidiaries had been hedged. After the
end of the year under review, Estonia adopted the euro. EEK-denominated equity
hedges ended in January 2011.
SHARE OFFERING
HKScan's Board of Directors implemented a share issue directed at Rose
Poultry's shareholders on the basis of the share issue authorisation granted to
it by the Annual General Meeting held on 23 April 2010.
Rose Poultry's shareholders were offered 1 000 000 HKScan Series A shares, the
subscription price of which was EUR 8.00 per Series A share.
The number of Series A shares to be issued in the share issue represents
approximately 2.02 percent of the number of all registered HKScan Series A
shares and 0.63 percent of votes carried by all the company's shares after the
issue has been effected.
The share issue directed to the shareholders of Rose Poultry resulted in the
number of Series A shares in HKScan rising from 48 626 522 to 49 626 522. The
share capital was not increased, as the subscription price was credited to the
reserve for invested unrestricted equity in its entirety.
The new shares were entered in the Trade register on 17 December 2010. Trading
together with the company's existing A Shares began on 20 December 2010. The
new Series A shares issued in the share issue will be subject to a lock-up
arrangement. During a period of 21 months from the closing date of the
acquisition (29 November 2010) at maximum 100 000 Series A shares can be
transferred within a 30 day period to any third party other than HKScan without
the consent of HKScan.
RESEARCH AND DEVELOPMENT
Practically all research and development in the HKScan Group involves normal
product development, meaning 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
9.6 million (EUR 8.9 m) was spent on R&D in 2010, equal to 0.5 percent of net
sales.
An example of a significant product development project carried out in Finland
is Rapeseed pork, which has emerged as a result of long-term research. In
accordance with a specific feeding programme, Rapeseed pigs eat, in addition to
Finnish grain, rapeseed oil, which improves the quality of the fat in the meat
in a natural way. Two-thirds of the fat in Rapeseed pork is soft, good fat and
the meat contains as much as 4 times more omega 3 fatty acids than ordinary
pork. Rapeseed pork has a beneficial effect on heart health, and it is also
tastier and more tender.
CHANGES IN MANAGEMENT
Olli Antniemi MSc (Econ & Bus Admin) was appointed senior vice president in
charge of strategy and development effective as of 1 January 2010. He also
joined the Management Team. Mr Antniemi was responsible for strategic business
planning with an emphasis on Group synergies and management of the Group's
strategy process. On 29 November 2010 he was appointed managing director of
Rose Poultry A/S responsible for HKScan's operations in Denmark. He previously
served as executive vice president of the HKScan Group's Baltic Group, as
managing director of Scan AB, as development director at HK Ruokatalo Oy and,
most recently, as senior vice president in charge of strategy and development
at HKScan. Mr Antniemi is a member of HKScan's Management Team and he reports
to CEO Matti Perkonoja.
In January 2010, the company's Board of Directors and HKScan Corporation's CEO
Matti Perkonoja agreed that he will stay on as CEO longer than previously
announced, until the end of February 2012, after which time he plans to retire.
Previously, he intended to retire after 2010.
Sirpa Laakso, MSc (Econ. & Bus. Adm.)was appointed HR director at HKScan
Corporation and a member of the Management Team on 24 November 2010. Ms Laakso
is responsible for HKScan's HR functions and for their development in all of
the Group's market areas. She reports to CEO Matti Perkonoja. Ms Laakso took up
her post on 13 January 2011.
CHANGES IN GROUP STRUCTURE
HKScan Corporation transitioned on 1 January 2010 to a holding company
structure in its Finnish business. The reorganization streamlined the
affiliated group's financial reporting and internal supervision. It was
accomplished as a business transfer on 1 January 2010 by transferring HKScan
Corporation's production-related property, plant and equipment in Finland as
well as its holdings in subsidiaries and associates to HKScan Finland Oy, a
holding company wholly owned by HKScan Corporation.
The reorganization was technical and legal in nature and it has no effect on
operational activities. HK Ruokatalo Oy and LSO Foods Oy, which changed its
name to HK Agri Oy at the beginning of 2011, the companies responsible for the
Group's Finnish business, carry on their activities as before. The arrangement
had no effect on jobs or the standing of the parent company or its
shareholders. Managing director Jari Leija of HK Ruokatalo Oy also serves as
managing director of HKScan Finland Oy.
In a bid to secure demand for Finnish meat raw material, HK Ruokatalo Oy
entered into cooperation in the early part of the year with Kivikylän
Kotipalvaamo Oy, a family business based in western Finland. The cooperation is
supported in the form of a 49 percent minority holding in the company, with the
current operators continuing to carry on the company's business proper. The
company was consolidated as a subsidiary based on control already on 31
December 2009.
AS Rigas Miesnieks (”Rigas Miesnieks”) signed in March an agreement on
acquiring a 90.8 percent holding in the Latvian company, AS Jelgavas Galas
Kombinats (”Jelgava”), which specializes in smoked meat products. The deal was
approved by the Latvian competition authorities in late June. The transaction
was closed and Jelgava was transferred to the ownership and control of Rigas
Miesnieks on 30 June 2010. Rigas Miesnieks is part of AS Rakvere Lihakombinaat,
which is part of HKScan's Baltic Group, and is responsible for operations in
Latvia.
In addition, in 2010, two transactions were concluded with owners of
non-controlling interests. During 2010, Rigas Miesnieks acquired a total of
98.8 percent of Jelgava's shares.
As part of the restructuring programme, Scan AB signed an agreement in early
June on the transfer of its production facility located in Visby, Gotland, to a
new company, Gotlands Slagteri AB. Scan AB owns 25 percent and Svenskt
Butikskött 75 percent of the company. This arrangement ensured the continuation
of the production plant's operations in Visby.
HKScan Corporation (”HKScan”) announced on September 9, 2010 that it had signed
an agreement to acquire the share capital of Denmark's leading poultry company,
Rose Poultry A/S (“Rose Poultry”), and on November 11, 2010 that the approval
by the competition authorities required to close the deal had been obtained.
The transaction was closed and Rose Poultry was transferred to the ownership
and control of HKScan on 29 November 2010.
In October, the Finnish Competition Authority approved the plan of HKScan
Finland and Osuuskunta Karjaportti to establish a new corporate entity that
will continue the production of processed meats at Portti's plant located in
Tikkala in the town of Mikkeli. The new company, Järvi-Suomen Portti Oy, began
operations on 1 January 2011. HKScan Finland Oy is a majority shareholder in
the new company with a 90 percent holding.
On 30 December 2010, on the basis of previous agreements, Scan AB purchased
Falkbolagen Produktion AB, which operates in Malmö, Sweden. The company cuts
hams for Pärsons AB and has a permanent staff of some 20. Previously,
Falkbolagen Produktion has carried out cutting operations as freight work for
the Scan Group.
On 30 December 2010 Scan AB increased, in accordance with a previous agreement,
its shareholding in Bertil Erikssons Slakteri AB to a full 100 percent. The
fairly small slaughterhouse employing a staff of 14 located in Krylbo, central
Sweden, slaughters beef for Scan and it has a significant role in ensuring the
procurement of beef in central Sweden. Scan AB's holding before the transaction
at end of the year was 35 percent. This share was acquired in autumn 2008.
INSIDER TRIAL RELATING TO SHARE PURCHASES BY LSO OSUUSKUNTA
The Helsinki district prosecutor decided that six persons, who were part of LSO
Osuuskunta's management in 2006, would be prosecuted for aggravated abuse of
insider information. Three of these persons were members of the Board of
Directors of HKScan Corporation at the time. The charge was based on the
respective persons' positions at the time as representatives of LSO Osuuskunta
and did not relate to their actions as members of the Board of HKScan
Corporation.
In April 2010, the Helsinki district prosecutor resolved not to bring charges
in respect of HKScan CEO Matti Perkonoja and one company official.
The trial relating to share purchases made by LSO Osuuskunta in August 2006
began at the beginning of November, and the District Court handed down the
decision in the matter on 20 December 2010. The District Court dismissed the
prosecutor's charge of aggravated abuse of insider information. According to
the decision of the District Court, the members of the Board of Directors of
LSO Osuuskunta at the time were guilty of negligent abuse of insider
information, for which the District Court imposed a fine. In addition, LSO
Osuuskunta was ordered to pay a corporate fine and to forfeit the estimated
benefit it received.
