HKScan’s Q4 2013 - analysts' expectations are considerably high

HKScan’s 2013 Financial Statement will be released on early February.  Let’s look at analysts’ expectations.  FT brings together analysts’ forecasts, and HKScan’s whole FY 2013 EPS estimates range from €0,18 to €0,26.  Consensus is €0,2267.  Current Q1 to Q3 EPS is €0,06.  Hence one might conclude that Q4 EPS estimates range from €0,12 to €0,20.

Q4 EPS of €0,20 seems extremely challenging. Let’s find out what kind of market area specific results could lead to analysts’ lower limit of €0,12. In the chart below, there is one such scenario illustrated. Non-recurring items are excluded.

Actual EBITs are indicated with solid lines.  Dashed circles show a set of reasonable market area specific 2013 Q4 EBIT figures, which could lead to the whole Group’s FY-2013 EPS of €0,12.

 

Quarterly earnings before interest and taxes by year in HKScan's market areas,

large write-offs excluded.

HKScan Finland’s Q3 was a failure.  Biggest competitor has increased its market share.  Demand has shifted to less expensive meat products. Compared to Q4 2012, revenues and EBIT likely will decrease.  While the biggest competitor campaigns domestic meat, HKScan concentrates on streamlining its meat import.  HKScan’s brand redesign whatever seems to be a dud.  Simplify! is CEO Kottonen’s new slogan.  Interestingly, this pic from HK Agri’s producer seminar from January this year, Samuli Eskola, EVP HKScan Finland speaking, may suggest that the biggest rival Atria is in his mind day and night. Rapeseed pork products don’t seem to sell too much.  Apparently the company thinks that the products need some kind of a power campaigning.  New mannequin is here. Analysts perhaps expect Q4 EBIT of €4 million, which would of course be a bad result.

HKScan Sweden’s Q1 was just bad. Q2 and Q3 have gone okay, but not quite overtaking the level of best years. EVP Göran Holm visited the above mentioned seminar and emphasized the importance of differentiation and benefits of advertising.  This means increasing marketing costs but in terms of revenues, Sweden is the biggest part of the Group and perhaps now it is the time when it will permanently become the number one in terms of earnings as well.  Analysts may think that Q4 EBIT of €7 million is reasonable.

HKScan Denmark has just announced a nearly €7 million investment to increase capacity and productivity in Vinderup.  Danes are optimists. Analysts likely are not.  Q4 EBIT of near €-1 million might be a good guess.

                          

HKScan Baltics’ Q3 was a positive surprise after the extremely weak Q2.  So, what will be the Q4 result?  Analysts may predict even a superb result.  Perhaps EVP Teet Soorm, punk-souled meat king from Viljandi, is steering the company to results that beat even the truly great achievements of the company’s former EVP Anne Mere. Q4 EBIT of €4 million is a brave but perhaps a reasonable estimate.

 

HKScan Poland’s Q3 was fairly nice but still a disappointment.  Let us once again repeat what Boguslaw Miszczuk, president of Sokołów, said early last  year: 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. Hence Q4 EBIT of €3 million, may be close to what analysts expect.

The sum of those country-specific figures is €17 million. Subtracting Group administration costs, perhaps some €3 million, we get the whole Group’s estimated Q4 EBIT of €14 million.

Then, continuing guesswork and adding the share of associates' results perhaps some €0,5 million, then subtracting net financial expenses perhaps about €6 million, then subtracting taxes about some €1,5 million and finally subtracting profit attributable to non-controlling interests, perhaps about €0,5 million, we end up with the sum of €6,5 million.  The number of shares is approximately 55 million.  Then, Q4 EPS would be about €0,12 which is the same as the lower limit of analysts’ expectations.

All in all, HKScan Finland is dropping, HKScan Sweden is picking up, likely taking the lead, HKScan Denmark believes in itself, HKScan Baltics keeps going fine and in Poland … I guess that HKScan’s stake of Sokołów or a part of it will be for sale this year.

We will discuss HKScan later but on Friday, February 14^th, we are going to look at Atria’s businesses.  Poetry In Motion.

Update 2014-02-04  As usual, in addition to the above-mentioned, we will very shortly look also at the Statements as soon as they have been released, HKScan on Wednesday 12th February and Atria on Thursday 13th February.

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