HKScan ‘burdened by challenges’ in first quarter

By Aidan Fortune

- Last updated on GMT

HKScan posted a poor first quarter of the year
HKScan posted a poor first quarter of the year

Related tags Pork Poultry

Finnish processor HKScan’s first-quarter performance has been labelled as “not acceptable” by its CEO, as the company reported a drop in group net sales.

Its net sales for the three months to 31 March 2018 were €411 million (m), down from €420.7m in the same period of 2017. This was attributed to difficulties at its Rauma poultry unit, which took longer than expected to become fully operational.

The business also reported a significant EBIT year-on-year drop during the quarter, -€18.6m compared to -€6.8m in the previous year. This was again attributed to Rauma, with HKScan estimating that the delays were responsible for up €9.9m of this drop.

The company’s Swedish earnings dropped slightly year-on-year due to increased production costs and, compounding its woes, strike action at its Rakvere slaughterhouse in Estonia added to production costs. There was more positive news from Denmark as its earnings grew slightly there.

Jari Latvanen, HKScan’s president and CEO, said: “Our first-quarter result was still burdened by the challenges related to the Rauma poultry unit ramp-up process in Finland. However, the negative impact clearly decreased from the previous quarter. During the first quarter, our main target was to improve our poultry delivery capability towards customers and, in this, we succeeded well. However, the measures taken to secure the customer deliveries caused additional costs and eroded the result. Moreover, the seasonal effect that is typical for the first quarter, was visible​.”

Latvanen expressed optimism for the second quarter of the year. “During the second quarter of the year 2018, our aim is to consolidate the Finnish poultry volumes fully to Rauma. In the second half of the year, full attention will be given to improving our efficiency and financial performance related to the Rauma plant. In the long run, our Rauma unit will substantially improve our efficiency and competitiveness, contributing to our strategy implementation​.”

More positively, the business announced it had begun exporting pork to China​.

Firm action

Latvanen outlined measures taken in the business to help it return to growth in Q2.

We have taken several firm actions in order to correct the negative result trend. The group-wide programme for operational efficiency improvement is advancing as planned, in parallel in several production units. Additionally, we are implementing cost-saving actions in all home markets​.”

The business also plans to start expansion work at its meals facility in Rakvere later this month.

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