The decision applied to the persons belonging to the Board of Directors of LSO
Osuuskunta at the time as well as to LSO Osuuskunta. Of the above-mentioned
persons, three - Markku Aalto, Tiina Varho-Lankinen and Matti Murto - were
members of HKScan Corporation's Board of Directors. All three as well as LSO
Osuuskunta have registered their intent to appeal the District Court's
judgement.
HKScan Corporation's Board of Directors decided in its meeting held on 4
January 2011 to convene an Extraordinary General Meeting on 4 February 2011 to
decide on the composition of the Board after receiving the notices of
resignation of three Board members. Notice of resignation has been tendered by
Markku Aalto, Tiina Varho-Lankinen and Matti Murto.
HKScan's largest shareholder, LSO Osuuskunta, proposed as new members of the
Board of Directors Juha Kylämäki, Niels Borup and Tero Hemmilä. Juha Kylämäki
is a farm entrepreneur and broiler meat producer. Niels Borup, MSc (Econ. &
Bus. Admin.), is a farm entrepreneur and a pork and milk producer. Tero
Hemmilä, M.Sc. (Agr. & For.), is managing director of Yara Suomi Oy.
In accordance with the proposal of HKScan's largest shareholder, LSO
Osuuskunta, the Extraordinary General Meeting elected to HKScan's Board of
Directors on 4 February 2011 Juha Kylämäki, Niels Borup and Tero Hemmilä.
At the organisation meeting held immediately following the Extraordinary
General Meeting, the Board elected Juha Kylämäki as its Chairman and Niels
Borup as Deputy Chairman. In addition to the above-mentioned new members Matti
Karppinen, Pasi Laine and Otto Ramel continue as members of HKScan's Board of
Directors.
AMENDMENTS TO THE ARTICLES OF ASSOCIATION
The Annual General Meeting held on 23 April 2010 resolved on the amendment of
Articles 6,7 and 9 of the Articles of Association, concerning the venue of
general meetings, the notice to general meetings and the Board of Directors of
the Company, respectively, to read as follows:
“Article 6
The Annual General Meeting of Shareholders shall be held annually by the end of
June on a date to be determined by the Board of Directors. General meetings of
shareholders may be held in the Company's domicile Turku, Vantaa or Helsinki.”
“Article 7
Notices to general meetings of shareholders shall be given to shareholders no
earlier than three (3) months and no later than three (3) weeks prior to the
meeting, however, no later than nine (9) days prior to the record date of the
meeting, by publication of the notice on the Company's website and, if so
decided by the Board of Directors, in one or more national newspapers as
determined by the Board of Directors.”
“Article 9
The company has a Board of Directors comprising between five and seven (5-7)
members. The Board of Directors elects a chairman and deputy chairman from
among its members.”
SHAREHOLDERS AND SHARE CAPITAL
At the end of the financial year, a total of 12 524 shareholders were entered
in the register of shareholders, compared to 11 387 the year before. At the end
of 2010, 23.3 percent (25.1%) of the company's shares were nominee registered
or held by non-domestic shareholders.
The Company's registered and fully paid-up share capital at the beginning of
the financial year and at the balance sheet date was EUR 66 820 528.10. The
share capital breaks down as follows:
Series A shares 49 626 522 shares 90.19%
Series K shares 5 400 000 shares 9.81%
Total 55 026 522 shares 100.00%
According to the Articles of Association, each A Share conveys one vote and
each K Share 20 votes. The K Shares are held by LSO Osuuskunta (4 735 000
shares) and Sveriges Djurbönder ek.för. (665 000 shares). Each share gives
equal entitlement to a dividend. The shares have no nominal value.
INCREASES IN SHARE CAPITAL FROM 2009 TO 2010
The company's share capital reported to the Trade Register was not increased
during the financial year 2010. The proceeds of EUR 8 million from the share
offering to the shareholders of Rose Poultry A/S − Vinderup Poultry A/S,
Skovsgaard Fjerkræslagteri A/S and Hedegaard A/S − executed in December 2010
were recognized in full in the reserve for invested unrestricted equity (RIUE).
The company's share capital reported to the Trade Register was not increased
during the financial year 2009. The proceeds of roughly EUR 78 million from the
share offering executed in November-December 2009 were recognized in full in
the reserve for invested unrestricted equity (RIUE).
STOCK EXCHANGE LISTINGS
HKScan's A Share has been quoted on Nasdaq OMX since 6 February 1997 in the
sector of Consumer Staples. During the year under review, 2010, 23 674 087 of
the company's shares were traded for a total of EUR 192 609 598. The highest
price quoted was EUR 10.20 and the lowest EUR 7.07. The middle price was EUR
8.18 and the year-end closing price was EUR 7.15. The share price fell by 8.9
percent on the year while the index for the Food Products sector (HX302020)
fell by 4.2 percent on or 5.9 points on the year.
The company's market capitalisation at the end of the financial year was EUR
393.1 million, having stood at EUR 423.7 million a year earlier, and breaks
down as follows: Series A shares had a market value of EUR 354.5 million and
the unlisted Series K shares a calculational market value of EUR 38.6 million.
HKScan has in place a market making agreement with FIM Pankkiiriliike Oy which
meets the requirements of Nasdaq OMX's Liquidity Providing (LP) operation.
TREASURY SHARES
At 1 January 2010, HKScan held a total of 51 982 of its A Shares. Over the
course of the year, 1 752 shares assigned in the years 2006-2008 as part of the
key employees' share bonus scheme reverted back to the company. At 31 December
2010, the company held a total of 53 734 of its A Shares. These had a market
value of EUR 0.38 million (EUR 7.15 each) and accounted for 0.10% of all shares
and 0.03% of all votes. No dividend is paid on treasury shares.
NOTICES OF CHANGES IN OWNERSHIP
During 2010, the company received one notice regarding changes in holdings
pursuant to Chapter 2:9 of the Securities Markets Act.
(1) Varma Mutual Pension Insurance Company announced that as a result of a
share transaction executed on 7 December 2010, its shareholding in HKScan
Corporation rose to 5.74 percent.
BOARD OF DIRECTORS' EXISTING AUTHORIZATIONS
(1) The AGM of 23 April 2010 authorized the Board to resolve on acquiring a
maximum of 3 500 000 Series A shares as treasury shares, equal to roughly 6.5%
of total registered shares and 7.2% of total A Shares.
Treasury shares may only be acquired using unrestricted equity. Treasury 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
utilized in purchasing the shares. The shares may be purchased in a proportion
other than that of the shares held by the shareholders (directed purchase).
This authorization is valid until 30 June 2011 and cancels the authorization
granted to the Board by the AGM of 23 April 2009 to resolve on acquiring the
company's treasury shares.
(2) The AGM also authorized the Board of Directors to resolve on an issue of
shares, option rights as well as other special rights entitling to shares as
referred to in Chapter 10:1 of the Limited Liability Companies Act. The Board
was authorized to resolve on the issue of a maximum of 5 500 000 A Shares,
corresponding to ca. 10.2% of all registered shares in the company and ca.
11.3% of all A Shares.
The Board may resolve upon all the terms and conditions of the issue of shares
and other special rights entitling to shares. The authorization to issue shares
shall cover the issuing of new shares as well as the transfer of the company's
treasury shares. The issue of shares and other special rights entitling to
shares may be implemented as a directed issue. This authorization is valid
until 30 June 2011 and cancels the authorization granted to the Board by the
AGM of 23 April 2009 on resolving on an issue of shares, option rights as well
as other special rights entitling to shares.
The authorizations concerning purchases of treasury shares and share issue were
granted to provide the company's Board with flexibility in deciding on capital
market transactions necessary to the company, e.g. to secure its financing
needs or to execute mergers and acquisitions. A directed acquisition of
treasury shares or directed share issue can only be executed for reasons of
weighty financial consequence to the company and the authorization cannot be
exercised in violation of the principle of shareholder equality.
EMPLOYEES
Excluding Denmark, the HKScan Group had in 2010, on average, 7 491 (7 429)
employees. The increase was due to the acquisitions in Finland and Latvia. In
December, over 900 more employees entered the Group's employment with the
acquisition of the Danish company, Rose Poultry AS. At the end of 2010, the
Group had 8 058 (6 963)employees.
Analysis of employees on average by market area:
2010 2009
------------------------
Finland 2 464 2 361
------------------------
Sweden 3 143 3 270
------------------------
Baltics 1 884 1 798
------------------------
Denmark 1) 913
------------------------
1) The figure corresponds to the situation at year-end.
In addition, Sokolów had on average 5 734 (5 665) employees.
