HKFoods Plc, Interim Report 2024 January-September 2024, 6 November 2024 at 8.30 a.m. EET
HKFoods' Interim Report 1 January-30 September 2024
July-September 2024
- HKFoods' net sales from continuing operations increased by 8.8 per cent to EUR 251.6 (231.2) million. Consumer demand in Finland continued at the previous period's level, and HKFoods increased its sales through successful commercial measures and its comprehensive product portfolio. Sales to the food service channel showed strong development, and HKFoods strengthened its market position.
- The Group's EBIT from continuing operations totalled EUR 11.6 (7.1) million.
- The Group's comparable EBIT from continuing operations was EUR 11.6 (6.6) million. Cost levels remained high in July-September. Wage costs were pushed up by higher costs for external services, as well as by the previously agreed general pay rises. HKFoods increased its profitability through successful commercial measures, production efficiencies and cost savings.
- Retail sales developed positively as a result of a comprehensive product range and commercial activities, which improved the sales mix and profitability. The investment in the Rauma poultry cutting department has exceeded the targets set for improving production efficiency.
- The comparable EBIT of the Business Unit Finland was EUR 13.2 (7.6) million.
- Cash flow from business operations including discontinued operations was EUR 7.5 (3.5) million.
- The company's extensive restructuring was completed on 31 October 2024 when HKFoods sold its Danish business to the Dutch Plukon Food Group B.V., following the approval of the Danish competition authority on 15 October 2024.
January-September 2024
- HKFoods' net sales from continuing operations increased by 7.6 per cent to EUR 735.0 (683.3) million.
- Sales increased due to good consumer demand and successful commercial activities. Sales grew particularly in the domestic retail channel; sales to the food service channel also increased. Exports from Finland were lower due to good domestic demand.
- The Group's EBIT from continuing operations totalled EUR 15.9 (11.1) million.
- The Group's comparable EBIT from continuing operations was EUR 17.4 (8.6) 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, remained challenging in Finland, but improved towards the end of the review period. Sales of poultry products and ready meals developed positively. Investments in production have increased efficiency. A better sales mix, increased production efficiency and cost savings improved EBIT during the review period.
- The comparable EBIT of the Business Unit Finland was EUR 23.2 (14.2) million.
- Cash flow from operating activities including discontinued operations was EUR 22.4 (17.6) million. Cash flow improved due to a better working capital performance and lower financing costs than in the comparison period.
- Interest-bearing net debt was EUR 213.8 (323.8) million and net gearing 96.4 (123.3) per cent.
- Interest-bearing net debt excluding IFRS lease liabilities was EUR 124.2 (221.8) million.
The figures in parentheses refer to the same period in the previous year, unless otherwise mentioned. The figures are unaudited.
Outlook for 2024
On 26 September 2024, the Board of Directors of HKFoods Plc decided on a positive profit warning and updated the guidance for 2024.??
Updated guidance for 2024?
HKFoods expects that the Group's comparable EBIT 2024 from continuing operations will grow clearly compared to 2023.??
HKFoods now estimates that the Group's comparable EBIT in 2024 will be EUR 22-25 million. The Group's comparable EBIT for the Group's continuing operations 2023 was EUR 11.6 million.
