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Strikes & Poor Pork Market Hit HKScan's Profits

by 5m Editor
12 August 2011, at 8:52am

FINLAND - HKScan Group's net sales in the first six months of the year grew to €1,223.3 million compared to €985.9 million last year.

The company said the growth in net sales of 24 per cent was mainly attributable to completed corporate acquisitions and when changes in currency rates were taken into account, organic growth stood at approximately five per cent.

Group profits (EBIT) for the first six months of the year came in at €8.0 million compared to €13.6 million in 2010.

The company said that the Group’s performance continued to be eroded by the poor profitability of pork, although HKScan has been able to retain and even strengthen its market position.

The company amended its profit guidance on 26 July 2011 and the Group's full-year EBIT is expected to fall short of 2010 levels.

The Group’s net sales in the second quarter of the year were €630.6 million compared to €502.3 million in 2010.

Profits came in at €6.7 million compared to €8.1 million last year.

The company said that with respect to the comparison year of 2010, the impact of industrial action in Finland in the quarter should be taken into account.

In Finland, the profitability of the business fell short of the targets and EBIT stood at €0.7 million. In 2010 there wa a loss of 0.1 million.

In Sweden, the results of operations improved and EBIT came in at €4.0 million compared to €3.1 million.

In Denmark, profitability fell short of the targets and EBIT was €-0.5 million.

In the Baltics and Poland, business operations progressed according to plan. In the Baltics, EBIT stood at €2.7 million compared to €3.3 million last year and in Poland at €2.8 million compared to €4.0million.

Group administration costs of €-2.9 million compared to €-2.1 million were exceptionally high on account of the Group’s development projects and other non-recurring expenses.

The group CEO Matti Perkonoja said: “HKScan’s EBIT for the early part of the year was adequate in the challenging market conditions. With respect to pork, the difficult global market situation will continue. The rise in the prices of meat raw materials and other inputs have eroded business profitability in all of HKScan’s market areas.

"The production of meat products in HKScan's main market areas is more expensive than in Europe’s major agricultural countries. The inflexibility of labour costs is emphasized in an open market competition situation. In continuing, the current situation will reduce the amount of food produced in these areas.

"The situation is alarming at the moment, particularly with respect to pork, which among the meat categories used by the company is most clearly within the sphere of global competition.

"Development of the entire food supply chain right from primary production will be important for the industry's future.

"HKScan operates responsibly in the meat sector. Its basis is created by an efficient, transparent and responsibly-operating production chain. Although HKScan operates internationally, it provides consumers in its market areas with locally-produced, safe and reliable food suited to local tastes the origin of which is traceable right to the farm.

"Only by developing the entire product offering in accordance with the expectations of consumers and the retail trade can development of the business in the right direction be ensured.

"Profitability of the Group's business operations in HKScan’s market areas poses a challenge. The development and efficiency measures, both ongoing and planned for the near future will, when followed through, improve the company’s profitability. Competition in the sector is intensifying.

"The actors who react fastest to the situation will cope best in the market.”