Employees by country at 31 December 2010:
31.12.2010 % 31.12.2009 %
---------------------------------------------------
Sweden 2 622 32,5 2 689 38,6
---------------------------------------------------
Finland 2 325 28,9 2 210 31,7
---------------------------------------------------
Estonia 1 605 19,9 1 552 22,3
---------------------------------------------------
Denmark 969 12,0 43 0,6
---------------------------------------------------
Latvia 292 3,6 181 2,6
---------------------------------------------------
Poland (Scan) 189 2,3 235 3,4
---------------------------------------------------
Other countries 57 0,8 53 0,8
---------------------------------------------------
In addition, Sokolów had 6,145 (5 577) employees.
The HKScan Group has employees in nine European countries. Executive management
in each country ensures that Group companies have regard to the legislation and
agreements governing employment, remuneration and other terms of employment,
and occupational safety in their respective countries.
SHARE-BASED INCENTIVE SCHEME FOR KEY EMPLOYEES
The company had in place a share-based incentive scheme for key employees
concerning the years 2006−2008. The company's Board has not launched a new
share-based incentive scheme since the expiration of the earlier scheme at the
end of 2008. No bonuses were paid under the scheme in 2008, 2009 or 2010. In
accordance with the terms of the scheme, 1 752 A Shares assigned as a part of
the incentive scheme in the years 2006-2008 reverted to the company in 2010.
The three-year commitment period ended on 31 December 2010 and the shares were
released for the unrestricted use of their recipients.
RISKS AND UNCERTAINTY FACTORS IN THE NEAR FUTURE
The most significant uncertainty factors in the HKScan Group's business involve
developments in the price of raw materials and Finnish and Swedish pork in
particular, in future possibly also the availability of these too. Market
area-specific uncertainty factors have to do especially with the success of the
business development programmes in Finland and Sweden and the integration of
the Rose Poultry acquisition in Denmark.
Challenges in the international economic situation will continue. Major
fluctuation in the Group's central currencies may affect the Group's
competitiveness, net sales, earnings and balance sheet. Changes in demand
attributable to the financial climate such as, for example, growing
unemployment, may occur in the Group's market areas or its export markets.
These may affect the Group's net sales and earnings.
Any unforeseeable authorities procedures may affect the company's business in
its export markets.
The possibility of animal diseases can never be fully excluded in the food
industry's raw meat supplies.
The Group is currently involved in certain legal proceedings and civil
litigation. The cases remain pending but are estimated to have no significant
impact on the Group's financial standing, however.
CORPORATE RESPONSIBILITY
HKScan recognizes its responsibilities as a major northern European meat
company and will always operate, at a minimum, in accordance with legislation
and the requirements of the authorities. In 2010, HKScan's priorities in
responsibility were nutrition, the environment and animal welfare. In 2010,
HKScan responsibility scheme was implemented in the subsidiaries in Finland,
Sweden and the Baltics.
HKScan invests in continuous research and product development in order to
develop new, healthier and better meat-based products. As meat and foods
prepared from it play a key role in the diet of consumers in HKScan's business
area, the company and its subsidiaries are able to have an impact on public
health through the product ranges they offer. The heart-healthy Rapeseed pork
developed by HK Ruokatalo serves as an example. When rapeseed oil is added to
the feed of pigs, the quality of the fat in their meet is rendered softer in a
natural way.
HKScan operates on the principle of causing minimum adverse environmental
impact during production. This principle is put into practice in all market
areas, taking into account existing regulations and EU-standard certification
processes. An ISO 14001-certifed environmental management system is in place at
all HK Ruokatalo production plants in Finland, the Rakvere Lihakombinaat and
Tallegg plants in Estonia and in six Scan production plants in Sweden. Other
Scan facilities apply the BAS system, in which environmental efforts are
managed by a local steering group responsible for setting environmental targets
for plants and monitoring compliance. In Poland, the Sokolów plants operate
according to good production practice under the ongoing supervision of the
Polish veterinary authority.
All plants operated by the Group in Sweden and the Baltics furthermore have in
place a quality management system conforming to the ISO 9001 standard. Most, in
Finland too, also hold ISO 22000 certification for their product safety
management system or BRC (British Retail Consortium) certification.
In the food industry, energy, water, waste arising from processing biological
materials, wastewater and flue gases from heating plants cause the greatest
environmental loading. HKScan seeks to reduce the amount of energy and water
consumed in relation to production (= specific consumption), to reduce all
waste, particularly the relative amount of landfill waste, and to improve
sorting. Since there are differences in operations and technology, focus areas
vary from one production facility to another. Continuous improvement has been
achieved by combining and rationalizing operations, by introducing new
procedures.
In 2010, HKScan's subsidiaries have also been involved in projects modelling
carbon dioxide emissions and the carbon footprint in meat production.
Healthy production animals whose welfare has been attended to are the
prerequisite for the operation and profitability of the entire meat chain. The
wellbeing of production animals reduce their stress, morbidity, and thus the
need for antibiotic treatments. Animal welfare is also taken into account in
animal breeding, animal housing conditions and transportation. In 2010, HKScan
subsidiaries have paid particular attention to improving the welfare of
production animals and to developing a set of measures and guidelines for
welfare.
EVENTS TAKING PLACE AFTER 31 DECEMBER 2010
(1) HKScan Corporation's Board of Directors decided in its meeting held on 4
January 2011 to convene an Extraordinary General Meeting on 4 February 2011 at
11 am to decide on the composition of the Board after receiving the notices of
resignation of three Board members. Notice of resignation were tendered by
Markku Aalto, Tiina Varho-Lankinen and Matti Murto. According to the decision
of the District Court, the members of the Board of Directors of LSO Osuuskunta
at the time − including the three persons mentioned above, who were members of
HKScan's Board of Directors − would have been guilty of negligent abuse of
insider information, for which the District Court imposed a fine. All three
have registered their intent to appeal the District Court's judgement.
HKScan's largest shareholder, LSO Osuuskunta, proposed as new members of the
Board of Directors Juha Kylämäki, Niels Borup and Tero Hemmilä. Juha Kylämäki
(law student) is a farm entrepreneur and broiler meat producer. Niels Borup,
MSc (Econ. & Bus. Admin.), is a farm entrepreneur and a pork and milk producer.
Tero Hemmilä, M.Sc. (Agr. & For.), is managing director of Yara Suomi Oy.
In accordance with the proposal of HKScan's largest shareholder, LSO
Osuuskunta, the Extraordinary General Meeting elected to HKScan's Board of
Directors on 4 February 2011 Juha Kylämäki, Niels Borup and Tero Hemmilä.
At the organisation meeting held immediately following the Extraordinary
General Meeting, the Board elected Juha Kylämäki as its Chairman and Niels
Borup as Deputy Chairman. In addition to the above-mentioned new members Matti
Karppinen, Pasi Laine and Otto Ramel continue as members of HKScan's Board of
Directors.
(2) The productivity programme of HKScan Finland's subsidiary, HK Ruokatalo,
concerning the period 2011−2013 announced last autumn is ready and the
employer-employee negotiations relating thereto concerning blue and white
collar employees in HK Ruokatalo's industrial processes, which started in
November, ended in January.
HK Ruokatalo and its blue and white collar personnel employed in industrial
processes, have signed an agreement whereby the parties commit to a target
programme which, when implemented, will improve the productivity of the
company's industrial processes on average by 20 percent. A production
facility-specific programme to develop cost competitiveness drawn up for the
company's production facilities in Finland constitutes a key part of the
agreement.
HK Ruokatalo's own industrial activity will be enhanced by returning HK
Ruokatalo's partially outsourced operations relating to its core business (e.g.
pork cutting) in stages to the company during 2011.
In order to streamline the company's industrial structure, HK Ruokatalo will,
together with representatives of the personnel, seek solutions regarding the
future roles of the production facilities in Säkylä and Mellilä.
Implementation of the productivity programme will mean a reduction of roughly
230 person-years in HK Ruokatalo's business chain, including subcontractors and
outsourced operations, by the end of 2011.
The productivity programme aims to reduce overall expenditure by EUR 12 million
annually. Of the annual cost benefits mentioned above, EUR 6 million are
estimated to be achieved during 2011. The additional expenditure of EUR 3
million announced previously is not estimated to arise from the implementation
of the programme.
FUTURE OUTLOOK
Consumer demand for food is expected to remain steady in the Group's domestic
markets. The business's decentralized structure consisting of different product
groups and geographical areas, and the initiated and planned efficiency
programmes provide the foundation for stronger development of the Group's
competitiveness and profitability.
