HKScan Corporation, Financial Statements Bulletin, 4 February 2021 at 8.00 am Finnish time
HKScan’s Financial Statements Bulletin 1 January – 31 December 2020
HKScan's strong profit improvement continued – the 2020 comparable EBIT clearly profitable and the best in five years
- HKScan’s net sales increased by 2.1 per cent to EUR 1,781.0 (1,744.4) million.
- EBIT improved by EUR 44.5 million to EUR 21.3 (-23.2) million.
- Comparable EBIT improved by EUR 19.2 million to EUR 17.0 (-2.2) million.
- Comparable EBIT was HKScan’s best result since 2015.
- Retail sales clearly increased due to the Covid-19 pandemic while the food service sales were significantly lower than in the comparison year.
- The pandemic slowed down the company’s profit improvement and its impact was strongest in Finland.
- Cash flow from operating activities improved by EUR 4.5 million to EUR 63.7 (59.2) million.
- Interest-bearing net debt was EUR 299.6 (275.8) million and net gearing 91.0 (84.8) per cent. The figures include the investment of EUR 37.7 million in the Vantaa plot.
- The Board of Directors proposes to the Annual General Meeting that no dividends be paid for 2020.
- HKScan’s net sales increased by 2.0 per cent to EUR 472.9 (463.8) million.
- EBIT improved by EUR 24.0 million to EUR 17.5 (-6.5) million.
- Comparable EBIT improved by EUR 6.3 million to EUR 12.1 (5.8) million. This was the best fourth quarter result since 2014.
- Retail sales of HKScan’s branded products clearly increased in all the home market areas.
- The negative impact of the pandemic on the EBIT was strongest in Finland and Sweden.
- Cash flow from operating activities weakened by EUR 8.1 million to EUR 40.5 (48.6) million, which was due to the temporary increase in inventories.
The figures in parentheses refer to the comparison period, i.e. the same period in the previous year, unless otherwise mentioned. The figures in this report are unaudited.
HKScan estimates that the Group’s comparable EBIT in 2021 will improve compared to 2020.
Key figures, net sales
|Net sales||472.9||463.8||1 781.0||1 744.4|
Key figures, EBIT
|- % of net sales||3.7||-1.4||1.2||-1.3|
|- % of net sales||2.6||1.2||1.0||-0.1|
|Comparable EBIT, Finland||10.4||2.6||6.0||-1.7|
|- % of net sales||5.0||1.3||0.8||-0.2|
|Comparable EBIT, Sweden||7.2||6.3||19.0||12.0|
|- % of net sales||3.9||3.6||2.9||1.8|
|Comparable EBIT, Baltics||0.3||1.6||4.0||5.1|
|- % of net sales||0.6||3.7||2.3||3.0|
|Comparable EBIT, Denmark||-0.7||-1.0||1.1||-5.3|
|- % of net sales||-1.8||-2.8||0.6||-3.5|
Key figures, other
|Profit/loss before taxes||15.2||-9.0||12.3||-34.5|
|- % of net sales||3.2||-1.9||0.7||-2.0|
|Profit/loss for the period||11.2||-10.6||4.8||-37.5|
|- % of net sales||2.4||-2.3||0.3||-2.2|
|Comparable EPS, EUR||0.04||0.00||-0.05||-0.26|
|Cash flow from operating activities||40.5||48.6||63.7||59.2|
|Cash flow after investing activities||26.5||41.4||-21.4*||27.6|
|Return on capital employed (ROCE) before taxes, %||3.9||-3.1|
|Net Gearing %||91.0**||84.8|
*Includes the investment to the plot of Vantaa EUR 37.7 million.
** Investment to the plot of Vantaa increased the net gearing ratio approximately 10 percentage points.
HKScan’s CEO Tero Hemmilä
HKScan has in two years progressed from a serious financial situation to a profitable company. The Turnaround programme, launched to resolve the company’s deep financial and operational crisis at the beginning of 2019, proceeded as planned and successfully in 2020. We raised the company's net result for the 2020 financial year to a profit of nearly EUR 5 million. The net result was profitable for the first time since 2015. I am pleased with the company’s strong development and result achieved in the very exceptional operating environment. EBIT for 2020 was EUR 21.3 million. In addition to strong business development, EBIT increased through the positive non-recurring items, which mainly resulted from strengthened business operations. Comparable EBIT was EUR 17.0 million, which is over EUR 19 million better than in the comparison year.
