HKFoods Plc, Half Year Financial Report 2024, January-June 2024, 7 August 2024 at 8.30 a.m. EEST
HKFood's Half Year Financial Report 1 January-30 June 2024
April-June 2024
- HKFoods' net sales from continuing operations increased by 8.8 per cent to EUR 254.6 (234.1) million. Consumer demand in Finland remained at the previous period's level and HKFoods strengthened its position in the Finnish market through successful commercial measures. In addition, exports increased significantly due to the shift in sales caused by the political strikes in March.
- The Group's EBIT from continuing operations totalled EUR 3.1 (4.4) million.
- The Group's comparable EBIT from continuing operations was EUR 4.4 (4.2) million. Cost levels remained high in April-June. In addition to the increase in the cost of external services, wage costs were pushed up by the previously agreed general salary rises. Wage cost inflation was practically neutral despite the one-off items in the comparison period, as the food industry's collective agreement solution raised wages in both summer 2023 and spring 2024. EBIT was also affected by the lower profitability of red meat value-added sales. However, successful commercial measures, production efficiencies and cost savings improved profitability in April-June 2024.
- The comparable EBIT of the Business Unit Finland was EUR 6.7 (6.1) million.
- Cash flow from operating activities including discontinued operations was EUR 13.1 (19.8) million. The comparison period includes positive EBITDA from divested businesses.
- The financing negotiations in the spring reached a conclusion that ensured the continuity of the company's financing.
- The sale of the Swedish business unit was completed on 27 March 2024. As a result of the transaction, HKScan Corporation's Annual General Meeting approved the change of the company name to HKFoods. The new name was adopted on 27 May 2024 after registration with the Trade Register. The new parallel company names are HKFoods Plc (in English) and HKFoods Abp (in Swedish).
- On 2 May 2024, HKFoods signed an agreement to sell its Danish businesses to the Dutch Plukon Food Group B.V. The transaction is expected to close during 2024 and is subject to approval by the Danish competition authorities. The Danish businesses will be presented as a discontinued operation.
January-June 2024
- HKFoods' net sales from continuing operations increased by 6.9 per cent to EUR 483.3 (452.1) million.
- Sales increased due to good consumer demand and successful commercial activities. Especially sales in the domestic retail channel increased.
- The Group's EBIT from continuing operations totalled EUR 4.3 (4.0) million.
- The Group's comparable EBIT from continuing operations was EUR 5.8 (2.0) million.
- Cost levels remained high. HKFoods strengthened its position in the Finnish consumer market, which reduced the need for less profitable meat exports. Profitability of red meat, especially beef, in Finland remained challenging. Sales and profitability of poultry and meat products and ready meals showed a positive trend. Improved sales mix, increased production efficiency and cost savings improved EBIT during the review period.
- The comparable EBIT of the Business Unit Finland was EUR 10.0 (6.6) million.
- Cash flow from operating activities including discontinued operations was EUR 14.9 (14.1) million. Cash flow improved from the comparison period as a result of better working capital development.
- Interest-bearing net debt was EUR 215.6 (361.9) million and net gearing 98.1 (138.5) per cent.
- Net interest-bearing debt excluding IFRS 16 lease liabilities was EUR 124.4 (251.6) million.
The figures in parentheses refer to the same period in the previous year, unless otherwise mentioned. The figures are unaudited.
Outlook for 2024
In 2024, HKFoods estimates that the Group's comparable EBIT from continuing operations will improve compared to 2023.