The exceptional internal supply chain problems that burdened 2010 have for the
most part been solved in the businesses in Finland and Sweden. Progress in the
Baltics and Poland is still on a sound footing. The ongoing integration of the
business in Denmark with the Group will bring synergy and other benefits during
the year.
In Sweden, the growing import of substantially cheaper pork has led to a change
that has weakened the market situation and profitability. If the change is
long-term, the company will consider increasingly using imported raw material
which meets the Group's quality and price criteria. Swedish consumers, whose
purchasing decisions guide the company's solutions, will rise to play a key
role.
The Group's full-year EBIT is expected to improve compared with 2010.
BOARD OF DIRECTORS' PROPOSAL ON DISTRIBUTION OF PROFIT
The parent company's distributable assets stand at EUR 168.0 million including
the reserve for invested unrestricted equity (RIUE), which holds EUR 151.1
million. The Board of Directors recommends that the company pays a dividend of
EUR 0.22 per share for 2010, i.e. a total of approximately EUR 12 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
HKScan Corporation's Annual General Meeting will be held at 11 am on Wednesday,
27 April 2011 in the Ballroom of Helsinki Fair Centre; address Messuaukio 1,
00520 Helsinki. To be eligible to attend the Annual General Meeting,
shareholders should be registered by 13 April 2011 in HKScan Corporation's
shareholder register maintained by Euroclear Finland Ltd (the Finnish Central
Securities Depository APK). Notice of and Board proposals to the Annual General
Meeting the will be published at a later date.
HKSCAN GROUP'S CONSOLIDATED FINANCIAL STATEMENTS 1 JANUARY - 31 DECEMBER 2010
CONSOLIDATED INCOME STATEMENT 1 JANUARY - 31 DECEMBER
(EUR million)
Note 2010 2009
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NET SALES 2 113,9 2 124,7
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Change in inventories of finished goods and work in 3,5 5,1
progress
--------------------------------------------------------------------------------
Work performed for own use and capitalised 1,3 0,9
--------------------------------------------------------------------------------
Other operating income 1. 13,6 6,7
--------------------------------------------------------------------------------
Share of associates' results 1,8 0,9
--------------------------------------------------------------------------------
Materials and services -1 445,9 -1 474,5
--------------------------------------------------------------------------------
Employee benefits expenses 1. -316,6 -306,7
--------------------------------------------------------------------------------
Depreciation and amortization 1. -61,5 -57,2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Other operating expenses 1. -262,0 -244,8
--------------------------------------------------------------------------------
EBIT 48,0 55,1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial income 8,1 5,2
--------------------------------------------------------------------------------
Financial expenses -21,9 -24,9
--------------------------------------------------------------------------------
Share of associates' results 2,2 2,0
--------------------------------------------------------------------------------
PROFIT/LOSS BEFORE TAXES 36,5 37,3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Income taxes -5,7 -4,9
--------------------------------------------------------------------------------
PROFIT/LOSS FOR THE PERIOD 30,8 32,5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PROFIT/LOSS FOR THE PERIOD ATTRIBUTABLE TO:
--------------------------------------------------------------------------------
Equity holders of the parent 27,9 29,9
--------------------------------------------------------------------------------
Non-controlling interests 2,9 2,6
--------------------------------------------------------------------------------
Total 30,8 32,5
--------------------------------------------------------------------------------
Earnings per share calculated on profit attributable to equity holders of the
parent:
EPS, undiluted, continuing operations, EUR/share 0,52 0,64
------------------------------------------------------------
EPS, diluted, continuing operations, EUR/share 0,52 0,64
------------------------------------------------------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR 1 JANUARY - 31 DECEMBER 2010
(EUR million)
2010 2009
----------------------------------------------------------------------
PROFIT/LOSS FOR THE PERIOD 30,8 32,5
----------------------------------------------------------------------
----------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME (after taxes):
----------------------------------------------------------------------
Exchange differences on translating foreign operations 13,5 1,8
----------------------------------------------------------------------
Available-for-sale investments 0,0 0,4
----------------------------------------------------------------------
Cash flow hedging 1,8 -7,1
----------------------------------------------------------------------
TOTAL OTHER COMPREHENSIVE INCOME 8,6 4,8
----------------------------------------------------------------------
----------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 46,1 27,6
----------------------------------------------------------------------
----------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO:
----------------------------------------------------------------------
Equity holders of the parent 42,6 24,8
----------------------------------------------------------------------
Non-controlling interests 3,5 2,8
----------------------------------------------------------------------
Total 46,1 27,6
----------------------------------------------------------------------
----------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET AT 31 DECEMBER
(EUR million)
Note 2010 2009
---------------------------------------------------------------------------
ASSETS
---------------------------------------------------------------------------
NON-CURRENT ASSETS
---------------------------------------------------------------------------
Intangible assets 2. 77,1 65,7
---------------------------------------------------------------------------
Goodwill 3. 100,4 88,2
---------------------------------------------------------------------------
Property, plant and equipment 4. 537,8 469,1
---------------------------------------------------------------------------
Shares in associates 27,0 20,9
---------------------------------------------------------------------------
Trade and other receivables 25,3 18,2
---------------------------------------------------------------------------
Other long-term investments 13,1 10,5
---------------------------------------------------------------------------
Deferred tax asset 14,4 12,3
---------------------------------------------------------------------------
NON-CURRENT ASSETS 795,0 685,0
---------------------------------------------------------------------------
---------------------------------------------------------------------------
CURRENT ASSETS
---------------------------------------------------------------------------
Inventories 5. 159,9 118,7
---------------------------------------------------------------------------
Trade and other receivables 240,6 194,3
---------------------------------------------------------------------------
Income tax receivable 0,3 0,2
---------------------------------------------------------------------------
Other financial assets 3,9 2,0
---------------------------------------------------------------------------
Cash and cash equivalents 69,5 73,9
---------------------------------------------------------------------------
CURRENT ASSETS 474,1 389,0
---------------------------------------------------------------------------
---------------------------------------------------------------------------
ASSETS 1 269,2 1 074,0
---------------------------------------------------------------------------
---------------------------------------------------------------------------
EQUITY AND LIABILITIES
---------------------------------------------------------------------------
---------------------------------------------------------------------------
EQUITY
---------------------------------------------------------------------------
Share capital 6. 66,8 66,8
---------------------------------------------------------------------------
Share premium reserve 73,4 74,2
---------------------------------------------------------------------------
Treasury shares -0,0 -0,0
---------------------------------------------------------------------------
Fair value reserve and other reserves 154,4 149,7
---------------------------------------------------------------------------
Translation differences 0,6 -13,1
---------------------------------------------------------------------------
Retained earnings 124,4 111,6
---------------------------------------------------------------------------
Equity attributable to equity holders of the parent 419,6 389,3
---------------------------------------------------------------------------
Non-controlling interests 11,1 9,4
---------------------------------------------------------------------------
EQUITY 430,6 398,7
---------------------------------------------------------------------------
---------------------------------------------------------------------------
NON-CURRENT LIABILITIES
---------------------------------------------------------------------------
Deferred tax liability 38,9 32,2
---------------------------------------------------------------------------
Non-current interest-bearing liabilities 361,2 329,9
---------------------------------------------------------------------------
Non-current non-interest bearing liabilities 12,4 5,9
---------------------------------------------------------------------------
Pension obligations 3,1 3,6
---------------------------------------------------------------------------
Non-current provisions 2,4 8,5
---------------------------------------------------------------------------
NON-CURRENT LIABILITIES 418,0 380,1
---------------------------------------------------------------------------
---------------------------------------------------------------------------
CURRENT LIABILITIES
---------------------------------------------------------------------------
Current interest-bearing liabilities 153,0 87,5
---------------------------------------------------------------------------
Trade and other payables 262,5 202,0
---------------------------------------------------------------------------
Income tax liability 2,7 2,7
---------------------------------------------------------------------------
Current provisions 2,3 2,8
---------------------------------------------------------------------------
CURRENT LIABILITIES 420,6 295,1
---------------------------------------------------------------------------
---------------------------------------------------------------------------
EQUITY AND LIABILITIES 1 269,2 1 074,0
---------------------------------------------------------------------------STATEMENT OF CHANGES IN CONSOLIDATED EQUITY
(EUR million)
1. 2. 3. 4. 5.*) 6. 7. 8. 9. 10. 11.
12.
--------------------------------------------------------------------------------
--
EQUITY 66,8 74,2 -8,4 143,5 0,0 14,6 -13,1 0,0 111,6 389,3 9,4
398,7
AT
01.01.
