From the President and CEO

President and CEO Jari Latvanen in the Q3/2018 Interim Report:

Our third quarter and January–September results were clearly disappointing. During the third quarter, we succeeded in improving further our delivery capability from the Rauma poultry unit, but the ramp-up related challenges still burdened our result. We continue to improve the efficiency and financial performance of the Rauma plant. In the long run, the unit will substantially improve our efficiency and competitiveness, thus contributing to HKScan’s strategy implementation. Additionally, we see some positive signs of value growth in sales both in Sweden and Baltics.

In July 2018, we further specified our group-wide efficiency improvement programme. The programme targets EUR 40 million annual savings during the year 2020 and onwards. We expect the most significant benefits of the programme to stem from improved operational efficiency. On top of that, we will, among other things, further reduce administrative costs and utilise Group synergies to a greater extent than before.

As part of the above-mentioned efficiency improvement programme, we initiated a strategic review related to the rationalisation and adjustment of the Finnish production operations with a target to improve the profitability and competitiveness of our operations. As a result of the process, the number of employees will decrease. Additionally, all units within the scope of the negotiations will prepare for location-specific temporary layoffs due to seasonal fluctuations. With these measures, we will reach annual savings of about EUR 7 million.

To improve our performance, we have taken prompt actions in developing the utilisation of our production network. We will develop our production units towards centres of excellence specialised in dedicated categories. Our Rakvere unit has, for example, been decided to be one of the sites specialising in the rapidly growing meals category. This is supported by the ongoing investment in Rakvere. As an example of the efficient cross-border utilization of our production network, our Finnish Rauma unit, specialized in poultry, is today serving also other HKScan home markets. After the reporting period, we launched the Finnish Karinäs® poultry products in Sweden.

During 2018 we have put further emphasis on category management work. As a result, we have discontinued plenty of unprofitable products and at the same time launched new, innovative products on the market. Efficient product portfolio management together with improvements in operational efficiency will improve our performance during the strategy period.

We are still in the early phase of our strategic transformation and turnaround process. Our performance is not yet satisfactory. Therefore, we will focus all our leadership resources on turning the adverse development and on improving our competitiveness and profitability.