Artoparto's Blog: Teet Soorm

Showing posts with label Teet Soorm. Show all posts

Friday, January 2, 2015

HKScan and a Danish giant

HKScan announced in December the sale of their egg business in Estonia and also becoming a minority shareholder in their Finnish hatcheries. Of course those were separate deals de jure but it was unpleasant to see that HKScan left without telling the simple fact that both contracting partners are part of the same group. Such secrecy gives an impression of dishonesty.

DAVA Foods Holding A/S ja Danish DanHatch AS both belong to Danish Agro corporation, with holdings in Finland already before this, among others 50% share of Muna Foods, formerly known as Munakunta, and 60% share of Hankkija Oy and the rest of Hankkija will likely be sold to Danes in no time.

HKScan Estonia’s egg business sale should have been guessed already a year ago, when the Group announced that Tallegg’s egg production will be separated from poultry meat production. Teet Soorm, head of HKScan Estonia, almost revealed it by first saying strongly that Tallegg’s focus is on poultry and then adding that egg production is still important business for the company. I would imagine that the negotiations were already advanced at that time.

Hannu Kottonen, CEO HKScan comments the two December sales: “These deals are further steps in our efforts to rationalize our operations, focus on our core business, improve our productivity and further simplify and clarify the Group structure. The changes allow us to further strengthen our position as the leading Nordic meat company.”

Yes, yes, Kottonen talks about core business. Core today, niche tomorrow, HKScan is shrinking fast. But what might be Danish Agro’s core business? Apparently they focus on … that’s right, they focus on agriculture. They are not shrinking, but in Finland, is it this, what is left of truly Finnish agriculture?

We will discuss HKScan later but on Friday, January 16^th, we are going to look at Atria’s businesses. Harvest Samba!

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

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Friday, May 23, 2014

HKScan Finland - Something better (in autumn)

HKScan’s Q1 report should not even be read, unless you want to get discouraged. There is nothing good. Nothing else than the fact mentioned previously also on this blog that from the autumn rapeseed pork products in Finland will be GMO free. Surely this is an interesting opportunity to succeed in the competition and win it.

It is of course utterly important that the marketing campaign is bold in a way that GMO free products will become the new standard in mid-range and high end meat products. This would hurt a lot the biggest rival especially if Snellman, a middle-sized company already selling GMO free products, would do its own campaigning. We’ll see, but GMO free product group might well be a game changer in Finland.

Evidently there have been tough negotiations with the employees at Tallegg plants in Estonia but as a whole, HKScan Baltics is doing well. Russia’s pork ban has hit hard but interestingly Teet Soorm, EVP HKScan Baltics, tells that their pork product sales in St.Petersburg region Russia have been in a steady rise. Could it be that HKScan is now seriously challenging the largest domestic rival now in Russia as well?

We will come back after three months on Friday, 29^th August. Summer has come and it’s time to listen to this fascinating Estonian song once again.

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

Friday, April 25, 2014

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.

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