Cash flow from operating activities before investments strengthened by almost EUR 5 million from the comparison year, but cash flow after investments remained negative for the whole of 2020. The single most significant reason for this was the purchase of the Vantaa production unit’s plot of land as well as a temporary increase in inventories. The purchase of the Vantaa plot of land was made using the right of first refusal and was strategically important for us to ensure the continuity of operations in Vantaa, as the technical and economic lifetime of the production unit extends well beyond ten years. Despite the significant improvement, the company’s level of profitability is still, of course, insufficient. Therefore, the situation requires continuous, determined promotion of ongoing development programmes and the full utilisation of new business opportunities.
HKScan’s net sales continued to grow. During the past year, we were able to increase the company’s net sales by more than 2 per cent to EUR 1,781 million. Growth was seen in all the market areas and in all the key product categories. Net sales growth was particularly strong in Denmark, where our strategy to increase added value progressed well. In all of our home markets, retail sales grew strongly while sales in the food service channel significantly declined due to the Covid-19 pandemic.
As a whole, 2020 was exceptionally demanding as a result of the very serious, ongoing pandemic as well as animal diseases detected in Europe, African swine fever detected in Germany in September and avian flu in Denmark at the end of the year.
In 2020, all HKScan’s home market areas, except the Baltics, improved their comparable EBIT. Profit improvement was clear in Finland, Sweden and Denmark. Performance in Sweden and Denmark was also historically strong. In Denmark, comparable EBIT turned profitable after 7 loss-making years. The Baltics showed very strong operational business development. However, due to lower meat market prices in Europe, the fair value of biological assets in the Baltic business decreased significantly, which resulted in lower comparable EBIT than in the comparison year. HKScan’s business in Poland has also strengthened, for our production unit mainly focusing on bacon. The production unit has mainly served the company’s other home markets, but its external business has strengthened as well, both in export markets and Poland. Financial figures for the Polish unit are reported as part of Sweden’s figures.
In the last quarter of 2020, HKScan’s EBIT was EUR 17.5 million. Comparable EBIT was EUR 12.1 million, which is over EUR 6 million better than in the comparison period. This was already the ninth consecutive quarterly profit improvement. The quarter was commercially strong, particularly the performance in December. Good control of marketing and administrative costs also supported the development. The continuation of the pandemic increased costs in production. In the last quarter of 2020, all home market areas, with the exception of the Baltics, improved their comparable EBIT from the comparison period. Business development in the Baltics was, however, strong and its weaker result was due to the decrease in the fair value of biological assets.
Our pork exports from Finland to China increased from the comparison year and the volume of exports was in line with our target. Our export to China is an important channel balancing the home market, although its direct impact on profit is still small. In China, demand is forecasted to remain strong although China’s own pork production has also shown clear growth. I see China interesting in terms of the exports of other meat types as well. We continue to work closely with the Finnish authorities to obtain export licenses also for poultry and meat products.
Changes in consumer behaviour emphasise the need for renewal in line with our strategy on our journey to a versatile food company. Changes in meat consumption vary between our home markets. In general, we can say that the strong growth in demand for poultry meat is continuing while the consumption of pork and beef has somewhat weakened in our home markets, with the exception of the Baltics. According to our estimate, the consumption of processed meat products has been stable, and even increased during 2020. It is clear that during the pandemic, the appreciation of domestic meat and meat products produced locally has clearly strengthened in relation to similar imported products.
Renewing ways and channels of food production and supply, combined with rapidly growing digitalisation, confirm the need to renew our operations. This change is supported by the company’s Food Solutions unit, which started operations in January 2021. Its goal is to develop new concepts and create added value for the company’s current, strongly product and category driven business.