10
--------------------------------------------------------------------------------
--
Income -0,1 1,9 -0,6 13,7 27,7 42,6 3,5
46,1
and
expens
es
recogn
ized
during
the
period
,
total
--------------------------------------------------------------------------------
--
Share- -0,8 -0,8
-0,8
based
compen
sation
expens
e
--------------------------------------------------------------------------------
--
Other -0,9 -0,9 -0,0
-1,0
change
--------------------------------------------------------------------------------
--
Direct 1,2 1,2 -0,2
1,1
recogn
ition
in
retain
ed
earnin
gs**)
--------------------------------------------------------------------------------
--
Transf 4,3 -4,3 0,0
0,0
ers
betwee
n
items
--------------------------------------------------------------------------------
--
Share 0,0
0,0
issue
--------------------------------------------------------------------------------
--
Purcha 0,0
0,0
se of
treasu
ry
shares
--------------------------------------------------------------------------------
--
Increa 0,0 0,0 -0,1
-0,1
se in
holdin
gs in
subsid
iaries
--------------------------------------------------------------------------------
--
Divide -11,9 -11,9 -1,6
-13,5
nd
distri
bution
--------------------------------------------------------------------------------
--
EQUITY 66,8 73,4 -6,5 143,5 0,0 17,4 0,6 0,0 124,4 419,6 11,1
430,6
AT
31.12.
10
--------------------------------------------------------------------------------
--
1. 2. 3. 4. 5.*) 6. 7. 8. 9. 10. 11.
12.
--------------------------------------------------------------------------------
---
EQUITY 66,8 73,5 -2,2 66,7 20,0 12,2 -15,8 0,0 97,0 318,2 5,4
323,7
AT
01.01.
09
--------------------------------------------------------------------------------
---
Income 0,0 -6,7 -0,1 2,7 29,0 24,8 2,8
27,6
and
expens
es
recogn
ized
during
the
period
,
total
--------------------------------------------------------------------------------
---
Share- 0,8 0,8
0,8
based
compen
sation
expens
e
--------------------------------------------------------------------------------
---
Other -20,0 0,2 -19,8 0,0
-19,8
change
--------------------------------------------------------------------------------
---
Direct -2,0 -2,0
-2,0
recogn
ition
in
retain
ed
earnin
gs*
--------------------------------------------------------------------------------
---
Transf 0,6 2,3 -2,9 0,0
0,0
ers
betwee
n
items
--------------------------------------------------------------------------------
---
Share 76,8 76,8
76,8
issue
--------------------------------------------------------------------------------
---
Purcha 0,0
0,0
se of
treasu
ry
shares
--------------------------------------------------------------------------------
---
Increa 0,0 2,1
2,1
se in
holdin
gs in
subsid
iaries
--------------------------------------------------------------------------------
---
Divide -9,4 -9,4 -0,9
-10,3
nd
distri
bution
--------------------------------------------------------------------------------
---
EQUITY 66,8 74,2 -8,4 143,5 0,0 14,6 -13,1 0,0 111,6 389,3 9,4
398,7
AT
31.12.
09
--------------------------------------------------------------------------------
---
COLUMNS: 1. Share capital, 2. Share premium reserve, 3. Revaluation reserve, 4.
Reserve for invested unrestricted equity (RIUE), 5. Other equity item, 6. Other
reserves, 7. Translation differences, 8. Treasury shares, 9. Retained earnings,
10. Equity holders of the parent, 11. Non-controlling interests, 12. Total
*) Comprising interest paid on hybrid bond.
CASH FLOW STATEMENT
(EUR million)
2010 2009
--------------------------------------------------------------------------------
Operating activities
--------------------------------------------------------------------------------
EBIT 48,0 55,1
--------------------------------------------------------------------------------
Adjustments to EBIT -4,6 -0,4
--------------------------------------------------------------------------------
Depreciation and amortization 61,5 57,2
--------------------------------------------------------------------------------
Change in provisions -7,9 7,6
--------------------------------------------------------------------------------
Change in net working capital -3,7 2,5
--------------------------------------------------------------------------------
Financial income 8,1 5,2
--------------------------------------------------------------------------------
Financial expenses -21,9 -24,9
--------------------------------------------------------------------------------
Taxes -5,7 -4,9
--------------------------------------------------------------------------------
Net cash flow from operating activities 73,8 97,4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Investing activities
--------------------------------------------------------------------------------
Gross investments in property, plant and equipment -73,6 -43,7
--------------------------------------------------------------------------------
Disposals of property, plant and equipment 7,0 2,9
--------------------------------------------------------------------------------
Investments in subsidiary -25,2 -4,7
--------------------------------------------------------------------------------
Shares in associates purchased -1,6 -0,3
--------------------------------------------------------------------------------
Shares in associates sold 1,3 0,0
--------------------------------------------------------------------------------
Loans granted -1,0 -0,0
--------------------------------------------------------------------------------
Repayments of loans receivable 1,2 5,1
--------------------------------------------------------------------------------
Net cash flow from investing activities -91,9 -40,8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cash flow before financing activities -18,1 56,6
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financing activities
--------------------------------------------------------------------------------
Proceeds from share offering 0,0 76,8
--------------------------------------------------------------------------------
Capital loan payments received 0,0
--------------------------------------------------------------------------------
Repayment of hybrid bond 0,0 -20,0
--------------------------------------------------------------------------------
Current borrowings raised 169,9 46,6
--------------------------------------------------------------------------------
Current borrowings repaid -159,1 -82,3
--------------------------------------------------------------------------------
Non-current borrowings raised 45,2 74,7
--------------------------------------------------------------------------------
Non-current borrowings repaid -33,0 -160,8
--------------------------------------------------------------------------------
Interest on hybrid bond 0,0 -2,1
--------------------------------------------------------------------------------
Dividends paid -11,9 -9,4
--------------------------------------------------------------------------------
Purchase of treasury shares -0,0 0,0
--------------------------------------------------------------------------------
Net cash flow from financing activities 11,1 -76,5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Change in cash and cash equivalents -7,0 -19,9
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cash and cash equivalents at 1.1. 75,9 94,4
--------------------------------------------------------------------------------
Effect of changes in exchange rates on cash and cash equivalents 4,5 1,4
--------------------------------------------------------------------------------
Cash and cash equivalents at 31.12. 73,4 75,9
--------------------------------------------------------------------------------
FINANCIAL INDICATORS
2010 2009
--------------------------------------------------
--------------------------------------------------
Net sales, EUR million 2 113,9 2 124,7
--------------------------------------------------
EBIT, EUR million 48,0 55,1
--------------------------------------------------
- as % of net sales 2,3 2,6
--------------------------------------------------
Profit before taxes, EUR million 36,5 37,3
--------------------------------------------------
- as % of net sales 1,7 1,8
--------------------------------------------------
Return on equity (ROE), % 7,4 9,0
--------------------------------------------------
Return on investment (ROI). % 6,3 7,4
--------------------------------------------------
Equity ratio, % 34,0 37,1
--------------------------------------------------
Net gearing ratio, % 101,7 84,9
--------------------------------------------------
Gross investments, EUR million 70,7 41,3
--------------------------------------------------
- as % of net sales 3,3 1,9
--------------------------------------------------
R&D expenditure, EUR million 9,6 8,9
--------------------------------------------------
- as % of net sales 0,5 0,4
--------------------------------------------------
Employees, average 7 491 7 429
--------------------------------------------------
PER SHARE DATA
2010 2009
-------------------------------------------------------------------
-------------------------------------------------------------------
Earnings per share (EPS), undiluted, EUR 0,52 0,64
-------------------------------------------------------------------
Earnings per share (EPS), diluted, EUR 0,52 0,64
-------------------------------------------------------------------
Equity per share, EUR 7,63 7,21
-------------------------------------------------------------------
Dividend per share, EUR 0,22 *) 0,22
-------------------------------------------------------------------
Dividend payout ratio, undiluted, % 42,6*) 34,5
-------------------------------------------------------------------
Dividend payout ratio, diluted, % 42,6*) 34,5
-------------------------------------------------------------------
Effective dividend yield, % 3,1*) 2,8
-------------------------------------------------------------------
Price/earnings ratio (P/E)
-------------------------------------------------------------------
- undiluted 13,9 12,3
-------------------------------------------------------------------
- diluted 13,9 12,3
-------------------------------------------------------------------
Lowest trading price, EUR 7,07 3,70
-------------------------------------------------------------------
Highest trading price, EUR 10,20 10,38
-------------------------------------------------------------------
Middle price, EUR 8,18 7,18
-------------------------------------------------------------------
Closing price on year, EUR 7,15 7,85
-------------------------------------------------------------------
Market capitalisation, EUR million 393,1 423,7
-------------------------------------------------------------------
Shares traded in thousands 23 674 22 285
-------------------------------------------------------------------
-- % of average number 43,8 49,6
-------------------------------------------------------------------
Adjusted number of outstanding shares in thousands
-------------------------------------------------------------------
- average during the financial year 54 015 44 937
-------------------------------------------------------------------
- at end of financial year 54 973 53 975
-------------------------------------------------------------------
- fully diluted 54 973 53 975
-------------------------------------------------------------------
*) Based on Board of Directors' dividend recommendation.
