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From the President and CEO

CEO Tero Hemmilä comments the Group’s Financial Statements 2018:

TERO HEMMILÄ, HKSCAN’S CEO

HKScan’s full-year result was disappointing. The implementation of the From Farm to Fork strategy has not yielded the desired change in the company’s profitability. Firm actions are now needed to correct the negative development.

The Group’s From Farm to Fork strategy is a relevant framework for us. As a part of our annual strategy process, we will update the strategy and re-define our strategic focus areas. The strategy work will start immediately and proceed during the first half of the year.

It is evident that we need to strengthen our foundation based on strong meat industry competences and focus more firmly on leading the meat value chain efficiently. This requires more active management of all parts of the long value chain. These capabilities have somewhat eroded in our company, which has been one factor causing inefficiency and weak financial performance. Once we have corrected these basic issues, we can start shifting our focus towards actions targeting renewal.

To ensure our focus on our customers and consumers we aim to put stronger emphasis on market area level management of the value chain and the product portfolio. Our aim is to operate in a more dynamic and efficient way, closer to our customers. Increasing net sales and improving productivity and cost efficiency will remain our key focus areas when building a more solid foundation for our business.

During the second half of the year, HKScan succeeded in improving further the delivery capability from the Rauma poultry unit, but there were still challenges that strongly burdened the result. There is still plenty of work to be done in order to reach the targeted level of operational efficiency. In the near future, we will further strengthen our focus and level of special expertise needed in Rauma to improve the unit’s efficiency and thereby its financial performance.

The group-wide efficiency improvement programme, specified in July 2018 is ongoing. The programme targets EUR 40 million annual savings during the year 2020 and onwards. We expect the most significant savings to stem from improved operational efficiency and reduced administrative costs. Effects of the programme are not showing yet in the 2018 results.

Despite the challenges, HKScan has several important strengths supporting our profitability improvement efforts. We have skilled personnel, strong consumer brands, a large selection of great products and a strong place on the consumer’s dinner table. I firmly believe that, together with our personnel, we will be able to improve the company’s competitiveness.