Previous guidance for 2024 published on 9 February 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) | 7-9/2024 | 7-9/2023 | 1-9/2024 | 1-9/2023 | 2023 |
| Net sales | 251.6 | 231.2 | 735.0 | 683.3 | 933.0 |
| Finland | 251.6 | 231.2 | 735.0 | 683.3 | 933.0 |
KEY FIGURES, EBIT, CONTINUING OPERATIONS
| (EUR million) | 7-9/2024 | 7-9/2023 | 1-9/2024 | 1-9/2023 | 2023 |
| EBIT | 11.6 | 7.1 | 15.9 | 11.1 | 14.3 |
| - % of net sales | 4.6 | 3.1 | 2.2 | 1.6 | 1.5 |
| Comparable EBIT | 11.6 | 6.6 | 17.4 | 8.6 | 11.6 |
| - % of net sales | 4.6 | 2.9 | 2.4 | 1.3 | 1.2 |
| Comparable EBIT, Finland | 13.2 | 7.6 | 23.2 | 14.2 | 20.5 |
| - % of net sales | 5.2 | 3.3 | 3.2 | 2.1 | 2.2 |
KEY FIGURES, OTHER
| (EUR million) | 7-9/2024 | 7-9/2023 | 1-9/2024 | 1-9/2023 | 2023 |
| EBITDA, continuing operations | 19.2 | 14.9 | 39.4 | 34.4 | 45.1 |
| Profit before taxes, continuing operations | 7.0 | 1.0 | 1.9 | -6.8 | -10.7 |
| - % of net sales | 2.8 | 0.4 | 0.3 | -1.0 | -1.2 |
| Profit for the period, continuing operations | 6.4 | 0.2 | 0.9 | -10.1 | -17.3 |
| - % of net sales | 2.5 | 0.1 | 0.1 | -1.5 | -1.9 |
| EPS, EUR, continuing operations | 0.05 | -0.01 | -0.03 | -0.14 | -0.24 |
| Comparable EPS, EUR, continuing operations | 0.05 | -0.02 | -0.02 | -0.17 | -0.27 |
| Cash flow from operating activities, incl. discontinued operations | 7.5 | 3.5 | 22.4 | 17.6 | 50.6 |
| Cash flow after investing activities, incl. discontinued operations | 6.8 | 34.9 | 77.4 | 33.1 | 73.3 |
| Return on capital employed (ROCE) before taxes, %, incl. discontinued operations | -2.4 | 0.0 | 3.0 | ||
| Interest-bearing net debt | 213.8 | 323.8 | 287.9 | ||
| Net gearing % | 96.4 | 123.3 | 121.0 |
HKFoods' CEO Juha Ruohola
The positive development of the company's continuing operations continued in the third quarter. Both the company's net sales and comparable EBIT showed a clear improvement. HKFoods' net sales from continuing operations increased by 8.8 per cent to EUR 251.6 (231.2) million. During the third quarter, we exceeded the company's EBIT target of 4%, with a comparable EBIT of 4.6% of net sales. Cumulatively for January-September, the target has not yet been reached, with EBIT at 2.4%. The result for the financial period from continuing operations was positive. During the third quarter, EPS also turned positive.
HKFoods increased its profitability through successful commercial measures, production efficiencies and cost savings. Retail sales developed positively as a result of a comprehensive range of products and commercial activities, which improved the sales mix and profitability.
The investment in the Rauma poultry cutting department has exceeded the targets set for improving production efficiency. The investment in Forssa has also been completed and the fine-tuning of the line is underway. At the Eura unit, our investment of around EUR 8 million in the production of ready-to-eat products is progressing according to plan. In September, we also decided on a significant strategic investment of around EUR 5 million in the ready meal production of our Vantaa unit. With this investment, we will increase our meal preparation capacity and develop new high-quality meals for consumers' various food moments. The savings of around EUR 6 million we previously announced for these investments and our other development plans have started to materialise as planned from Q3/2024 onwards.
Over the past two years, 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 by 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. Our major restructuring was completed at the end of October, when the sale of our Danish subsidiary ROSE Poultry A/S to the Dutch Plukon Food Group was closed after the Danish Competition Authority approved the transaction.
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 109.9 million from the comparison period and by EUR 74.1 million from the year-end to EUR 213.8 (323.8) million. The sale of the Danish business unit was completed on 31 October 2024. The company received cash of EUR 36.6 million, which were used to pay the company's debts.
The wellbeing and safety of our employees are at the heart of our responsibility programme. Our key target is to be a safe and healthy workplace for our own employees and for the partners working in our units. Improving safety at work will continue to require our continued commitment and action together with all our employees. To further develop the quality of our operations and products, we also launched a quality culture project.
Following the completion of our major restructuring, we are now focusing on implementing our long-term strategy by improving the competitiveness of our core business and the profitability of our operations We have launched an efficiency programme aimed at significantly improving our performance. The programme includes cost reduction, production efficiency improvements, product portfolio optimisation and efforts to strengthen commercial measures.