KEY FIGURES, NET SALES, CONTINUING OPERATIONS
| (EUR million) | 4-6/2024 | 4-6/2023 | 1-6/2024 | 1-6/2023 | 2023 |
| Net sales | 254.6 | 234.1 | 483.3 | 452.1 | 933.0 |
| Finland | 254.6 | 234.1 | 483.3 | 452.1 | 933.0 |
KEY FIGURES, EBIT, CONTINUING OPERATIONS
| (EUR million) | 4-6/2024 | 4-6/2023 | 1-6/2024 | 1-6/2023 | 2023 |
| EBIT | 3.1 | 4.4 | 4.3 | 4.0 | 14.3 |
| - % of net sales | 1.2 | 1.9 | 0.9 | 0.9 | 1.5 |
| Comparable EBIT | 4.4 | 4.2 | 5.8 | 2.0 | 11.6 |
| - % of net sales | 1.7 | 1.8 | 1.2 | 0.4 | 1.2 |
| Comparable EBIT, Finland | 6.7 | 6.1 | 10.0 | 6.6 | 20.5 |
| - % of net sales | 2.6 | 2.6 | 2.1 | 1.5 | 2.2 |
KEY FIGURES, OTHER
| (EUR million) | 4-6/2024 | 4-6/2023 | 1-6/2024 | 1-6/2023 | 2023 |
| EBITDA, continuing operations | 11.4 | 11.7 | 20.3 | 19.1 | 45.1 |
| Profit before taxes, continuing operations | -1.4 | -2.0 | -5.1 | -7.8 | -10.7 |
| - % of net sales | -0.6 | -0.9 | -1.1 | -1.7 | -1.2 |
| Profit for the period, continuing operations | -1.7 | -3.8 | -5.5 | -10.3 | -17.3 |
| - % of net sales | -0.7 | -1.6 | -1.1 | -2.3 | -1.9 |
| EPS, EUR, continuing operations | -0.03 | -0.05 | -0.09 | -0.13 | -0.24 |
| Comparable EPS, EUR, continuing operations | -0.02 | -0.06 | -0.07 | -0.15 | -0.27 |
| Cash flow from operating activities, incl. discontinued operations | 13.1 | 19.8 | 14.9 | 14.1 | 50.6 |
| Cash flow after investing activities, incl. discontinued operations | -3.3 | 10.9 | 70.6 | -1.9 | 73.3 |
| Return on capital employed (ROCE) before taxes, %, incl. discontinued operations | -1.1 | -2.0 | 3.0 | ||
| Interest-bearing net debt | 215.6 | 361.9 | 287.9 | ||
| Net gearing % | 98.1 | 138.5 | 121.0 |
HKFoods' CEO Juha Ruohola
HKFoods' extensive restructuring progressed in the second quarter. At the beginning of May, we announced that we have signed an agreement to sell our Danish subsidiary ROSE Poultry A/S to the Dutch Plukon Food Group. The transaction is expected to close during 2024 and it will be subject to the approval of the Danish competition authorities.
On a positive note, the second quarter saw an improvement in the company's net sales and comparable EBIT, as well as the conclusion of the financing negotiations in the spring, which ensured the company's financial continuity.
HKFoods' net sales from continuing operations increased by 8.8 per cent to EUR 254.6 (234.1) million in the second quarter of the year 2024. The Group's EBIT from continuing operations totalled EUR 3.1 (4.4) million and the Group's comparable EBIT from continuing operations was EUR 4.4 (4.2) million.
Sales increased due to successful commercial activities across all sales channels, but cost levels remained high in April-June. In addition to higher costs for external services, wage costs were driven up by previously agreed general increases and growth in production volumes and added value. As a result, wage costs were higher than in the comparison period, even though the comparison period's costs included significant one-off items for wage settlements. While inflation pressures have eased, market interest rates have remained high, increasing costs not only for the whole value chain but also for consumers. This has restrained consumer purchasing behaviour, especially for red meat. The profitability of the sales of red meat value cuts decreased from the comparison period. However, HKFoods strengthened its position in the Finnish consumer market.
Investments in Forssa and Rauma progressed as planned and the investment in the Rauma poultry cutting unit was completed during the quarter. We have also centralised our poultry product packaging activities from Eura to Rauma and Forssa and decided on an investment of approximately EUR 8 million in the production of ready-to-eat products at our Eura unit. These investments and our other development plans are expected to generate the total annual cost savings of around EUR 6 million as reported earlier. Savings will start to materialise from Q3/2024 onwards.
Over the past 18 months, we have been assessing the position of our businesses within the Group in order to increase our financial flexibility. We have improved HKFoods' profitability and strengthened the balance sheet through the sale of the Baltic business, which was completed in August 2023. The sale of the Swedish business was closed at the end of March 2024. Following the sale of the Swedish business, we adopted the new company name HKFoods at the end of May, as decided by the Annual General Meeting.
The business divestments have strengthened HKFoods' balance sheet and the proceeds have been used to repay the company's loans. The company's net debt decreased by EUR 146.3 from the comparison period and by EUR 72.3 million from the year-end to EUR 215.6 (372.7) million.
During the period under review, HKFoods negotiated the refinancing of debt maturing in January-March 2025. The outcome of the financing negotiations was positive for the company and ensured continuity of our financing.
At the heart of our responsibility programme is our employees' wellbeing and safety, which we promote through the Group-wide Better Together and Safety First programmes. These programmes are part of the implementation of HKFoods' strategy and corporate responsibility programme in line with the company's values Inspire, Care, Lead and Deliver. Our key target is to be a safe and healthy workplace for our employees and partners working in our units.