After the review period in January 2021, we published the Zero Carbon climate plan as part of our responsibility programme. We set ourselves the ambitious goal of being carbon-neutral for our own industrial production by the end of 2025 and for our whole food chain by the end of 2040. Climate work is an integral and important part of HKScan’s business leadership and will play a key role on the top management's agenda.
Our operating environment is exceptionally demanding due to the pandemic and animal diseases detected in some of the European countries. From the spring 2020, we have successfully conducted preventive measures to ensure the health of our personnel, the high quality of our products and the uninterrupted continuity of our operations. This work continues, and we do our utmost to secure the company’s operations and service capability also under the exceptional circumstances.
With the three-year Turnaround programme launched at the beginning of 2019, we have already been able to cumulatively improve the comparable EBIT by over EUR 63 million in two years. The company’s cash flow from operating activities improved cumulatively by EUR 78 million during the same period. With a successful share issue and strong profit improvement of business, our net gearing is at a level that allows a controlled continuation of our Turnaround programme.
We will also continue our assessments related to the company structure and look at the positioning of different market areas as part of the Group’s business operations. In terms of the Vantaa production unit’s plot of land acquired last spring, we aim to expand its ownership base to further develop the area to meet the future needs.
HKScan’s continued profit improvement in 2020 gives the company a solid foundation to continue working in line with the strategy. In the difficult operating environment, the strong cornerstone of our success has been our employees’ attitude and expertise. In the achieved profit improvement, I see the significance and achievements of the strong work of all our employees. We aim to make HKScan an even more interesting, versatile food company that rewards its owners. I want to thank the company’s owners, personnel, customers, contract farmers, financiers and all stakeholders for our very good and profitable collaboration in 2020.
Board of Directors’ proposal on the distribution of profit
The parent company’s distributable equity stands at EUR 290.9 (274.7) million including the reserve for invested unrestricted equity, which holds EUR 215.1 (215.1) million. The Board of Directors recommends that no dividends be paid for 2020.
Annual General Meeting 2021
HKScan’s Annual General Meeting is planned to be held on Thursday, 8 April 2021 in Turku, Finland. The invitation to the meeting will be announced later.
Webcast for analysts and media
In connection with its Financial Statements Bulletin 2020, HKScan will hold a webcast in Finnish for analysts, institutional investors and media representatives on 4 February 2021 at 10 am, Finnish time. You can follow the Finnish webcast at: https://hkscan.videosync.fi/2020-q4-tulos. HKScan’s CEO Tero Hemmilä and CFO Jyrki Paappa will present the year 2020 result.
Investor calls in English will be arranged on request. To agree on the date and time, please contact Marjukka Uutela-Hujanen, tel. +358 10 570 6218.
HKScan will publish its 2020 Annual Report in week 11/2021 on the company’s website at www.hkcan.com. The Annual Report includes Corporate Responsibility Report as well as Board of Directors’ Report and Financial Statements. HKScan’s Interim Report January-March 2021 will be published on 6 May 2021.
Turku, 4 February 2021
Board of Directors
For further information
Tero Hemmilä, CEO, tel. +358 10 570 2012
Jyrki Paappa, CFO, tel. +358 10 570 2512
Heidi Hirvonen, SVP Communications, tel. +358 10 570 6072
Media contacts: HKScan Media Service Desk +358 (0)10 570 5700 or email: email@example.com
HKScan’s target is to grow into a versatile food company. With over 100 years of experience, we make tasty, healthy and responsibly produced food responding to the needs of consumers and customers. For us at HKScan, responsibility means genuine action throughout the food chain and continuous improvement. As part of our Zero Carbon project, we have set ourselves the goal of a carbon-neutral food chain from farms to consumers by the end of 2040. Our home markets cover Finland, Sweden, the Baltics and Denmark. Some 7,000 HKScan professionals ensure tastier life - today and tomorrow. We make delicious products from trusted raw materials for varied of food moments. Our strong brands are HK®, Kariniemen®, Via®, Scan®, Pärsons®, Rakvere®, Tallegg® and RoseTM. In 2020, net sales of the publicly listed HKScan totalled nearly EUR 1.8 billion.