HKScan and Atria see poor half-year results

By Aidan Fortune

- Last updated on GMT

Finnish processors experienced a tough start to the year
Finnish processors experienced a tough start to the year

Related tags Beef Pork Poultry

Major Finnish meat processors have reported a poor half-year, due to currency fluctuations and production issues.

Finnish producer HKScan recorded a dip in net sales for the first six months of the year, down from €880.3m in 2017 to €844.5m. The business was mostly impacted by delays at its Rauma processing plant.

Jari Latvanen, HKScan’s president and CEO, described the results as “disappointing”​.

“The result was still burdened by the challenges related to the Rauma poultry unit ramp-up process in Finland. However, we succeeded in improving our poultry delivery capability,”​ he said. “We terminated our operations at the Eura plant and consolidated the Finnish poultry volumes to Rauma during the second quarter. We continue to give our full attention to the performance of the unit in order to ensure improvement in the efficiency and financial performance of the Rauma plant. In the long run, the unit will substantially improve our efficiency and competitiveness, thus contributing to HKScan’s strategy implementation.”

He outlined plans for “firm action”​ to correct this recent downturn, which included saving €40m a year. “Today, we communicated the financial target, scope and schedule of our ongoing group-wide efficiency improvement programme. The programme targets ​€40 million annual savings during the year 2020 and onwards. We expect the most significant benefits of the programme to stem from improved operational efficiency. On top of that, we will, among other things, reduce administrative costs further and utilise group synergies to a greater extent than before. The planned efficiency improvement measures related to production and logistics operations in Finland, announced on 25 June 2018, are also part of the group-wide efficiency improvement programme.”

More positively, HKScan did identify that global meat consumption was projected to increase 1.6% per annum and that this growth was estimated to be led by poultry. It also noted that there were several value-related consumption trends that supported its strategy implementation, and that the business would see value growth and better operational efficiency in production in 2018.

Atria sales down

Fellow Finnish processor Atria also saw a drop in sales for the first six months of the year. Its net sales were €359.1m, down from €368.4m in the same period of 2017. Atria’s EBIT for the half-year was €5.4m, down year-on-year from €10m. The performance was attributed to the weakened Swedish krona and Russian rouble. The group’s Swedish and Russian division saw a poor half-year of sales, driving the results, while its Finnish division recorded sales growth during the period.

Atria CEO Juha Gröhn said: “The sales of barbecue products went well, but this was not enough to increase our net sales. The profits for the second quarter fell short of expectations. All business areas are working hard to improve cost control. Measures to continuously improve productivity and to manage pricing have been intensified.

“The half-year review indicates a better profit level for Finland, although profits weakened slightly in the second quarter year-on-year.”

Gröhn explained the poor performance at the Swedish operations. “Sweden's profits were poor. Sales were short of target and high raw material costs weakened profitability. The machinery installations of the poultry plant investment programme are being finalised and the commissioning continues as planned. Early in the year, poultry operations were strained by a sluggish poultry market and the commissioning costs of the new technology. During the second quarter, the poultry market situation in Sweden began to improve and Atria’s production processes for poultry became more effective."

Finland had more positive news recently when a steak from the country as crowned the winner of the World Steak Challenge 2018​.

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