HKScan’s Q1 2013 - Analysts’ expectations are fairly high

HKScan’s Q1 2013 Interim Report will be released on early May and now is the right time to look at analysts’ expectations.  Reuters brings together analysts' forecasts and other company information and some HKScan’s forecasts are also available.  Q1 2013 EPS estimates range from €0,04 to €0,07. 

At the first sight expectations look modest but it appears that even EPS of €0,04 requires a good or even an excellent result. It is true that in 2010 Q1 was as much as €0,06 but net financial costs were only €2,6 million and taxes close to zero. Last year’s Q1 result instead was €-0,09, net financial costs €8,0 million and taxes €2,5 million.

In order to reach EPS of €0,04, the entire Group's Q1 EBIT should perhaps be approximately €11 million.  First adding the share of associates' results perhaps some €0,5 million, then subtracting net financial expenses perhaps about €7 million, then continuing guesswork and subtracting taxes about €1 million and finally subtracting profit attributable to non-controlling interests, perhaps about €1 million, we end up with the sum of €2,5 million.  The number of shares is approximately 55 million.  Then, Q1 EPS would be just above €0,04, reaching the analysts’ range, namely EPS from €0,04 to €0,07. Clearly, analysts are expecting a fine quarter. Let's look briefly at HKScan’s market areas.

HKScan Finland needs to reach a good Q1 result, preferably better than those achieved in recent years. Last years’ Q1 EBIT was only about €3 million and the company said that the quarter went according to the plan. Now this kind of result is not enough.  What is needed is a result comparable to 2009 Q1, which the company said to be a strong quarter.  But the analysts, so it seems, perhaps think that EBIT of €5 million is achievable.

                                                                                         

HKScan Sweden is surely not expected to show anything like last years’ catastrophic Q1. It may be reasonable to wait for something like in previous years. Then Q1 EBIT of €2 million does not sound impossible. In the 2012 Annual Report there is a great deal of talk about the launch of rapeseed pork products. Unfortunately there is nothing much about actual results but only talk about a couple of prizes, talk about many positive comments and even talk about how the launch resulted in a lot of talk in social media.  It looks that the whole concept is not a marked success, at least not yet.

HKScan Denmark’s Q1 2013 result (possible non-recurring income excluded) should be mildly positive.  Production in Vinderup has been restarted in early December.   Then Q1 EBIT of €1 million is within the realms of possibility.

HKScan Baltics is, as noted many times also here, in a good shape and one can expect a good Q1 result, something similar to those in recent years.  Then Q1 EBIT of €1 million is undoubtedly possible. However, one should recall, that last year’s Q4 quarter was in fact weak.  It was due to increased costs, energy prices for instance, not particularly due to reduced sales.  The ongoing energy saving program perhaps helps.

HKScan Poland needs a result close to its Q1 in 2010, which the company said to be its best Q1 result ever. However, one must repeat here what Boguslaw Miszczuk, president of Sokołów, has said.   In a recent journal article he points out a rather pessimistic view something like this:  The deteriorating economic situation in Poland may limit the consumption of foods, including meat and dairy products – it may be expected that consumers are increasingly interested in lower-priced products.  Hard speech.  So 2013 Q1 EBIT of €4 million may be slightly optimistic.

The sum of those country-specific figures is €13 million. Subtracting Group administration costs, perhaps some €2 million, we end up with the needed figure of €11 million. Overall, analysts’ Q1 EPS estimates ranging from €0,04 to €0,07 are modest but even this kind of result looks hard to achieve and one decisive fact is that HKScan is burdened by enormous financial expenses.

We will discuss HKScan later but on Friday, May 10^th, we are going to look at Atria’s businesses. Summer is not coming in a hurry. I’m afraid it means that it will go away in a hurry. Sad.

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