HKScan’s turnaround plan reaps dividends
In its Financial Statements Bulletin for 1 January to 31 December 2019, it reported a 1.7% year-on-year increase in net sales while its EBIT improved by €44.1m (from -€46.3m to -€2.2m).
The company introduced an updated group-wide operating model from the beginning of 2020 to support the implementation of the turnaround programme and group strategy. The new operating model emphasises business units’ profit responsibility. The first turnaround programme was introduced in 2019 following a run of less than stellar results.
HKScan CEO Tero Hemmilä praised the progress made by the business. “We started the Turnaround programme at HKScan at the beginning of 2019. The programme proceeded as planned and we are pleased with the achieved profit improvement.
“We are on the right track and our profit improvement is almost on target. EBIT improved by over €25m from the comparison year and was -€23.2m. The most significant non-recurring items in 2019 were related to the Rauma poultry unit, adjusting the number of personnel and impairment of assets in the Danish operations.“
Hemmilä outlined the group’s performance in its various markets. “In 2019, all HKScan’s market areas improved their comparable EBIT. Finland and the Baltics were the best performers. Clear improvement was also seen in Sweden. Due to a clearly improved second half in 2019, Denmark achieved a better comparable EBIT compared to the previous year. It is clear that the group’s profitability is not yet at a satisfactory level, but we will continue our goal-oriented, systematic work together with the entire personnel.
“In Finland and Sweden, total meat consumption decreased slightly. In our estimation, the rise in consumer prices of meat has contributed to the consumption decline. Growth in poultry consumption was strong while pork and beef consumption declined. According to our own estimates, total meat consumption continued to grow in the Baltics, both in pork, beef and poultry. In Denmark, poultry consumption continued to grow. We expect the clear increase in poultry to continue in all our home markets in the coming years.”
The business also reported a rise in exports to China. “Our pork exports from Finland to China increased, with volumes in line with targets. The demand is forecasted to remain strong also in 2020. The volatility of market prices is expected to continue. We will continue to work closely with the authorities in our home markets to obtain export licenses also for poultry and beef in China. The exceptional situation in the Chinese pork market caused by African Swine Fever has some impact on the demand for other types of meat and on world market prices.”
He also gave an update on the investment in the Rauma poultry facility. “We have decided to continue increasing capacity and improving productivity in the Rauma poultry unit; we will invest approximately €6.0m in renewing the slaughter process. The investment will be implemented in stages at the end of 2020.
“With the investment, raw material yields, productivity and operational reliability will improve, and the capacity of the whole unit can be significantly increased to meet the strongly growing demand for poultry meat in the coming years. The current slaughter line does not correspond to the functional level we have set as our target in the Rauma poultry unit.”