HKScan looks to sales to lift profits

03-Nov-2016 - Last updated on 04-Nov-2016 at 15:02 GMT

HKScan said it may have to cut costs and bolster sales to improve profitability

Finnish meat processor HKScan may need to lift sales in 2017 to improve poor profitability, according to the company’s chief financial officer Tuomo Valkonen.

HKScan has confirmed sales will need to be lifted, and costs examined across loss-making parts of the business, after the meat processor reported a €9m drop in year-on-year sales for the third quarter of 2016.

Tuomo Valkonen, chief financial officer of HKScan, told this site the business will look at ways to improve top-line sales and cut costs after admitting the current profit level was “not satisfactory”.

“Cost management is important and we need to do something with our costs and there will not be an area that we do not touch in 2017,” Valkonen told GlobalMeatNews.

“It’s also a sensitive issue as the second-biggest cost [to our business] is personnel, so we need to watch what we do with that.”

Valkonen suggested the key for the business is to improve its sales margin, but cost-cutting may also be needed.

He added: “Denmark is a loss-making business, so we need to think what we do there in general – we need to turn it around. In Sweden, our cost structure is more or less in place, but the weak point clearly is our sales, so we need to find a way to improve and grow here.”

While cuts are an option that has not been ruled out, improving top-line sales remains central to HKScan’s strategy, especially as net sales dropped from €474.9m in Q3 2015 to €465.9m in Q3 2016. Valkonen said the business would look to develop more processed and value-added products in Sweden, its biggest market.

Bullish on future trading

The meat processor’s profitability was hit by a combination of rising raw material costs, ferocious price-cutting in Finland’s retail sector and increased prices in beef due to a shortage of slaughter-ready animals.

When asked if the business was confident it could remain competitive in Scandinavia, Valkonen said: “Yes, but it will not be quick. It will be slow, slow, and that’s the number one item for the new CEO [Jari Latvanen]”.

Latvanen joined HKScan on Monday 31 October and has already made one key appointment, bringing in ex-Unilever managing director Jyrki Karlsson as the new executive vice-president. Reporting directly to the CEO, Karlsson has been tasked with improving the ailing profitability and commercial performance of HKScan.

While the business expects its fourth-quarter results to be better than Q3, full-year earnings will not be above last year’s €9.6m.

Trading figures for 2016 will be posted on 8 February 2017.