HKScan issues stark profit warning

23-Oct-2016 - Last updated on 24-Oct-2016 at 10:44 GMT

HKScan expects operating profit to be equal to or less than the €9.6m reported in 2015

Finnish meat processor HKScan has warned investors it has lowered its full-year profit forecast after previously expecting an upswing in revenue.

Predictions for the company’s full-year operating profit for 2016 were lowered thanks to a mixture of higher raw material costs and worse-than-expected meat sales in Sweden.

Operating profits for the year will be on par or below levels reported in 2014, HKScan said in a financial bulletin on 21 October. HKScan reported operating profit of €9.6m in its end-of-year trading report for 2015, so figures for 2016 are unlikely to reach double digits. This will be a significant two-year drop on the €55.5m HKScan reported for operating profit in 2014 – a year the business was not impacted by the destabilising Russian meat import ban.

Falling finance

HKScan has previously said in public that it expected operating profits to improve from 2015, but this has yet to materialise. In the statement from HKScan, the business bemoaned its “weaker-than-anticipated sales performance” in Sweden, as well as higher costs and the lack of raw beef materials that have all put a strain on the business.

Signs of deteriorating financial conditions were reported in its interim trading report for the first half of 2016, with HKScan reporting a €2.6m drop in pre-tax profits. This was fuelled by high raw material costs, as well a surplus of pork in Finland.

Reporting on the performance in June, Tuomo Valkonen, HKScan’s chief financial officer, said there were a number of factors in the Scandinavian market that were working against the Nordic meat processor.

HKScan, which has net sales of approximately €1.9bn, is due to publish its January-September interim trading report on Wednesday 2 November 2016.