HKScan stays weak throughout Scandinavia

In Finland, Sweden and Denmark, the Q4 results were poor and any new cure is not forthcoming. Feed cost reduction is, after all, only a small joy and blaming of primary production is cheap talk. Throughout the whole Scandinavia HKScan seems to be unable to produce selling products for a sensible profit, even though the company’s market position is strong.  In the Baltics the position is strong as well, and there everything goes smoothly. In Poland Sokołów’s market share is only about 10%, competition is hard, exports account for about 25% of net sales, and nonetheless all goes well. One may wonder if HKScan will ever achieve good results in Scandinavia. Where the money goes?

Hannu Kottonen, CEO HKScan, comments the Q4 result rather mildly. He regards the strong cash flow the most positive achievement.  But otherwise, he’s satisfied only with Christmas sales, Baltics and Poland. 

During the past year, Kottonen has given a plethora of reasons for poor results, bad weather as an example. Headwind was the reason this time.  So to speak.  Changes made in the company’s strategy he considers successful and according to him, setting is now in place for a long time to come. Believe if you like.

We have focused on implementing the strategy and operating model. The progress has been good and many goals have been achieved. Unfortunately when looking at the financial performance, the headwind in all market areas has partly eliminated the good work. However, we as HKScan Group now have a more stable foundation for better performance in 2014 and beyond.

HKScan Finland lost net sales when compared to the same period in 2012 but the main rival is currently clearly ahead.  Management has been replaced, rationalization has been made in many production units, technological improvements have been made, rapeseed pork has been pushed into the markets, organic pork products are launched. But in terms of profits, nothing has changed for the better.

HKScan Baltics didn’t quite reach the same level as in Q3.  Anyway, Tabasalu’s plant is now in full steam and new products are launched all the time.  One may come to conclusion, that in Estonia, they truly master the product development.  For instance one new product, the Kiev cutlet, fried breaded chicken-broiler fillet roll with butter-dill filling  from Talleg surely is a novelty as a ready-to-eat product, compared for instance to Finnish so called novelty Poppikset, which is nothing but the old chicken nuggets in an updated shape, and even in the same kind of package.  No problems in the Baltics.

HKScan Sweden disappointedly fell short of expectations again, and so the report says again: “The strategic review is continuing in Sweden.”  So far, results have not been seen. Probably workers are laid off haphazardly, units are shut down just for show, and pseudo reforms are made in primary production.

In the Short-term Risks section, the report states very interestingly:

Additionally, the Group’s on-going development projects and organisational restructurings can bring uncertainties caused by own actions and unforeseen extra costs.

What might that mean?

HKScan Denmark’s Rose Poultry is completely dependent on export of frozen chicken. If it does not succeed at reasonable prices, the company does not make profit. It has not succeeded. Export of fresh products to Sweden is not enough to make the company profitable.

HKScan Poland’s Sokołów succeeds from quarter to quarter.  There is a large, multi-page interview with Boguslaw Miszczuk, President of Sokołów, interview surely worth reading.  Picking just one  point here:  Miszczuk  tells that in 2014 the company does not plan any major investments.  However, in the next three years the company intends to make significant investments. Miszczuk declines to reveal any details.  I’ve been anticipating that HKScan will during 2014 sell its stake of Sokołów or a significant portion of it.  I believe that HKScan will be out of these investments.

Update 2014-02-28:  Sokołów stake sold!  The Release came while writing the above text. 

We will discuss HKScan later but on Friday, March 14^th, we are going to look at Atria’s businesses.  Nothing Gold Can Stay.

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