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From the CEO

CEO Tero Hemmilä comments the Group’s Interin Report Q1/2019:

TERO HEMMILÄ, HKSCAN’S CEO

HKScan’s first quarter result was negative but improved clearly from the comparison period. We are not satisfied with the results reported today, but we see the root causes of the weak financial performance and continue to implement the agreed resolute actions for correcting our financial performance.

The cost saving and development actions started and boosted after the beginning of the year, together with the actions begun last year, started to record results. The most significant factors affecting the improved financial performance were the positive development of our Finnish poultry business and the related Rauma operations. Moreover, successful operational efficiency improvement actions in all market areas and firm cost reduction measures contributed to the result. The improved performance of the Finnish poultry business was visible in the improvement of both cash flow and EBIT. The EBITDA of the Rauma unit turned positive during the first quarter.

Pork export from Finland to China proceeded according to plan and the targets for the first year of export will be met. The strong reduction of pork production in China caused by African swine fever has increased the demand of pork in the global market and has a positive impact on the price level of export sales.

After the reporting period we announced changes in the composition of the Group Management Team. The changes became valid immediately. In accordance with the goals presented earlier, the Management Team has been strengthened with meat and food industry expertise.

The new Group Management Team has taken the helm in driving the implementation of short-term corrective measures as well as in renewing the Group strategy and related strategic focus areas. The work will continue during the spring and summer. The new Management Team is preparing a three-year programme for the company, aiming to restore its profitability to the level of leading companies in the industry. The content of the profitability improvement programme and the company’s updated strategy will be communicated in late summer at the latest. Efficiency improvement programmes that have begun earlier will be incorporated in the new result improvement programme.

As stated earlier, we continue to strengthen the market area level management of both the entire meat value chain and the product portfolio. When it comes to product development we will shift the emphasis from the group-level centralised way of working towards country and market area based responsibilities, which takes better and faster into account consumers’ and customers’ expectations. We assume the shift to become visible in the perceived attractiveness of our products as well as in sales development. With this change we ensure customer and consumer orientation of our business. Increasing net sales and improving productivity and cost efficiency will remain as our key focus areas when building a more solid foundation for our business. Our ambition is to restore our brand leadership position in selected categories and concentrate on developing and growing these categories. We will further increase our efforts in our sustainability work as a key part of the foundation of our business. Participation in the climate change related dialogue will increase in importance for us.

We see the poultry and meals businesses as the strategic long term development growth directions. In red meat we want to have a strong development approach and proactively respond to consumers sustainability related potential concerns. We are also openly and more widely examining our role and share in the consumer’s diet and are actively assessing our business portfolio.

We are planning a share issue to secure our financial position and to strengthen our capital structure. The planned share issue would provide a strong foundation for balancing the Company’s financial situation and for building future growth.

By stabilising our financial situation we develop HKScan to become an interesting company that rewards its shareholders and belongs to key food-industry players on the market.