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.

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.

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.

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.