The measures taken have moved the company in the right direction, in line with our promises. I am confident that we will achieve our new estimate of HKFoods' 2024 comparable EBIT of EUR 22-25 million, which we announced at the end of September. Thanks go to our employees, customers, contract farmers and our other partners. This is an achievement made together with all of you.
Key events in July-September 2024
HKFoods invests in the growing meal category at its Vantaa unit - New technology line to prepare meals to make consumers' everyday lives easier?
HKFoods Plc decided on a significant strategic investment of approximately EUR 5 million in the meal production of its Vantaa unit. The investment is HKFoods' response to the growing demand for ready meals in both the retail and food service sectors. The investment supports HKFoods' strategy to increase added value and operational efficiency. The company aims to grow in product categories that make everyday life easier for consumers, such as meals, meal components and snacks.?
Details on the matter were provided in the following release: 19 September 2024
Positive profit warning - HKFoods Plc updated its financial guidance for 2024??
HKFoods Plc updated its financial guidance for 2024 due to the positive performance of its continuing operations.?
Details on the matter were provided in the following release: 26 September 2024
Events after the reporting period
The sale of the Danish business unit to Plukon Food Group B.V. was completed on 31 October 2024
On 15 October 2024 HKFoods was informed that the Danish Competition Authority has approved the arrangement announced in May 2024 whereby HKFoods sells its operations in Denmark.
The sale of the Danish business unit was completed on 31 October 2024. The company received cash of EUR 36.6 million. The amount was used to pay off the company's debts.
Details on the matter have been provided in the following releases: 2 May 2024, 15 October 2024 and 31 October 2024
Changes in HKFoods Plc' s Executive Team
Jari Leija, HKFoods Plc's EVP Business Unit Finland and member of the Executive Team, left the company on 24 October 2024. He held this position since 2019.
Details on the matter have been provided in a release: 24 October 2024
Following the completion of the sale of HKFoods' Danish business, Michael Juhl Jørgensen, Interim EVP of HKFoods' Business Unit Denmark and member of the Group Executive Team, left HKFoods on 31 October 2024. He held this position since July 2024.
Details on the matter have been provided in a release: 31 October 2024
HKFoods to launch Finnish poultry exports to China in late 2024
HKFoods will start exporting poultry meat from Finland to China in late 2024, following an export licence for HKFoods' Rauma unit. The export licence obtained by HKFoods for Finnish poultry meat is a significant addition to HKFoods' extensive export rights. HKFoods currently exports Finnish pork to China.
Details on the matter have been provided in a release: 30 October 2024
Turku, 6 November 2024
HKFoods Plc
Board of Directors
Webcast
In connection with its Interim Report for January-September 2024, HKFoods will hold a webcast in Finnish for analysts, institutional investors and media on 6 November 2024 at 10 a.m. EET. You can follow the Finnish webcast at https://hkfoods.videosync.fi/q3-2024 and the recording will be available at https://www.hkfoods.com later on the same day. HKFoods' CEO Juha Ruohola and CFO Mika Tilli will present the Interim Report for January-September 2024.
To arrange investor calls, please contact executive assistant Suvi Oksava, tel. +358 44 554 4231 or suvi.oksava@hkfoods.com.
Financial reports
HKFoods Plc will publish its Financial Statements Bulletin for 2024 on Friday 14 February 2025 at approximately 8:30 a.m. EET.
HKFoods will publish the following financial reports in 2025:
• Interim Report for January-March 2025 on Wednesday 7 May 2025 at about 8:30 EEST
• Half-Year Financial Report 2025 on Wednesday 6 August 2025 at about 8:30 EEST
• Interim Report for January-September 2025 on Wednesday 5 November 2025 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 email communications@hkfoods.com or tel. +358 10 570 5700.
With 110 years of experience, we at HKFoods make life tastier - today and tomorrow. With nearly 3,000 professionals, we make responsible and locally produced food for consumers' various food moments. Our well-known brands in Finland are HK®, Kariniemen® and Via®. 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 EUR 933 million.www.hkfoods.com
The brands mentioned in this report - HK®, Kariniemen® and Via® - are registered trademarks of HKFoods Group.
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