interim report q1-3/2016 · nestlé cesko, market head 2008–2010 nestlé zone europe, assistant...
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Interim report Q1-3/2016
Aki Laiho, COO 2 November 2016
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Meat business environment in Q1-3/2016
• The Nordic meat market remained challenging− Growth in Sweden and Denmark− Decline in Finland and the Baltics
• Meat prices generally low and price competition in retail continued
• Unbalance in animal raw material supply has influenced the business throughout the year− Low beef raw material availability and
rapidly increasing purchase prices, especially in Sweden
− In Finland pork supply volumes stabilizing thanks to ongoing special actions
• Risks related to African Swine Fewer prevail in the Baltics (Estonia)− Activities for mitigating the spread to own
farms continue
22 NOVEMBER 2016
INTERIM REPORT Q1-3/2016
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Extracts from the third quarter
• Development of the BBQ assortment succeeded well on all home markets
• Profitability of exports improved thanks to recovered export prices of pork
• Finland succeeded in increasing its sales and EBIT despite the declining market and decreasing sales prices
• Sustainability related communications activities in Sweden under “Framtidens Kött” (Meat of the Future) concept
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2016–2018: Focus on new markets and new products
4
Source: Modified from Doblin,Ten Types of Innovation
New markets and audience
Enterclose-by markets and audience
Servedmarkets and audiences
Optimizeexisting offerings and operations
Createextensions, enhancements, improvements
New concepts
1
2
2
3
3
PRODUCT INNOVATIONS
NEW
MARKETS
2 NOVEMBER 2016
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Focus on new products New concepts and concept extensions
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New markets and audience
Enterclose-by markets and audience
Servedmarkets and audiences
Optimizeexisting offerings and operations
Createextensions, enhancements, improvements
New concepts
PRODUCT INNOVATIONS
NEW
MARKETS
Source: Modified from Doblin,Ten Types of Innovation
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The Finnish Rauma poultry plant
• The project is proceeding on schedule and according to plan• Construction will be completed in spring 2017• Installation of equipment will begin in spring 2017• The plant will be commissioned in autumn 2017
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The Polish Świnoujście bacon plant
• Design phase of the expansion investment in progress• Contract negotiations with architect on a final path• Machine supplier selection on-going• Final requirements re. building and technology under definition
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Agreement for contract slaughtering with Ello iLammhult AB in Sweden
• HKScan Sweden AB has signed an agreement for contract slaughtering with Ello i Lammhult AB in the Smålandlocality of Lammhult in Sweden.
• The new agreement− Will improve the availability of Swedish
beef sourced by HKScan in Sweden, ca. 3-5 per cent on an annual basis
− Enables HKScan to establish a stronger foothold in Southern Sweden and deliver benefits to local beef producers
− Around 1000 Ello’s contract producers will have the opportunity to sign a production agreement with HKScan and benefit from HKScan’s producer services
• The agreement marks the continuation of long-term collaboration between HKScan and Ello, bringing mutual benefits to both partners as well as to local beef producers in Sweden
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Rauma investment proceeding in schedule
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Tuomo Valkonen, CFO 2 November 2016
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Net sales and EBIT still behind the previous year,
although EBIT improved for the third quarter
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HKScan Group Q1-3/2016
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• Group’s net sales decreased both for Q1-3 and in Q3 − Finland grew – higher sales volume and better product mix − Other market areas behind – especially Sweden due to lower sales performance with
processed products and shortage of beef
• BBQ assortment and novelties developed well on all the market areas
• Group’s EBIT lagged behind for Q1-3 − Sweden declined – lower sales volume and unfavourable product mix, high animal
purchase price in beef− Finland declined – in H1 rise in operational costs due to i.a. pork oversupply− Denmark and Baltics improved
• Group’s EBIT over the previous year in Q3 − Finland and Baltics up – Finland gained in sales margin and Baltics in operational costs− Sweden and Denmark down – Sweden due to sales volume and product mix
• Group’s inventories slightly up due to increase in Sweden and Denmark, down in Finland and Baltics
• Profit warning on 21 October
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HKScan Group
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Market area Sweden
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Market area Finland
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Market area Denmark
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Market area Baltics
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Financial performance
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*) Comparable
15
ROCE*)
Net gearingEBIT*)
Net debt
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Group net sales
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Group net sales, last twelve months
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Sweden net sales
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Finland net sales
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Denmark net sales
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Baltics net sales
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Group EBIT development *)
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*) Comparable
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Group EBIT*)
Q1-Q3/2015 vs Q1-Q3/2016
2 NOVEMBER 201623INTERIM REPORT Q1-3/2016
*) Comparable
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Group EBIT*)
Q1-3/2015 vs Q1-3/2016
2 NOVEMBER 201624INTERIM REPORT Q1-3/2016
*) Comparable
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Group EBIT*)
2 NOVEMBER 201625INTERIM REPORT Q1-3/2016
*) Comparable
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Group EBIT last twelve months*)