FORMULAE FOR FINANCIAL INDICATORS
Profit before taxes - taxes
Return on equity (%) ---------------------------------- x 100
Total shareholders' equity (average)
Profit before taxes + interest expenses and
other financial expenses
Return on investment (%) ---------------------------------- x 100
Balance sheet total - zero interest
debts (average)
Total equity
Equity ratio (%) ---------------------------------- x 100
Balance sheet total - advances received
Net interest-bearing liabilities - interest-
bearing loans receivable − cash and carry equivalents
Net gearing ratio(%) ---------------------------------- x 100
Total shareholders' equity
Equity attributable to
equity holders of the parent
Earnings per share -------------------------------------
Average adjusted number of shares
during the financial year
Equity attributable to
equity holders of the parent
Equity per share ------------------------------------------
Adjusted number of shares
at end of financial year
Dividend per share
Dividend per share --------------------------------------------
Coefficient of share issues
after the financial year
Adjusted dividend per share
Dividend payout ratio (%) --------------------------------------- x 100
Earnings per share
Dividend per share
Effective dividend yield (%) --------------------------------------- x 100
Adjusted closing price on the last
trading day
Adjusted closing price on the last
trading day
P/E ratio ---------------------------------------
Earnings per share
Market capitalisation Number of outstanding shares at the end of the
financial year x closing price at the last day of the financial year
No. of employees Average of workforce figures calculated at the
end of calendar months
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES
HKScan Corporation's financial statement bulletin for 1 January − 31 December
2010 has been prepared in compliance with IAS 34 Interim Financial Reporting.
The consolidated financial statements have been prepared in compliance with the
International Financial Reporting Standards (IFRS) and the IAS and IFRS
standards and SIC and IFRIC interpretations effective at 31 December 2010.
The consolidated financial statements have been prepared in compliance with the
same accounting policies as in 2009 except for the following new standards,
interpretations and standard amendments which are effective as of 1 January
2010.
- Amended IAS 27. Consolidated and Separate Financial Statements. The amended
standard requires the effects of changes in subsidiary ownership to be
recognized directly in Group equity when the parent entity retains control. If
control in the subsidiary is lost, any remaining investment is measured to fair
value and any difference recognized in profit or loss. A corresponding
accounting treatment will in future apply also to investments in associates
(IAS 28) and interests in joint ventures (IAS 31) As a result of the amendment,
the losses of a subsidiary can be allocated to the non-controlling interest
also when the losses exceed the non-controlling interest's investment.
- Change to IAS 39, Financial Instruments: Recognition and Measurement -
Eligible Hedged Items. These changes relate to hedge accounting. Their purpose
is to clarify the instructions of IAS 39 on the hedging of unilateral risk and
risk of inflation in items belonging to financial assets or liabilities. The
interpretation has not had an effect on the consolidated financial statements
- Improvements to IFRSs. The small and less urgent changes to the standards
made through the Annual Improvements procedure are collected together and
implemented all at once, once a year. The changes in this project apply to a
total of 12 standards. The effects of the changes vary from standard to
standard but will not be significant for the future consolidated financial
statements.
- Changes to IFRS 2, Share-based Payment - Group Cash-Settled Share-Based
Payment Arrangements. The purpose of these changes is to clarify that a company
receiving goods or services from suppliers or service providers must apply IFRS
2, even if it does not have an obligation to make the required share-based cash
payments. It has not had any significant effect on the Group's financial
statements.
The Group has yet to apply the following new or revised standards and
interpretations published by the IASB. These will be applied as from the
effective date of each standard and interpretation or, if the effective date
does not fall on the first day of the financial year, as from the start of the
financial year first beginning after the effective date.
- Change to IAS 32, Financial Instruments: Presentation - Classification of
Rights Issues (effective from 1 February 2010 or the succeeding financial
periods). The change applies to the accounting treatment (classification) for
the issue of shares, options and warrant outside the issuer's functional
currency. The changes are not significant for the upcoming consolidated
financial statements.
- IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments
(effective from 1 July 2010 or the succeeding financial periods). The
interpretation clarifies accounting where an entity renegotiates the terms of a
financial liability and as a result, issues its own equity instruments to the
creditor to settle all or a part of the financial liability. It will not have
an effect on the Group's upcoming financial statements
- Amendments to IFRIC 14 interpretation, Prepayment of Minimum Funding
Requirement (effective from 1 January 2011 or the succeeding financial
periods). The amendment is aimed at correcting the unintended consequence of
IFRIC 14 IAS 19 − The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction. After the amendments, entities are
permitted to recognize as an asset some voluntary prepayments for minimum
funding contributions. They will not have an effect on the Group's upcoming
financial statements.
- Revised IAS 24, Related Party Disclosures(effective from 1 January 2011 or
the succeeding financial periods). The revised standard clarifies the
definition of a related party and simplifies the disclosure requirements for
government-related entities.
- IFRS 9, Financial Instruments (effective from 1 January 2013 or the
succeeding financial periods). IFRS 9 is the first phase in a broader project
to replace IAS 39 with a new standard. Different measurement methods have been
maintained, but they have been simplified. IFRS 9 divides financial assets into
two classifications: those measured at amortized acquisition cost and those
measured at fair value. The classification depends on the entity's business
model and the characteristics of the contractual cash flows. The IAS 39
instructions on impairment and hedge accounting remain in force. The figure for
previous years do not need to be adjusted if the standard adopted before the
financial period beginning on 1 January 2012. The standard has not yet been
approved for application in the EU.
- Improvements to IFRSs (as a rule, effective for financial periods beginning
on or after 1 January 2010). The small and less urgent changes to the standards
made through the Annual Improvements procedure are collected together and
implemented all at once, once a year. The amendments have not yet been approved
for application in the EU.
- ED 9 Joint Arrangements. The current IAS 31 Interests in Joint Ventures
permits the proportionate consolidation of the figures for a joint venture
(line by line consolidation). The standard (the new ED 9) is likely to be
amended to permit the application of the equity method only. The new standard
will significantly alter both Group figures and the treatment of the Poland
segment. No effective date has yet been determined.
ANALYSIS BY SEGMENT
Net sales and EBIT by main market area
(EUR million)
Possible table in table detected.
Object reference not set to an instance of an object.
*) Includes EUR 1.3 million in non-recurring severance pay relating to the
termination of the former CEO's employment and recognized in Q1.
**) Includes soil decontamination expense on sold land of EUR 0.9 recognized in
Q2.
NOTES TO THE INCOME STATEMENT
1. NON-RECURRING ITEMS
(EUR million)
Q4/2010 Q4/2009 2010 2009
------------------------------------------------------------------------------
Employee benefits expenses *) -- -5,8 -- -10,8
------------------------------------------------------------------------------
Depreciation and impairment **) -- -- -- -1,9
------------------------------------------------------------------------------
Soil decontamination expense on sold land ***) -- -- -0,9 --
------------------------------------------------------------------------------
Gains on disposal of production facilities ***) -- -- 7,9 --
------------------------------------------------------------------------------
Total non-recurring items****) -- -5,8 7,0 -12,7
------------------------------------------------------------------------------
*) Included in the income statement in the item “Employee benefits expenses”.
**) Included in the income statement in the item “Depreciation ”.
***) Included in the income statement in the item “Other operating expenses”.
****)Included in the income statement in the item “Other operating income”.
During the financial year the company's business segments have incurred
exceptional costs amounting to nearly EUR 20 million. These items do not
entirely meet the definition of a non-recurring item in accordance with the
company's accounting policies, and do not appear in the table above. These
items include the exceptional costs and losses incurred from the industrial
action in the operations in Finland as well as losses and exceptional costs
weakening profitability associated with the start of restructuring in the
operations in Sweden. The items in question have been reported in the reviews
of the business segments, and the company has taken them into account in its
performance management.
