HKScan hails "excellent progress" in strategic transformation
HKScan upbeat on progress as earnings lift
HKScan, the European meat group, said it made "excellent progress" in its strategic transformation throughout 2014, a year of strengthening profits.
The company revealed full-year net profit rose to EUR57.1m (US$58.5m) in the 12 months to end-December, up from EUR9.8m in the prior year. EBIT climbed to EUR55.5m versus EUR11.7m in 2013. Sales were down slightly at EUR1.99bn, compared to EUR2.11bn.
The strong profit expansion reflected HKScan's efforts to improve margins by focusing on cost cutting and selling off under-performing units. HKScan's bottom line was also lifted by efforts to pay down debt. The company said it saw improved results in its largest markets - Finland and Sweden - but flagged a "disappointing" performance in the Baltics, which were hit by the Russian embargo, and Denmark.
"The profit development programme for 2014 proceeded as planned, and we met our target of achieving an annual cost reduction exceeding EUR20m and a reduction of over EUR50m in net debt," CEO Hannu Kottonen commented.
Looking to 2015, HKScan said it anticipates an improvement in operating profit. The group said it expects its performance to strengthen in the last quarter of the year.
HKScan Group’s financial statements release 1 January—31 December 2014: Fourth-quarter EBIT stronger than the previous year – restructuring completed
* Net sales were EUR 1 988.7 (2 113.2) million for January–December, and EUR 523.2 (547.9) million in the fourth quarter.
* Reported EBIT for January–December was EUR 55.5 (11.7) million, and the EBIT margin was 2.8 (0.6) per cent. Comparable EBIT excluding non-recurring items for the year was EUR 12.4 (11.2) million, and the corresponding EBIT margin was 0.6 (0.5) per cent.
For the fourth quarter, reported EBIT was EUR 7.1 (10.9) million, and the EBIT margin was 1.4 (2.0) per cent. Comparable EBIT excluding non-recurring items for the quarter was EUR 13.4 (6.7) million, and the corresponding EBIT margin was 2.6 (1.2) per cent.
* Cash flow before debt service was EUR 201.7 (86.8) million in 2014 and EUR 28.2 (86.2) million in the fourth quarter.
* Profit before taxes was EUR 51.2 (6.7) million in 2014 and EUR 4.3 (7.7) million in the fourth quarter.
* EPS was EUR 1.05 (0.16) in 2014 and EUR 0.09 (0.10) in the fourth quarter.
* Net financial expenses were EUR 15.5 (23.6) million in 2014.
* Net debt was EUR 141.5 (335.3) million, and net gearing was 31.8 (82.0) per cent in 2014.
Outlook for 2015: HKScan expects the operating profit (EBIT) excluding non-recurring items to improve from 2014, and anticipates the last quarter to be the strongest.
TheBoard’s proposal for dividend is EUR 0.10 (0.10) per share. The Board proposes also an additional dividend of EUR 0.39 per share.
Hannu Kottonen, HKScan’s President and CEO, comments on the fourth quarter and 2014:
“Last year saw excellent progress of HKScan’s strategic transformation process, which started at the end of 2012. We have streamlined our production set-up and simplified the Group structure to a great extent. The major strategic reviews and restructuring of our operational footprint have now been completed.
Divestments and working capital improvement actions have strengthened the balance sheet substantially. As a result, HKScan’s financial position is now strong and financial expenses have decreased significantly. In addition, refinancing was supported by a bond issuance balancing the debt portfolio.
The process of building One HKScancontinued and was supported by the HKScan brand identity renewal. Company names were harmonized across all home markets. HKScan’s first Group brand, Flodins®, was launched as an outcome of the brand strategy implementation. The Flodins brand complements the existing strong local brands.
In general, the business environment in 2014 was turbulent. Markets and demand were weak throughout the whole year and led to tough sales price competition in all market areas. Sales volumes declined and the product mix followed consumer behaviour favouring lower price products. Russia’s embargo on EU pork imports was followed by a further ban on the agricultural goods from the west. The export bans resulted in global pork oversupply, which negatively impacted directly and especially our sales, profits and volumes, both on our home markets and in exports.
Despite the challenging circumstances, the Group strategy implementation advanced well and I am pleased to recognize that our restructuring efforts and Group-wide operational work improved our financial results in our biggest market areas, Sweden and Finland. This played a key role in doubling year-on-year Group EBIT in the fourth quarter.
The Baltics and Denmark in particular posted a disappointing result, with EBIT declining on the previous year. The Baltics suffered most from Russia’s embargo. Denmark continued to suffer from a structural imbalance, and the situation will remain challenging into 2015. In January 2015, we initiated statutory negotiations at the Skovsgaard plant regarding plans to centralize poultry slaughtering and cutting at the Vinderup facility in Denmark. The negotiations were concluded at the end of January. This is an important move toward building a profitable business structure in the future.
The profit development programme for 2014 proceeded as planned, and we met our target of achieving an annual cost reduction exceeding EUR 20 million and a reduction of over EUR 50 million in net debt. The development programme was essential in mitigating sales and margin shortfalls. Work to improve our operational profit will continue as part of our continuous improvement efforts.
We will continue building synergies between our home markets, focusing on improving productivity and investing in our top brands. Last autumn we initiated feasibility studies in preparation for major investment programmes in Finland and Estonia. The investments are targeted at consolidating the Group’s foothold in value-added product categories and growing segments. Our strategic target is profitable growth.”
Original source: HKScan
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