HKScan’s Q1 2014 - Minor loss expected by analysts

HKScan’s Q1 2014 Interim Report will be released on early May, so let’s look at analysts’ expectations.  Bloomberg brings together analysts' forecasts and Q1 2014 EPS estimates range from €-0.05 to €-0.02.  Consensus EPS is €-0.04. Last year’s Q1 EPS was €-0.08, hence a smallish improvement is expected. 

In order to reach EPS of €-0.04, the entire Group's Q1 EBIT should be approximately €3 million.  Let's look briefly what kind of country-specific results the Group might need.

Figure: Quarterly earnings before interest and taxes by year and by market area.  All non-recurring items are excluded.  Figures are highly unofficial.

Actual EBITs are indicated with solid lines.  Dashed ovals show a set of reasonable market area specific 2014 Q1 EBIT figures, which could lead to the whole Group’s Q1 EPS of about €-0.04, which corresponds to analysts’ consensus. 

 

HKScan Finland needs a positive Q1 result, something comparable to those achieved in recent years. The analysts, so it seems, perhaps think that EBIT of €2 million is achievable.  That’s not much.

However, immediate future looks better, at least interesting. Namely HKScan’s stock exchange release on April 10th is big news.  According to it, Finnish rapeseed pork will be GMO free already from September.  Soy will be replaced by domestic protein sources. Evidently feeding systems are ready.  This will be the real beginning of the rapeseed pork product line’s boom.  The biggest rival has been absolutely stubbornly uninterested in GMO free feed but Snellman, a medium sized rival, already has such beef products.  It is clear, that these two players will ensure that very soon consumers are taking GMO free products for granted when it comes to high or medium priced products.  HKScan’s biggest rival will be in trouble and possibly they have to make considerable changes in their brand new feed plant in order to keep up with the consumer’s new requirements.

                                                                                        

HKScan Sweden has to improve to meet the expectations.  However, analysts are likely not expecting but a slight loss. Then Q1 EBIT of €-1 million is a good guess.  

A new, but well-known (together with Annerstedt) Swedish brand Flodins will be launched on all Group’s markets.  It is meant to be a brand for traceable, trendy, easy-to-use, easy-to-prepare products.  It must mean also new product lines and of course in the short run it means only costs.  The other news, not as good, is that HKScan Group has become a member of the Round Table on Responsible Soy Association and HKScan Sweden is at the forefront.  But supposedly in consumers’ minds GMO free soy is the key, and this membership does not all require it.  Just to mention one other member of the association:  Monsanto.

HKScan Denmark’s Q1 2013 result should not be negative, and Q1 EBIT of €0 million is reachable. 

A salmonella contamination incident at Vinderup plant in early April may have a negative effect on results later this year.

          

HKScan Baltics should also reach Q1 result something similar to those in recent years.  In an interview this week, Teet Soorm, head of HKScan Estonia, pointed out that labor costs are rising but noted also that warm winter has reduced energy costs. Then Q1 EBIT of €1 million is undoubtedly possible.

HKScan Poland needs a result close to its Q1 in recent years and EBIT of €4 million is probably expected by analysts.  During the quarter, HKScan sold its stake of Sokołów.

The transaction is expected to be approved by the authorities quite soon. This means that in the short run HKScan’s revenues and especially earnings will decrease dramatically, of course.

The sum of those country-specific figures is €6 million. Subtracting Group administration costs, perhaps some €3 million, we end up with the needed figure of €3 million.

This EBIT of €3 million might indeed result in the analysts’ consensus Q1 EPS of €-0.04. Namely first adding the share of associates' results perhaps some €0.5 million, then subtracting net financial expenses perhaps about €5 million, then continuing guesswork and subtracting taxes about €0.5 million and finally subtracting profit attributable to non-controlling interests, perhaps now close to €0 million, we end up with the sum of €-2 million.  The number of shares is approximately 55 million, which means that Q1 EPS would be €-0.036 which is close to the analysts’ consensus EPS of €-0.04.

We will discuss HKScan later but on Friday, May 9^th, we are going to look at Atria’s businesses.  But even before that, we are going to look very briefly at both companies' Q1 reports as soon as they are released.  Okay, just some poetry here: Earnestly urging earnings urgently.

