HKScan Corporation, Financial Statements Bulletin, 9 February 2023 at 8.30 am EET
HKScan’s Financial Statements Bulletin 1 January – 31 December 2022
October-December 2022
- On 13 December 2022, HKScan announced that it had signed an agreement to sell its Baltic business. The transaction is expected to be closed in the second half of 2023 and it is subject to approval by the competition authorities in Estonia and Latvia. The transaction changes HKScan’s structure and financial key figures. HKScan discloses the Baltic business as discontinued operations and the company's financial reporting will focus on continuing operations, which comprise the businesses in Finland, Sweden and Denmark. The classification of the Baltic Business Unit as assets and liabilities held for sale and its valuation at fair value based on the purchase price resulted in an impairment of EUR 30.6 million. Further information on assets and liabilities held for sale and discontinued operations can be found in Note 7 to the Financial Statements.
- HKScan’s net sales from continuing operations increased by 14.8 per cent to EUR 513.6 (447.5) million. In the review period, sales prices were significantly higher than in the comparison period, as higher costs due to strong inflation had been passed on to product sales prices, especially in April-September. Net sales increased in all sales channels and in all of the company’s home markets. Especially food service sales increased clearly.
- The Group’s EBIT from continuing operations totalled EUR 5.1 (11.6) million.
- The EBIT from discontinued operations, Business Unit Baltics, totalled EUR -35.4 (-4.0) million.
- The Group’s comparable EBIT from continuing operations was EUR 3.1 (11.3) million. The main reasons for the decline in comparable EBIT were significantly higher energy and logistics costs and weakened consumer demand in the home markets.
- Cash flow from operating activities was EUR 37.1 (42.1) million.
January-December 2022
- HKScan’s net sales from continuing operations increased by 11.5 per cent to EUR 1,833.8 (1,645.3) million.
- The Group’s EBIT from continuing operations totalled EUR 10.1 (21.4) million.
- The Group’s comparable EBIT from continuing operations was EUR 9.7 (17.9) million. To secure the availability of domestic meat raw material essential for its business, HKScan increased producer prices for meat raw material faster than sales prices due to structural pricing delays. Sales price increases and efficiency improvements in own operations gradually offset the impact of strong cost inflation in the early part of the year towards the summer. The sharp rise in energy and logistics costs, accelerated in the third quarter, could only be partly covered by sales price increases.
- Business Unit Finland’s comparable EBIT was EUR 3.4 (8.5) million.
- Business Unit Sweden’s comparable EBIT was EUR 16.6 (22.9) million.
- Business Unit Denmark’s comparable EBIT was EUR 1.4 (0.0) million.
- The EBIT from discontinued operations, Business Unit Baltics, totalled EUR -60.8 (-3.6) million.
- Cash flow from operating activities was EUR 18.9 (54.6) million. The lower cash flow than in the comparison period was due to a decline in EBITDA and an increase in working capital. The increase in working capital was due to cost inflation.
- Interest-bearing net debt was EUR 347.2 (314.5) million and net gearing 124.4 (95.2) per cent.
- The Board of Directors proposes to the Annual General Meeting that no dividends be paid for 2022.
The figures in parentheses refer to the same period in the previous year, unless otherwise mentioned. The figures are unaudited.
Outlook for 2023
In 2023, HKScan expects the Group’s comparable EBIT from continuing operations to improve compared to 2022. The full-year performance will be significantly affected by inflation and the development of consumer purchasing power in the company’s home markets. On the other hand, in the beginning of 2023, energy and logistics costs are on a more moderate level than in the peak of 2022.
KEY FIGURES, NET SALES, CONTINUING OPERATIONS
(EUR million) | 10-12/2022 | 10-12/2021 | 1-12/2022 | 1-12/2021 |
Net sales | 513.6 | 447.5 | 1 833.8 | 1 645.3 |
Finland | 250.4 | 209.7 | 868.3 | 772.3 |
Sweden | 208.9 | 196.7 | 745.1 | 700.4 |
Denmark | 54.3 | 41.0 | 220.4 | 172.7 |
KEY FIGURES, EBIT, CONTINUING OPERATIONS
(EUR million) | 10-12/2022 | 10-12/2021 | 1-12/2022 | 1-12/2021 |
EBIT | 5.1 | 11.6 | 10.1 | 21.4 |
- % of net sales | 1.0 | 2.6 | 0.5 | 1.3 |
Comparable EBIT | 3.1 | 11.3 | 9.7 | 17.9 |
- % of net sales | 0.6 | 2.5 | 0.5 | 1.1 |
Comparable EBIT, Finland | 1.4 | 5.2 | 3.4 | 8.5 |
- % of net sales | 0.5 | 2.5 | 0.4 | 1.1 |
Comparable EBIT, Sweden | 4.3 | 8.7 | 16.6 | 22.9 |
- % of net sales | 2.0 | 4.4 | 2.2 | 3.3 |
Comparable EBIT, Denmark | 0.4 | 1.0 | 1.4 | 0.0 |
- % of net sales | 0.8 | 2.4 | 0.6 | 0.0 |
KEY FIGURES, OTHER
(EUR million) | 10-12/2022 | 10-12/2021 | 1-12/2022 | 1-12/2021 |
EBITDA, continuing operations | 14.8 | 25.0 | 55.8 | 71.4 |
Profit before taxes, continuing operations | -1.8 | 9.2 | -0.9 | 10.3 |
- % of net sales | -0.4 | 2.0 | 0.0 | 0.6 |
Profit for the period, continuing operations | -2.7 | 4.9 | -4.9 | 2.5 |
- % of net sales | -0.5 | 1.1 | -0.3 | 0.2 |
EPS, EUR, continuing operations | -0.05 | 0.03 | -0.11 | -0.02 |
Comparable EPS, EUR, continuing operations | -0.07 | 0.03 | -0.11 | -0.06 |
Cash flow from operating activities, incl. discontinued operations | 37.1 | 42.1 | 18.9 | 54.6 |
Cash flow after investing activities, incl. discontinued operations | 13.6 | 21.2 | -21.9 | 81.2* |
Return on capital employed (ROCE) before taxes, %, incl. discontinued operations | -6.5 | 3.6 | ||
Interest-bearing net debt | 347.2 | 314.5 | ||
Net gearing % | 124.4 | 95.2 |
* Includes the sale of Vantaa property (land and buildings) with EUR 76.1 million.
