Pre-tax profit for the Nordic meat producer during the first six months of the year dropped to €2.6m.
The drop comes against a backdrop of soaring raw beef material costs in Sweden, as well as a glut of pork in Finland, which dampened overall performance.
Material costs in Sweden stabilised in June and now that prices have rebalanced, Tuomo Valkonen, HKScan’s chief financial officer, expected the company to be “back to profit in Sweden regarding beef” by the close of 2016.
‘Behind’ on profits
“There are factors that are not working for us – they are against us – and it’s the beef purchase price in Sweden and the pork oversupply in Finland which are the main factors why we are behind,” he said.
MHP has sought to mitigate the pressure caused by its pork surplus by implementing a voluntary reduction in piglet production in Finland. However, the global economic outlook is expected to remain challenging as competition at retail level is expected to make meat trade tough, the business said.
A positive take away from the lacklustre results, said HKScan’s deputy CEO Aki Laiho, was that domestic sales of Danish poultry “continued the positive trend already seen in the previous quarter”.
Expansion in China
The business is still operating at a loss in fresh poultry in Denmark, but sales growth looks likely to continue until the winter of this year.
Sales margins in Sweden dropped, but the pressure was partially alleviated by the stabilisation across HKScan’s key markets – the Baltics, Denmark and Finland – in the second quarter of 2016.
In the face of challenging times, the business is actively pursuing expansion in international markets. “We want to start exports to China, so we can start building the business there,” said Valkonen, who added the business was active in South Korea and Hong Kong.
The business also exports meat to Germany and England and Valkonen has earmarked these two nations as areas where the business wants to grow in.
Several global risks still worry HKScan. The “most significant uncertainty factors” relate to the sales and raw material prices, the business said. Dangers of livestock viruses, such as African swine fever – currently raging in Estonia – and food scandals pose potential risks to operational stability. The company also admitted that animal pressure groups also posed a risk.