Poor results continue as HKScan cuts 160 jobs

02-May-2017 - Last updated on 03-May-2017 at 10:46 GMT

Cash flow declined partially due to investment in the Finland-based Rauma poultry plant

Related tags Meat Pork Strategic management Beef Poultry

Beleaguered meat processor HKScan has endured more decline, and a company-wide restructuring bid to avert further pain will lead to 160 job losses.

Struggling Finland-based meat producer HKScan has reported a loss for the first quarter of 2017, which runs from 1 January to 31 March.

In February this year, the company announced a company-wide review of its business model, which it said would lead to 150 job cuts to its office-based staff. However, the business confirmed on 3 May that 10 more staff would be axed. Talks with staff are now complete and HKScan’s workforce will be slimmed by 160.

The new operating model is designed to give HKScan a “sharper focus” as it aims to plot a course through the storm ahead.

Rising admin costs

The business posted a pre-tax loss of €8.2m for Q1, a result that HKScan’s president and CEO Jari Latvanen described as “dissatisfactory” – he used similar terminology to describe the firm’s full-year results earlier this year too.

He said the poor results were “due to the declined sales margins of the processed category in Finland, and increased group administration costs”.

Sweden, one of HKScan’s biggest markets, has been a constant issue, with low raw material supply piling pressure on the firm. This continued in Q1, but there could be light at the end of the tunnel for HKScan.

The firm gained market share in its home market, Finland, despite overall decline there. Focusing on efficiency in Denmark has paid off with reduced operating costs. And the Baltic market for red meat is improving after a long period of depressed margins.

Efforts to improve profitability

Fuelling the cautious optimism, HKScan said it believes consumer confidence is improving in its home markets and its blossoming export business in Asia is on the up.

“We strongly believe that sustainability and quality throughout the food value chain gives us a significant competitive advantage,” said Latvanen.

“Rising interest in our elementary antibiotic-free grown pork and poultry are good examples of the opportunities we systematically continue to seize.

“During the past months, we have been conducting an evaluation of HKScan’s strategic market presence, ways of working and the cornerstones of our future success… By putting all these measures into effect, we will strive to improve our recipe to being more competitive and, consequently, more profitable.”

Net sales for Q1 came to €420m, compared like-for-like with €439m in Q1 2016. A drop in the sales margin for HKScan’s Finland-based processed meat category dented pre-tax profits.

For the full-year, the company wants to match the comparable operating profit of €13.2m it reported in 2016.