HKScan’s interim CEO Juha Ruohola
In 2022, HKScan’s net sales increased strongly as a result of sales price increases due to cost inflation. HKScan’s net sales from continuing operations increased by 11.5 per cent to EUR 1 833.8 (1 645.3) million. Net sales from continuing operations increased in all home markets and sales channels. Particularly strong growth was seen in the food service channel, where sales increased by 25 per cent. In Denmark, retail sales of branded products grew by 36 per cent. Retail sales also increased in Finland and Sweden.
On the other hand, the Group’s EBIT from continuing operations was down from the comparison period and totalled EUR 10.1 (21.4) million and comparable EBIT was EUR 9.7 (17.9) million. HKScan’s profitability from continuing operations is not satisfactory and improving the profitability is one of our key priorities in 2023.
At the beginning of 2022, HKScan’s own operations were still partially subject to restrictions related to the Covid-19 pandemic. The instability in Europe caused by Russia’s invasion of Ukraine accelerated the sharp rise in production costs and interest rates.
Over the past year, we worked determinedly to improve the cost efficiency of our operations. We covered the increased costs by raising sales prices in all our home markets. Despite the net sales growth, the comparable EBIT for the company’s continuing operations was well below the comparison period. The exceptionally high increase in energy and logistics costs could not be fully covered by sales price increases and cost savings. Rising housing and interest costs put the brakes on overall consumer spending and affected consumer demand for HKScan's products and our sales mix. HKScan has been able to respond to the change of consumer behaviour, as the company’s position in basic foods is strong and its consumer brands are well-known. HKScan’s wide product portfolio offers products at the right price to meet changing consumer needs.
The Business Unit Denmark continued its strong performance throughout the year and improved its comparable EBIT. In Finland and Sweden, the comparable EBIT was positive, but exceptionally high cost inflation, especially energy price increases, exceeded all forecasts and weakened the EBIT.
In December, we reported that HKScan had signed an agreement to sell its Baltic business to the Estonian AS Maag Grupp. The divestment of the Baltic business will improve HKScan's profitability and strengthen its balance sheet, and will enhance the company's ability to improve production efficiency and implement its long-term strategy. The transaction changes HKScan’s structure and financial key figures. The Baltic business is disclosed as discontinued operations in HKScan’s 2022 Financial Statements and reporting will focus on the continuing operations in Finland, Sweden and Denmark.
In 2022, we updated our responsibility programme and continued to build a carbon-neutral food chain in line with our Zero Carbon climate plan. The objectives of our responsibility programme relate to the wellbeing of nature and people: to climate, packaging, biodiversity and the safety and wellbeing of employees. We achieved good results in work safety, with a 25 per cent reduction in the accident frequency rate in HKScan's continuing operations and an increase of up to 94 per cent in the number of safety observations made by our personnel, thanks to our goal-oriented Safety First programme. Our focus is on promoting a proactive safety culture.
The unstable geopolitical situation is increasing business challenges while at the same time shortening supply chains by strengthening demand for domestic raw materials and familiar products in all our home markets. Ensuring security of supply is important. Rapid response to cost changes will continue to be required from industry and trade to create continuity in the production of food based on domestic raw materials and the availability of products made from them.
The effective use of the potential of our core business and the development of a sustainable, local food chain are crucial to HKScan's success. In an exceptional and rapidly changing operating environment, HKScan is focused on profitability improvement. We focus on the core business and aim to minimise any negative effects on the company's performance and to ensure that our results develop in line with our target. Throughout the Group, the key issues are tight cost control, increasing productivity in production, optimising the product portfolio in response to changing consumer demand and our commercial activities.