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Disclaimer:  All content provided on this site is for entertainment purposes only.  This site does not provide any investment advice and content on this site should not be construed as recommendation to buy or sell any financial instruments.  Please consult a qualified financial adviser before making any financial decision.  I make no representations as to the accuracy, completeness, suitability, or validity, of any information on this site or found by following any link on this site.  I will not be liable for any errors, omissions, or any losses, injuries, or damages arising from displaying or using any content provided on this site.  I am not responsible for users' comments.  I reserve the right to update or delete any content on this site for any reason.

Atria Plc Q1-2014 - slight improvement expected

Atria's Q1-2014 Interim Report will be published on May 7^th. Let’s look at the results from recent years.  The chart below illustrates Atria's quarterly EBITs starting from 2009.  The readings are highly unofficial. Large write-offs are excluded. 

Together with the chart, it is interesting to look at what analysts might think of Atria's Q1-2014.  FT summarizes analysts' forecasts and other company information.  Analysts’ Q1-2014 consensus EPS for Atria is €0.022.  We do not know the arguments of the analysts, but now we will speculate on what kind of business area specific results their estimates could be based on. 

In the chart below, actual EBITs are indicated by solid lines.  Dashed circles show a set of reasonable country-specific Q1-2014 EBIT figures, which could lead to EPS of €0.018, which is close to the above mentioned analysts’ Q1-2014 EPS consensus.

Quarterly earnings before interest and taxes by year in Atria's business areas, large write-offs excluded.

At the first sight, Q1 consensus EPS of €0.022 does not look challenging at all but indeed, it requires improvement to last year.  Let’s go very briefly through the country-specific Q1-2014 figures presented on the chart.

Atria Finland – Q1-2014 EBIT of €6 million might be somewhat optimistic. It is quite close to last year’s corresponding EBIT of €6.7 million, which in fact includes a non-recurring profit of €1.1 million.  The fact is that general economic conditions in Finland are still worsening.  Consumers are prone to switch to cheaper imported products and lower priced product groups. There are even chances that the result will be close to the terrible Q1-2011 which would ruin the whole Group’s Q1 result.  However, the analysts might be expecting a decent EBIT of something around €6 million.

Atria Scandinavia – Q1-2014 EBIT of €1 million might be pessimistic but Q1 results have lately been just above zero.  Last year’s Q4 was promising, however. Cleverly Lithells, using imported meat, makes virtue out of necessity by launching “Världskorv” product family, including sausages with exotic names like Welsh Dragon, New Orleans, Oxford and Santiago. At the same time, the premium brand Lönneberga which uses domestic meat, prominently emphasizes brand’s Swedish origin. Atria Scandinavia might soon be doing very well but for now the analysts are most likely expecting a normal Q1 result, perhaps an EBIT of €1 million. Anything below zero would be a huge disappointment.

Atria Russia - Q1-2014result will almost surely be below zero.  New products supposedly are not selling enough. Weak ruble certainly weakens the result and due to the ongoing pork ban, pork is more expensive anyway. Evidently analysts are not expecting any turnaround for the better just now. Perhaps an EBIT of €-2 million is a common guess among analysts, but a result somewhat below it would not be a real disappointment.

Atria Baltic – Q1-2014 EBIT of €0 million is slightly optimistic.  Russian pork ban has hit hard, but Olle Horm, EVP Atria Baltic, declares that the primary production will be maintained.  One may see but in the short term, Atria Baltic will likely continue around zero and the analysts might well expect a fairly normal result, perhaps just an EBIT of €0 million.

Some more guesswork – Total of those guesses about what the analysts might have thought, makes €5 million.  We must now make a few subtractions using the past few quarters’ readings as guidelines.  Some minor subtractions or additions are ignored.  Subtracting unallocated costs about €1 million, finance cost about €3 million and taxes, let’s say €0.5 million, we get the final reading of around €0.5 million. Then earnings per share would be about €0.018, which is quite close to the analysts’ consensus. 

We will look at Atria later but on Friday, April 25th we are going to look at HKScan's businesses. But now, poetry for your pleasure.

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

Disclaimer:  All content provided on this site is for entertainment purposes only.  This site does not provide any investment advice and content on this site should not be construed as recommendation to buy or sell any financial instruments.  Please consult a qualified financial adviser before making any financial decision.  I make no representations as to the accuracy, completeness, suitability, or validity, of any information on this site or found by following any link on this site.  I will not be liable for any errors, omissions, or any losses, injuries, or damages arising from displaying or using any content provided on this site.  I am not responsible for users' comments.  I reserve the right to update or delete any content on this site for any reason.