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*) Comparable
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Sweden EBIT*)
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*) Comparable
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Finland EBIT*)
2 NOVEMBER 201628INTERIM REPORT Q1-3/2016
*) Comparable
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Denmark EBIT*)
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*) Comparable
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Baltics EBIT*)
2 NOVEMBER 201630INTERIM REPORT Q1-3/2016
*) Comparable
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Group cash flow before debt service*)
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*) Comparable
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Group cash flow before debt service*)
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*) Comparable
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Sweden cash flow before debt service*)
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*) Comparable
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Finland cash flow before debt service*)
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*) Comparable
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Denmark cash flow before debt service*)
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*) Comparable
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Baltics cash flow before debt service*)
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*) Comparable
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Group net financial expenses
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Group cash flow before financing*)
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*) Comparable
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Group investments
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Profit before taxes*)
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*) Comparable
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Profit before taxes last twelve months*)
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*) Comparable
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Profit for the period*)
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*) Comparable and attributable to shareholders of parent company
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Earnings per share (EPS)*)
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*) Comparable
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Interest-bearing debt and maturity structure
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Maturity of Group’s interest-bearing debt (EUR million)Interest-bearing debt by credit type
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Group personnel*)
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*) End of month average
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Key figures
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Outlook for 2016 (amended on 21 Oct)
• HKScan estimates that its comparable operating profit for 2016 will remain at or below the previous year’s level. − The reason for the lowered outlook is the weaker performance of the
market area Sweden, where the net sales have fallen, beef raw material purchase prices were high and the shortage of beef raw material prevailed.
• HKScan previously expected that its comparable operating profit (EBIT) would improve from 2015.
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Jari Latvanen, President and CEO2 November 2016
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Key employment history
Stora Enso Oyj, EVP, Consumer Board division 2015–10/2016 Findus Group, CEO, Findus Nordic 2010–2014 Nestlé Cesko, Market Head 2008–2010 Nestlé Zone Europe, Assistant Vice President 2007–2008 Nestlé Sverige Ltd, Country Manager Sweden 2003–2007 Zoegas Coffee Ltd , Managing Director 2003–2007 Nestlé Norden, Nordic Marketing Director 2001–2003 Suomen Nestlé Oy, National Sales Director 2000–2001 HK Ruokatalo Oy, Commercial and Sales Mgmt positions 1995–2000Fazer Leipomot Oy, Sales Management positions 1989–1995
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First reflections
Tens of interviews conducted between the new CEO and HKScan key employeesStakeholder interviews in progressTop three expectations that have emerged from the interviews are: 1. Create a winning team with
good alignment and leadership2. Clarify the overall
organisational model to enhance common way of working and accountability
3. Create a compelling and simple vision and strategy that is based on real choices and is actionable
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We will build on our strengths and utilise our opportunities at the maximum
• Food is fashion, protein is emphasized in diets
• Growing categories and segments exist• Well-known brands, “iconic” products, leading
position in many categories • Innovations and new concepts raising
consumers and customers interest• Nordic, high-quality meat raw material• Biggest player in Northern Europe with scale
economies• Strategic investments in poultry (Finland) and
bacon (Poland)• Sustainability, cooperation and reliability
throughout the meat value chain• Roots deep in society, long heritage• Committed people with strong know-how• Strong balance sheet
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Examples from internal interviews by Jari Latvanen
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Weaknesses need to be worked on and threatsneed to be proactively addressed
• Low profitability• Limited utilisation of Group synergies • Negotiation power of retail, hard
discounters and private label• Niche, small-scale local players taking
market share• Growing pressure from foreign
producers• Environmental and health concerns
related to red meat• Global trade restrictions, tightening
laws and regulations• Animal diseases
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Examples from internal interviews by Jari Latvanen
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Latvanen’s recipe for success
Ingredients:• Win with the customers• Delight the consumers• Grow our categories• Gain market share• Deliver profit improvement• Build highly motivated
teams with people having outstanding capabilities and drive
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RELEVANCEDIFFERENTIATION
OWNABILITY
OPPORTUNITYOPPORTUNITY
INTERIM REPORT Q1-3/2016
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HKScan’s future success is to be built on our unique strengths
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Thank you