Key events in 2022
HKScan signed an agreement to sell its Baltic business
On 13 December 2022, HKScan announced that it has signed an agreement to sell its Baltic business to the Estonian AS Maag Grupp. The debt-free purchase price is EUR 90 million, of which EUR 20 million is conditional on the combined results of the separately defined meat business to be sold and Maag Grupp's Baltic meat business in 2024-2026. The transaction is expected to be closed in the second half of 2023 and it is subject to approval by the competition authorities in Estonia and Latvia. Further information on assets and liabilities held for sale and discontinued operations can be found in Note 7 to the Financial Statements.
In connection with the divestment of the Baltic business, HKScan started a written procedure in December to seek approval for a temporary waiver from the covenant in the terms and conditions of a EUR 90 million bond issued in March 2021. The temporary waiver was approved in a written procedure before Christmas. Further details are given in the company's stock exchange releases published on 13 December 2022 and 20 December 2022.
New bank loan to repay the bond and an increase in credit facilities
In June 2022, HKScan agreed on a new EUR 39.5 million bank facility to repay the bond maturing in September 2022. Additionally, in early October, the company agreed on an increase of EUR 45.0 million in credit facilities.
Juha Ruohola started as interim CEO on 29 September 2022
The Board of Directors of HKScan Corporation and CEO Tero Hemmilä jointly agreed that Hemmilä would leave his position as HKScan’s CEO on 29 September 2022. HKScan’s Board of Directors appointed Juha Ruohola as interim CEO of the company. As a member of the Group Executive Team, Juha Ruohola has been responsible for the Business Unit Baltics, the Polish business, the Group's meat balance, and exports and imports. At the same time, Markus Kirsberg was appointed to the Group Executive Team as interim EVP for Business Unit Baltics.
HKScan promoted cost efficiency in Finnish operations and clarified the Group’s operating model
HKScan’s goal is to clearly improve the cost efficiency and competitiveness of production. In 2022, HKScan conducted statutory negotiations in the Rauma and Eura production units of its Finnish poultry business and in the Forssa unit of its meat business. In Forssa, an investment of more than EUR 5 million in production development will be carried out. The changes in the poultry business are expected to generate annual savings of more than EUR 3 million in 2023. In Forssa, the measures are expected to generate annual savings of more than EUR 2 million, estimated to be realised after the completion of the investment in 2024 at the latest.
In addition, HKScan’s Group operations in Finland conducted statutory negotiations in the spring and autumn to streamline and clarify the operating model. The change in the operating model and other efficiency measures are expected to result in total annual savings of approximately EUR 3 million, which are expected to be realised after the first quarter of 2023.
HKScan improved its energy efficiency and prepared for possible exceptional situations
Since early spring, HKScan prepared for exceptional situations in the energy market and secured the energy supply to its production units by increasing the flexibility of its energy solutions. The company introduced an energy-saving programme to improve energy efficiency through operational changes and investments.
Board of directors’ proposal on the distribution of profit
The parent company's distributable equity is EUR 265.4 (282.5) million, including the reserve for invested unrestricted equity of EUR 216.0 (215.4) million and the profit for the financial year 2022 of EUR -13.9 million. The Board of Directors proposes to the Annual General Meeting that no dividends be paid for 2022. The remaining distributable assets will be retained in equity.
Annual general meeting 2023
HKScan’s Annual General Meeting is planned to be held in Turku on Thursday, 20 April 2023. The invitation will be published later.
Turku, 9 Februay 2023
HKScan Corporation
Board of Directors
Webcast
In connection with its Financial Statements Bulletin 2022, HKScan will hold a webcast in Finnish for analysts, institutional investors and media on 9 February 2022 at 10 am EET. You can follow the Finnish webcast at https://hkscan.videosync.fi/2022-tilinpaatos and the recording will be available at www.hkscan.com later during the same day. HKScan’s interim CEO Juha Ruohola and CFO Jyrki Paappa will present the 2022 result.
To arrange investor calls, please contact executive assistant Julia Hautamäki, tel. +358 40 846 7156 or julia.hautamaki@hkscan.com.
HKScan’s Auditor’s Report, Report of the Board of Directors and Financial Statements 2022
On 8 February 2023, HKScan’s auditor has issued an Auditor’s Report for the company’s Financial Statements 2022. This stock exchange release includes as an attachment 2022 Report of the Board of Directors, Financial Statements Auditor’s Report, which includes emphasis of matter related to Assumption of ability to continue as a going concern.
HKScan will publish the Report of the Board of Directors and Financial Statements as a visual pdf file and as an xHTML file in accordance with the European Single Electronic Format (ESEF) reporting requirements in week 11/2023.
Financial reports
- HKScan will publish the following financial reports in 2023:
- Interim Report for January-March 2023 on Wednesday 10 May 2023, at about 8:30 EET
- Half-Year Financial Report 2023 on Wednesday 9 August 2023, at about 8:30 EET
- Interim Report for January-September 2023 on Wednesday 8 November 2023, at about 8:30 EET
For further information
Juha Ruohola, interim CEO, tel. +358 400 647 160
Jyrki Paappa, CFO, tel. +358 50 556 6512
HKScan Media Service Desk tel. +358 10 570 5700 or email communications@hkscan.com