HKScan said it has faced “major challenges” during the first months of 2012

HKScan said it has faced “major challenges” during the first months of 2012

Finnish meat firm HKScan has made a loss in the first quarter of 2012 and announced plans to cut costs over the next two years.

In a trading update ahead of the firm's earnings results next month, HKScan said on Thursday that it had made a loss in the first quarter of 2012 as a result of higher than expected purchase prices and poor access to Swedish pork and beef.

HKScan said it has faced "major challenges" during the first months of 2012 in Sweden.

The company said production of Swedish pork and beef has continued to fall, resulting in higher purchase prices and lower slaughtering volumes.

"The long period of strengthening seen in the Swedish krona has also resulted in considerable increases in meat imports and made it difficult to raise the price of increasingly expensive Swedish meat raw material in retail trade in particular," the company said.

"Price increases and cost adaptation have taken place in Sweden, but so far these measures have shown insufficient results."

Nonetheless, the performance of the group's other markets have been in line with targets, it said, with Finland in particular delivering an "improved performance" year-on-year.

The company reaffirmed its full-year guidance issued in February that EBIT will be "better than in 2011".

In addition, the firm has launched a "development programme" to run to the end of 2013 with the aim of achieving annual performance improvements exceeding EUR20m (US$26.1m) and "considerable reductions" in invested capital.

The programme covers the group's operations in Finland, Sweden, Denmark and the Baltics, with a focus on "the management of production and the product offering in response to demand" as well as on variable and fixed costs and working capital, the company said.

It will also look at "tightening" the group structure and a more efficient utilisation of group synergies that are already underway.

HKScan will issue its full first-quarter earnings results on 8 May.