Artoparto's Blog: March 2014

Friday, March 28, 2014

HKScan - it's now Nordic everywhere

Nordic knowhow, leading Nordic meat expert, Nordic house of brands, pride in Nordic roots - that’s what the Group and its new home pages tell.

Hannu Kottonen CEO HKScan Group, comments Sokołów sale:

“The deal is positive for all parties.”

Evidently, HKScan couldn’t afford to continue now when Sokołów is going to make significant investments.

Kottonen continues:

“We continue building HKScan as one strong Nordic Group focusing on branded meat business. The deal resulting in strong balance sheet and lower net financial costs will improve our prerequisites for speeding-up the strategic work to invest in our strong brand offering as well as on related production facilities and technologies.”

Time will tell what kind of truly strategic investments there will be. Rather it seems that the Group’s restructurings have been some kind of operational cost savings projects.

The Group has now some money to spend. Fortunately it is not wasted instantly: The Board of Directors proposes to the Annual General Meeting that a dividend of only €0.10 be paid for each share.

Now the Group does not invest in enlargement but on the contrary in downsizing. The great and mighty Scan gives up but others continue to prosper.

Newspaper Lantbruk tells about these matters extensively. The plant in Örebro is closed and in Skara the slaughtering is discontinued and partly moved to Kristianstad, partly outsourced to a nearby Skövde slaughterhouse, a large family company. Skara's capacity utilization rate was only 40% but on the other hand, in Kristianstad it will rise only to 70%.

Göran Holm, EVP Consumer Business HKScan Scandinavia, justifies the actions something like this:

We have analyzed an incredible number of options before we came to this. It would have become more expensive to close in Kristianstad than in Skara.

That sort of a strategy!

And what about this? The above mentioned newspaper tells also that Göran Holm revealed that Scan will in the future allow certified GM soy in the feed, which according to Swedish Pig Entrepreneurs can lower the production cost by €6 to €7 per pig.

My question is if moving to GM feed is company's strategy or only cost savings again? It may prove to be a monumentally bad mistake.

But what about the Baltic?

HKScan’s turnover in the Baltic has remained at about €175 million level for some time. In Estonia, HKScan is the unchallenged number one, no doubt. About the same holds for Latvia, where Rīgas Miesnieks is the market leader, turnover about €35 million. In Lithuania, however, Klaipėdos Maistas with its perhaps 10% to 20% market share and turnover about €15 to €30, is probably not quite what the company is hoping for. Lithuania after all is the largest economy in the Baltic. So, let’s make a guess: Next major investments after Sweden will be made in Lithuania.

We will discuss HKScan later but on Friday, April 11^th, we are going to look at Atria’s businesses. Nordic static - Baltic dynamic.

This is Artoparto and here is my Disclaimer. Please read it.

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Friday, March 14, 2014

Atria Finland seeks growth in beef and poultry

In hindsight it is evident that a couple of years ago, when the decision was made to set up a large slaughterhouse at Kauhajoki, the deal with Saarioinen quite likely was practically ready.

Atria Finland will strengthen its already strong position in beef. The report of Finnish Competition and Consumer Authority FCCA (in Finnish) makes quite clear that Saarioinen has been a significant vendor of fresh beef for instance in HoReCa sector. Kauhajoki slaughterhouse’s capacity utilization rate of course rises right away, but when the supply contract, which is included in the deal, ends after about five years or so, Atria is able to expand its own processed beef product lines significantly. Naturally all this is subject to the condition that Saarioinen's farmers do not go to competitors' camps.

Poultry production should continue to strengthen significantly as well, but there are problems. The new starting company Huttulan Kukko may take its share of farmers. Another factor of uncertainty is the fact that the company Finnish Broiler, will not continue to distribute Ross Parent Stock but instead has started importing of Hubbard-bred stocks. They need a longer growing period, which can cause a variety of changes and surprises throughout the production chain. Whatever Atria Finland has decided to do, there must be some kind of changes.

Back to FCCA's report. It contains interesting data which tell that Atria Finland’s market share in cold cuts is only about 10 to 20 percent. These products are known to be company’s core category, and there seems to be room for growth. On the other hand, the official Meat Industry Report (in Finnish), released last autumn, tells for example that the consumption of cold cuts has been decreasing more than 30% compared to the peak year of 2007. Thus, in the short run, growth indeed can only come from increasing market share.

We will discuss Atria later but on Friday, March 28^th, we are going to look at HKScan’s businesses. Poultry and beef - mighty relief?

This is Artoparto and here is my Disclaimer. Please read it.