NOTES TO THE BALANCE SHEET
2. CHANGES IN INTANGIBLE ASSETS
(EUR million)
1-12/2010 1-12/2009
------------------------------------------------------------
Carrying amount at beginning of period 65,7 57,8
------------------------------------------------------------
Translation differences 8,1 3,0
------------------------------------------------------------
Increase 1,2 2,8
------------------------------------------------------------
Increase (acquisitions) 4,2 2,0
------------------------------------------------------------
Decrease -0,2 0,0
------------------------------------------------------------
Depreciation and impairment -3,5 -2,7
------------------------------------------------------------
Transfer to other balance sheet item 1,5 2,8
------------------------------------------------------------
Carrying amount at end of period 77,1 65,7
------------------------------------------------------------
3. CHANGES IN GOODWILL
(EUR million)
1-12/2010 1-12/2009
------------------------------------------------------------
Carrying amount at beginning of period 88,2 81,7
------------------------------------------------------------
Translation differences 4,2 1,6
------------------------------------------------------------
Increase 1,3 1,9
------------------------------------------------------------
Increase (acquisitions) 6,8 3,0
------------------------------------------------------------
Decrease 0,0 0,0
------------------------------------------------------------
Depreciation and impairment 0,0 0,0
------------------------------------------------------------
Transfer to other balance sheet item 0,0 0,0
------------------------------------------------------------
Carrying amount at end of period 100,4 88,2
------------------------------------------------------------
4. CHANGES IN PROPERTY, PLANT AND EQUIPMENT
(EUR million)
1-12/2010 1-12/2009
------------------------------------------------------------
Carrying amount at beginning of period 469,1 479,3
------------------------------------------------------------
Translation differences 17,4 6,6
------------------------------------------------------------
Increase 71,6 41,2
------------------------------------------------------------
Increase (acquisitions) 43,0 3,8
------------------------------------------------------------
Decrease -2,4 -3,3
------------------------------------------------------------
Depreciation and impairment -59,5 -55,8
------------------------------------------------------------
Transfer to other balance sheet item -1,5 -2,6
------------------------------------------------------------
Carrying amount at end of period 537,8 469,1
------------------------------------------------------------
5. INVENTORIES
(EUR million)
1-12/2010 1-12/2009
--------------------------------------------
Materials and supplies 88,8 73,9
--------------------------------------------
Unfinished products 8,8 7,1
--------------------------------------------
Finished products 45,7 23,7
--------------------------------------------
Goods 0,0 0,0
--------------------------------------------
Other inventories 6,2 4,1
--------------------------------------------
Prepayments 2,6 2,1
--------------------------------------------
Live animals, IFRS 41 7,6 7,6
--------------------------------------------
Total inventories 159,9 118,7
--------------------------------------------
6. NOTES TO EQUITY
Share capital Number of Share Share RIUE Treasury Tot.
and share outstanding capital premium shares
Share premium shares reserve
reserve
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1.1.2010 53 974 540 66,8 72,9 143,1 0,0 282,8
--------------------------------------------------------------------------------
Reversion of -1 752 0,0 0,0
treasury
shares
--------------------------------------------------------------------------------
Share issue 1 000 000 8,0 8,0
--------------------------------------------------------------------------------
31.12.2010 54 972 788 66,8 72,9 151,1 0,0 290,8
--------------------------------------------------------------------------------
RIUE = Reserve for invested unrestricted equity
Dividends for the financial year 2009 were paid on 5 May 2010. At a dividend of
EUR 0.22 per share, the total came to EUR 11.9 million.
INTEREST-BEARING LIABILITIES
The Group's interest-bearing debt at year-end stood at 514.2 million (EUR 417.4
m). The growth in debt was affected by the considerable strengthening of the
Swedish crown (by approximately 12.5%) throughout the year, tying up of working
capital and the higher cash flow from investing activities following the
relatively low investment level the previous year. In addition, in conjunction
with the Rose Poultry transaction, liability was assumed for the
interest-bearing debt of Rose Poultry, which at 31 December 2010 amounted to
approximately EUR 52 million.
FINANCIAL RISKS
Financial risks consist of refinancing and liquidity risks, counterparty risks
in financial contracts, foreign exchange risks, interest rate risks, commodity
risks and credit risks. Financial risks and financial risk management are part
of the Group's treasury policy. The policy observed has been adopted by the
Board and its implementation is centralized to a finance unit led by the
Group's CFO. The treasury policy was not amended in the financial year 2010.
Hedging of a net investment in a foreign subsidiary was started in the period
under review in respect of the Danish krone.
The purpose of capital management in the Group is to support business through
an optimal capital structure by safeguarding a normal operating environment and
enabling organic and structural growth. Capital structure is influenced by
controlling the amount of working capital tied up in the business and through
reported profit/loss, distribution of dividend and share issues. The Group may
also decide on the disposal of assets to reduce liabilities.
Financial risks and capital management will be discussed in more detail in the
Notes to the 2010 financial statements.
DERIVATIVE INSTRUMENT LIABILITIES
(EUR million)
31.12.2010 31.12.2009
----------------------------------------------------------------
Nominal values of derivative instruments
----------------------------------------------------------------
----------------------------------------------------------------
Foreign exchange derivatives 149,9 104,6
----------------------------------------------------------------
Interest-rate derivatives 247,0 203,5
----------------------------------------------------------------
Electricity derivatives 10,2 10,8
----------------------------------------------------------------
----------------------------------------------------------------
Fair values of derivative instruments
----------------------------------------------------------------
----------------------------------------------------------------
Foreign exchange derivatives -0,3 -1,1
----------------------------------------------------------------
Interest-rate derivatives -16,8 -11,3
----------------------------------------------------------------
Electricity derivatives 2,2 -0,6
----------------------------------------------------------------
CONSOLIDATED OTHER CONTINGENT LIABILITIES
(EUR million)
31.12.2010 31.12.2009
---------------------------------------------------------------------
---------------------------------------------------------------------
Debts secured by
---------------------------------------------------------------------
pledges or mortgages
---------------------------------------------------------------------
- loans from financial institutions 56,1 33,9
---------------------------------------------------------------------
---------------------------------------------------------------------
Given as security
---------------------------------------------------------------------
- real estate mortgages 48,9 55,5
---------------------------------------------------------------------
- pledges 20,8 30,4
---------------------------------------------------------------------
- floating charges 47,3 20,7
---------------------------------------------------------------------
---------------------------------------------------------------------
Security for debts of participating interests
---------------------------------------------------------------------
- guarantees 5,3 5,0
---------------------------------------------------------------------
---------------------------------------------------------------------
For others
---------------------------------------------------------------------
- guarantees and pledges 13,8 12,4
---------------------------------------------------------------------
---------------------------------------------------------------------
Other contingencies
---------------------------------------------------------------------
Leasing commitments 25,5 19,0
---------------------------------------------------------------------
Other rent liabilities 56,3 40,6
---------------------------------------------------------------------
Other commitments 6,5 5,8
---------------------------------------------------------------------
BUSINESS TRANSACTIONS WITH RELATED PARTIES
2010 2009
---------------------------------------
Sales to associates 40,4 34,9
---------------------------------------
Purchases from associates 35,1 35,2
---------------------------------------
Trade and other receivables 1,8 2,5
---------------------------------------
Trade and other payables 8,8 8,5
---------------------------------------
Severance pay to the CEO 0,0 1,3
---------------------------------------
BUSINESSES ACQUIRED
Rose Poultry A/S
HKScan Corporation announced on September 9, 2010 that it had signed an
agreement to acquire all the shares in Denmark's leading poultry company, Rose
Poultry A/S (“Rose Poultry”), and on November 11, 2010 that the approval by the
competition authorities required to close the deal had been obtained. As a
result, the remaining closing procedures were executed, control was obtained
and Rose Poultry was transferred to HKScan's ownership as of November 29, 2010.
The largest poultry company in Denmark, Rose Poultry produces annually more
than 130 million kilos of poultry meat, which is sold under the company's own
Rose brand as well as under private labels as fresh, frozen or processed
products in the company's main markets in Denmark, Sweden and the UK. Rose
Poultry has three production facilities in Denmark and the company employs
approximately 1 000 people. Rose Poultry's net sales in the financial year
2008/2009 were approximately EUR 211 million.
The acquisition cost is calculated on the basis of the company's provisional
balance sheet as per 29 November 2010 prepared in accordance with IFRS and the
HKScan Group's accounting principles in respect of all material elements.
