HKScan to streamline staff and production following ‘disappointing’ results

By Aidan Fortune contact

- Last updated on GMT

HKScan's recent results have been hampered by production issues at its Rauma plant
HKScan's recent results have been hampered by production issues at its Rauma plant
Nordic meat processor HKScan is still feeling the effects of production delays at its Rauma poultry unit, with net sales for the quarter down year-on-year.

During the July to September 2018 period, the business’ net sales were €416.2m, down from €452.4m in 2017. Its EBIT for the quarter was a deficit of €10.1m compared to a deficit of €0.8m in the same period of 2017. This reduction has been mostly attributed to a halt in production at its Rauma poultry site.

For the January to September period, net sales were down from €1.33bn in 2017 to €1.26bn, while its EBIT showed a deficit of €45.7m compared to €18.1m in the previous year.

HKScan president and CEO Jari Latvanen described the results as “disappointing”,​ but he was positive about future growth. “Our third-quarter and January–September results were clearly disappointing. During the third quarter, we succeeded in improving further our delivery capability from the Rauma poultry unit, but the ramp-up related challenges still burdened our result. We continue to improve the efficiency and financial performance of the Rauma plant. In the long run, the unit will substantially improve our efficiency and competitiveness, thus contributing to HKScan’s strategy implementation. Additionally, we see some positive signs of value growth in sales both in Sweden and the Baltics.”

Earlier this year, HKScan announced an efficiency programme to save €40m a year. Latvanen gave more details on this scheme. “In July 2018, we further specified our group-wide efficiency improvement programme. The programme targets ​€40 million in annual savings during the year 2020 and onwards. We expect the most significant benefits of the programme to stem from improved operational efficiency. On top of that, we will, among other things, further reduce administrative costs and utilise group synergies to a greater extent than before.”

He added that a reduction in staff numbers would occur as part of the programme.

“As part of the above-mentioned efficiency improvement programme, we initiated a strategic review related to the rationalisation and adjustment of the Finnish production operations, with a target to improve the profitability and competitiveness of our operations. As a result of the process, the number of employees will decrease. Additionally, all units within the scope of the negotiations will prepare for location-specific temporary layoffs due to seasonal fluctuations. With these measures, we will reach annual savings of about ​€7 million.”

As well as staff reduction, HKScan also plans to streamline its production line.

“To improve our performance, we have taken prompt action in developing the utilisation of our production network. We will develop our production units towards centres of excellence specialised in dedicated categories. Our Rakvere unit, for example, has been chosen to be one of the sites specialising in the rapidly growing meals category. This is supported by ongoing investment in Rakvere. As an example of the efficient cross-border utilisation of our production network, our Finnish Rauma unit, specialised in poultry, is now also serving other HKScan home markets. After the reporting period, we launched the Finnish Karinäs poultry products in Sweden.”

Latvanen said its portfolio has already been cut back. “During 2018, we have put further emphasis on category management work. As a result, we have discontinued plenty of unprofitable products and, at the same time, launched new, innovative products on the market. Efficient product portfolio management, together with improvements in operational efficiency, will improve our performance during the strategy period.”

Related topics: Financial, Others, Poultry

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