Nordic poultry products group Scandi Standard has implemented “precautionary cash preservation measures” in the face of the coronavirus crisis, which has pushed up retail sales but dented its foodservice operations.
The Stockholm-listed business said it does not propose to pay an annual dividend and will present that case at its AGM as the manufacturer of ready-to-eat, chilled and frozen poultry items estimates it will post operating income of SEK115m (US$11.5m) for the first quarter, more than SEK110m a year earlier. It is due to report first-quarter results on 12 May.
Scandi Standard said Covid-19 has pushed up retail sales by around 10-15% as more people eat at home, while foodservice has dropped 50-60%. The company’s out-of-home operations account for about 20% of net sales to the Nordic countries and Ireland, it added.
“Despite a limited operational and financial impact so far, the board of directors has found it prudent to implement precautionary cash preservation measures in case the situation should escalate,” the company said in a trading update today (14 April). It added: “More than 60% of Scandi Standard’s products are normally sold through domestic retail channels. As consumers are eating more at home, Scandi Standard has seen significant underlying growth in net sales”.
Due to lower foodservice sales, Scandi Standard said it has “executed forceful measures to adjust throughput of products intended for these channels and made plans for alternative sales of specialised products already in stock”.
Scandi Standard expects to post non-comparable items of about SEK50m in the first quarter, of which about SEK35m are Covid-19 related. It said the costs are primarily driven by adjustments to production capacity and provisions to foodservice inventory and bad debt, and includes costs “relating to keeping parts of the production lines closed through April 2020”.
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It is also undertaking a “comprehensive strategic project”, more details for which will be revealed in the quarter one trading report.
Chief executive Leif Bergvall Hansen said: “I am proud in the way our organisation has rapidly been able to adapt to the current environment. I am confident that the combination of operational and financial measures implemented will allow us to optimise our performance in challenging times.”
The company said it had experienced a higher-than-normal level of sick leave but did not report any Covid-19 infections at any of its plants, which have “delivered a solid performance in manufacturing”.
Scandi Standard added it is dedicating all “resources to secure timely deliveries of high-quality products to the customers in the prevailing environment. In order to mitigate [the] risk of downtime due to potential staff shortages in the coming period, heightened bio-security measures in all plants and contingency plans for staffing have been implemented.”