Because the process of fair valuing the acquired assets and liabilities has not
been completed as at the reporting date, the initial accounting for the
business combination is incomplete as at December 31, 2010. As a result, the
fair values of the acquired net assets and the amount of goodwill presented
below are provisional and may be subject to adjustments once the fair valuation
process is finalized.
The initial purchase price allocation calculation determined in Danish krone
has been translated into euros by using the November's Group reporting exchange
rate.
The preliminary amount of goodwill of EUR 3.6 million arising from the
acquisition is attributable to HKScan's stronger position as one of the leading
northern European poultry companies and the potential for substantial synergy
benefits expected from combining the Group and Rose poultry.
None of the goodwill recognized is expected to be deductible for income tax
purposes. The following table summarizes the consideration paid for Rose
Poultry and the amounts of the assets acquired and liabilities assumed
recognized at the acquisition date.
Consideration at 29 November 2010
--------------------------------------------------------------------------------
EUR
million
--------------------------------------------------------------------------------
Purchased consideration settled in cash 15,4
--------------------------------------------------------------------------------
Deferred consideration 8,0
--------------------------------------------------------------------------------
Total consideration 23,4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The assets and liabilities arising from the acquisitions are
as follows
--------------------------------------------------------------------------------
Note EUR
million
--------------------------------------------------------------------------------
Cash and cash equivalents 0,0
--------------------------------------------------------------------------------
Property, plant and equipment 4 39,8
--------------------------------------------------------------------------------
Brand(included in intangible assets) 2 2,6
--------------------------------------------------------------------------------
Contracts (included in intangible assets) 2 1,6
--------------------------------------------------------------------------------
Investments in associates 3,0
--------------------------------------------------------------------------------
Available-for-sale investments 0,5
--------------------------------------------------------------------------------
Inventories 5 23,7
--------------------------------------------------------------------------------
Trade and other receivables 25,6
--------------------------------------------------------------------------------
Trade and other payables -32,0
--------------------------------------------------------------------------------
Loans -41,9
--------------------------------------------------------------------------------
Provisions -0,1
--------------------------------------------------------------------------------
Deferred tax liabilities -2,9
--------------------------------------------------------------------------------
Total identifiable net assets 20,0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Goodwill 3,6
--------------------------------------------------------------------------------
The total consideration of 23.4 million includes a deferred consideration that
requires the Group to redeem the 1 000 000 consideration shares issued to the
former owners of Rose Poultry at EUR 8 million commencing in 18 months after
the acquisition date. The redemption obligation (written put) expires in 21
months from the acquisition date. The redemption liability has been recorded as
a financial liability and included in the purchase consideration at fair value
and it can be settled either by cash or by shares, at the request of the holder
of the put.
Acquisition-related costs (EUR 0.5 million) have been included in other
operating expenses in the consolidated income statement for the year ended 31
December 2010.
The fair value of trade and other receivables is EUR 25.6 million and includes
trade receivables with a fair value of EUR 24.5 million. The fair value of
trade receivables does not include any significant risk.
The fair value of the acquired identifiable intangible assets of EUR 4.2
million is provisional pending confirmation of the final valuations for those
assets.
The revenue included in the consolidated statement of comprehensive income
since 29 November 2010 contributed by Rose Poultry was EUR 21.8 million. Rose
Poultry also contributed EBIT of EUR -0.0 million over the same period.
Had Rose Poultry been consolidated from 1 January 2010, the consolidated
statement of comprehensive income would show revenue of EUR 2 314.2 million and
EBIT of EUR 52.7 million.
OTHER BUSINESSES ACQUIRED (AS Jelgavas Galas Kombinats, Falkbolagen Produktion
AB, Bertil Erikssons Slakteri AB)
AS Rigas Miesnieks (“Rigas Miesnieks”) signed in March an agreement on
acquiring a 90.8 percent holding in the Latvian company, AS Jelgavas Galas
Kombinats (“Jelgava”), which specializes in smoked meat products. The deal was
approved by the Latvian competition authorities in late June. The transaction
was closed and Jelgava was transferred to the ownership and control of Rigas
Miesnieks on 30 June 2010. Rigas Miesnieks is part of AS Rakvere Lihakombinaat,
which is part of HKScan's Baltic Group, and is responsible for operations in
Latvia.
In addition, there have been two transactions with owners of non-controlling
interests during 2010. Rigas Miesnieks purchased 98.8 percent of Jelgava's
shares during 2010.
The purchase price of Jelgava was EUR 1.9 million. The preliminary goodwill of
EUR 3.1 million arising from the acquisition is based on the acquired customer
base as well as on its potential to achieve substantial synergetic benefits in
merging with the Jelgava Group.
On the basis of previous agreements, Scan AB purchased Falkbolagen Produktion
AB (“Falkbolagen”), which operates in Malmö, Sweden. The company cuts hams for
Pärsons AB and has a permanent staff of some 20. Previously, Falkbolagen
Produktion has carried out cutting operations as freight work for the Scan
Group. The transaction was closed and Falkbolagen was transferred to the
ownership and control of Scan AB on 30 December 2010. The purchase price of
Falkbolagen was EUR 0.7 million. The transaction did not generate goodwill.
Scan AB increased, in accordance with a previous agreement, its shareholding in
Bertil Erikssons Slakteri AB to a full 100 percent. The fairly small
slaughterhouse employing a staff of 14 located in Krylbo, central Sweden,
slaughters beef for Scan and it has a significant role in ensuring the
procurement of beef in central Sweden. Scan AB's holding before the transaction
at the end of the year was 35 percent. The transaction was closed and Bertil
Erikssons Slakteri was transferred to the ownership and control of Scan AB on
30 December 2010. The purchase price of Bertil Erikssons Slakteri was EUR 2.1
million. The preliminary goodwill of EUR 0.8 million arising from the
acquisition is based on the strengthening of Scan AB's competitive position in
central Sweden.
All the acquisitions have been recognized provisional as permitted under IFRS
3R. As a result, the amounts of the net assets acquired and goodwill presented
below are provisional and may be subject to adjustments from the date of
acquisition over the next 12 months.
The initial purchase price allocation calculation determined in local
currencies has been translated into euros by using the Group reporting exchange
rate.
None of the goodwill recognized is expected to be deductible for income tax
purposes. The following table summarizes the consideration paid and the amounts
of the assets acquired and liabilities assumed recognized at the acquisition
date, as well as the fair value of the non-controlling interests. EUR
million
--------------------------------------------------------------------------------
Purchase consideration settled in cash 4,7
--------------------------------------------------------------------------------
Total consideration 4,7
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The assets and liabilities arising from the acquisitions are
as follows
--------------------------------------------------------------------------------
Note EUR
million
--------------------------------------------------------------------------------
Cash and cash equivalents 2,0
--------------------------------------------------------------------------------
Property, plant and equipment 4 5,9
--------------------------------------------------------------------------------
Inventories 5 0,8
--------------------------------------------------------------------------------
Trade and other receivables 1,7
--------------------------------------------------------------------------------
Trade and other payables -4,7
--------------------------------------------------------------------------------
Loans -3,5
--------------------------------------------------------------------------------
Deferred tax liabilities -1,6
--------------------------------------------------------------------------------
Total identifiable net assets 0,7
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Non-controlling interests 0,0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Goodwill 3,9
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Other operating expenses do not include material costs relating to the
acquisition in the 2010 consolidated income statement.
The net sales of other operations acquired, which were included in the
consolidated income statement, were EUR 3.9 million and EBIT was EUR -0.8
million.
If the other operations acquired had been consolidated to the Group as of 1
January 2010, net sales in accordance with the consolidated income statement
would have been EUR 2,129.1 million and EBIT EUR 49.1 million.
The figures reported in the financial statement release are unaudited.
Vantaa, 18 February 2011
HKScan Corporation
Board of Directors
Further information is available from HKScan Corporation's CEO, Matti
Perkonoja. Please leave any messages for him to call with Marjukka Hujanen on
+358 (0)10 570 6218.
HKScan is one of the leading food companies in northern Europe with home
markets in Finland, Sweden, Denmark, the Baltic countries and Poland. HKScan
manufactures, sells and markets pork and beef, poultry products, processed
meats and convenience foods under several well-known local brand names. Its
customers are retail, the HoReCa sector, industry and export customers. HKScan
is active in nine countries and has some 11,000 employees. It had net sales of
EUR 2.1 billion in 2010.
DISTRIBUTION:
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