The situation in the pork sector is "alarming", says HKScans CEO

The situation in the pork sector is "alarming", says HKScan's CEO

Finland-based meat processor HKScan has posted a first-half loss as rising commodity costs and low pork prices hit the company's profits.

HKScan today (10 August) booked a EUR3.5m (US$5m) net loss for the first six months of 2011, compared to a net profit of EUR8.9m a year earlier. The group's EBIT reached EUR8m, down from EUR13.6m in last year's first half.

The company, which last month lowered its EBIT forecast this year, said its performance "continued to be eroded by the poor profitability of pork".

Net sales rose 24% to EUR1.22bn but HKScan said its improved top line was "mainly" due to acquisitions. On an organic basis, excluding the impact of exchange rates, sales were up 5%.

CEO Matti Perkonoja said HKScan's EBIT was "adequate" but warned the "difficult global market situation" in the pork sector would continue.

He said increasing prices of raw materials had hit profits in all of HKScan's markets.

"The production of meat products in HKScan's main market areas is more expensive than in Europe's major agricultural countries. The inflexibility of labour costs is emphasised in an open market competition situation. In continuing, the current situation will reduce the amount of food produced in these areas. The situation is alarming at the moment, particularly with respect to pork, which among the meat categories used by the company is most clearly within the sphere of global competition," Perkonoja said.

"Development of the entire food supply chain right from primary production will be important for the industry's future."