In terms of safety at work, the trend in accident frequency has levelled off this year. Improving work on safety requires from us long-term effort and measures in co-operation with our employees.
However, we still need to be particularly focused on achieving our profitability target. We will continue to keep a tight grip on costs, improve production efficiency, optimise our product portfolio in the face of changing consumer demand and take commercial action.
Thanks to the significant structural and operational measures taken, we can focus on the implementation of HKFoods' long-term strategy with confidence and continue our determined work towards becoming a versatile food company. We ha ve achieved this in cooperation with our employees, but also with our customers, contract farmers and other partners.
Key events in Q2 2024
The company name changed to HKFoods
The sale of the Swedish business was completed on 27 March 2024. Due to the sale, the Annual General Meeting approved the change of the company name from HKScan Oyj to HKFoods Oyj. The new name, logo, website and email address were introduced on 27 May 2024 after registration with the Trade Register. The parallel company names of the new name are HKFoods Plc (in English) and HKFoods Abp (in Swedish).
The names of the subsidiaries will change when their new names are officially registered. The new name of the Danish subsidiary is ROSE Poultry A/S from 27 May 2024. The name of the Polish subsidiary will be HKFoods Poland Sp. z.o.o. from 23 August 2024 onwards. HKScan Finland Corporation will be changed to HKFoods Finland Plc on 2 September 2024.
Other contact details of the company and employees, such as phone numbers and addresses, will remain unchanged.
Details on the matter were provided in the following releases: 15 March 2024 18 April 2024 and 24 May 2024.
HKFoods to sell its Danish business
On 2 May 2024, HKScan signed an agreement to sell its Danish business to the Dutch Plukon Food Group B.V. The debt-free purchase price is EUR 44.6 million. The transaction is expected to close during 2024 and is subject to approval by the Danish competition authorities. Following the decision to sell the Danish business, the assessment of the position of the company's various businesses has now been completed.
Details on the matter have been provided in the 7 March 2024 and 2 May 2024 releases.
HKFoods issued secured notes of EUR 90 million
On 17 June 2024, HKFoods issued secured senior notes of EUR 90 million. The three-year notes mature on 17 June 2027, carry a floating interest at the rate of EURIBOR 3 months plus a margin of 7.5 per cent and had an issue price of 100 per cent.
The proceeds from the issue of the notes will be used for refinancing certain existing indebtedness of HKFoods and general corporate purposes of the HKFoods' group.
Details on the matter have been provided in the 31 May 2024, 7 June 2024, 10 June 2024, 10 June2024 and 13 June2024
Events after the reporting period
Mika Tilli started as a new CFO and member of the Group Executive Team as of 1 July 2024.
Details on the matter have been provided in a release: 26 March 2024
Michael Juhl Jørgensen started as Interim EVP, Business Unit Denmark and member of the Group Executive Team as of 1 July 2024.
Details on the matter have been provided in a release: 27 May 2024
Turku, 7 August 2024
HKFoods Plc
Board of Directors
Webcast
In connection with its Half Year Financial Report 2024, HKFoods will hold a webcast in Finnish for analysts, institutional investors and media on 7 August 2024 at 10 a.m. EEST. You can follow the Finnish webcast at https://hkfoods.videosync.fi/q2-2024/ and the recording will be available at www.hkfoods.com later on the same day.
HKFoods' CEO Juha Ruohola and CFO Mika Tilli will present the Half Year Financial Report.
To arrange investor calls, please contact executive assistant Suvi Oksava, tel. +358 44 554 4231 or
suvi.oksava@hkfoods.com.
Financial reports
HKFoods will publish the Interim Report for January-September 2024 on Wednesday 6 November 2024, at about 8:30 EET.
For further information
Juha Ruohola, CEO, tel. +358 400 647 160
Mika Tilli, CFO, tel. +358 50 538 5793
HKFoods Media Service Desk tel. +358 10 570 5700 or email communications@hkfoods.com
With 110 years of experience, we at HKFoods make life tastier - today and tomorrow. Our strategic target is to grow into a versatile food company. Our home markets are Finland and Denmark, where around 3,600 of our professionals make responsible and locally produced food for consumers' varied food moments. Our well-known brands include HK®, Kariniemen®, Via® and Rose®. We are developing a more climate-friendly way of producing food. HKFoods is a publicly listed company, and in 2023, our net sales from continuing operations totalled nearly EUR 1.2 billion. www.hkfoods.com
The brands mentioned in this report - HK®, Kariniemen®, Via® and Rose® - are registered trademarks of HKFoods Group.
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