Annual Report • Apr 1, 2010
Annual Report
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The favourable development of the HKScan Group starting in late 2008 continued throughout the year 2009. The Group's competitiveness grew stronger and supplier shares increased in all market areas. Reported EBIT increased by 45 percent and stood at EUR 55.1 million while EBIT exclusive of non-recurring items climbed to EUR 67.8 million. Higher profi tability and lower fi nancing costs quadrupled pre-tax earnings to EUR 37.3 million.
In consequence of the international fi nancial crisis in autumn 2008, the Group's central currencies – the Swedish crown and the Polish zloty – continued to experience sharp movements. These resulted in a decline of 7.4 percent in net sales when measured in euro, yet at fi xed exchange rates net sales held steady at the previous year's level.
The share offering executed in December 2009 strengthened the Group's balance sheet structure while also increasing operational and strategic fl exibility. The fi nancing situation remained stable throughout the year.
Markets continued to fl uctuate in the wake of the international economic crisis. Negative economic growth as forecasted was recorded in Sweden, the Baltics and Finland. The buying decisions of consumers were also affected by the economic downturn. HKScan's extensive product portfolio nonetheless features foods and food ingredients to satisfy the wide range of needs faced by a diverse consumer base, whatever the economic climate. Rising interest in basic products such as sausages and ground meat products suits HKScan well and has helped us move past the recession.
During its internationalization process, HKScan has acquired stakes in companies that are market leaders and have the premier brands in their country. HK and Kariniemen in Finland as well as Scan and Pärsons in Sweden are highly respected brand names. Rakvere and Tallegg in the Baltics and Sokolów in Poland are also recognized widely and well by consumers. These strategic choices have proved correct in the current economic climate as well.
The structures of retail are in fl ux and the prolonged recession is affecting the division of the food market. The increasing number of private label food products and brands introduced by retail chains has resulted in fi ercer competition. Competition has also been intensifi ed by companies based in countries with lower production costs, and global retail chains moreover remain on the lookout for new markets.
HKScan enjoys a strong market position in Northern Europe. It is the market leader in the Swedish and Baltic markets, the second-largest in Finland and Poland, and the market leader in several important product segments.
"During its internationalization process, HKScan has acquired stakes in companies that are market leaders and have the premier brands in their country. These strategic choices have proved correct in the current economic climate as well."
With the industrial restructuring of 2006–2008 now complete, HKScan sees no signifi cant investment needs in Finland. Now is the time to capitalize on the restructuring, which translates into effi ciency and agility in day-to-operations as well as the ongoing development of operations for the benefi t of our customers.
HK Ruokatalo's standing as a supplier grew stronger and its higher sales of basic products boosted EBIT. Excellent delivery reliability was maintained all year. Sales over Christmas and New Year's were successful, and HK Ruokatalo was the nation's largest supplier of Christmas hams.
HKScan's priority in development in the coming years is Sweden, where a three-year programme is designed to deliver a marked improvement in Scan AB's profi tability and build the company into an innovative and desirable business partner. The measures are envisioned to deliver annual streamlining benefi ts of EUR 30 million in Sweden by the end of 2012. Scan contributes signifi cantly to the success of the entire Group owing to its size and the scope of its business.
In addition to the industrial restructuring announced in September, the year under review saw a new management system put into place and operational and administrative Group processes defi ned and developed in Sweden. To allow a sustained approach to developing the procurement of meat raw material, Scan established a separate procurement company Svenska Livdjur och Service AB (SLS) to attend to Scan's producer contracts, meat purchases and production counselling.
Scan's standing in the Swedish market grew stronger in 2009 and consumer confi dence in the Scan brand and Scan's product portfolio remained solid also through the economic downturn. Performance was good in the fourth quarter of the year in particular, moreover delivered amidst the restructuring and reorganization ongoing in the Scan group.
Deep economic recession and declining consumer purchasing power are clearly evident in all Baltic states. The national economies remained unclear to a certain extent and the challenges in Latvia in particular were formidable. A profound restructuring is underway in the Baltic meat industry.
Vigorous adjustment measures and operational cost controls as well as product launches refl ecting the spirit of the times enabled Rakvere Lihakombinaat and Tallegg to improve and boost their competitiveness in a highly demanding business environment. HKScan's Baltic Group counted among the industry's winners in its respective market areas, successfully solidifying its standing also through the recession.
In Poland, Sokolów performed well and its profi tability improved. This was partly due to Sokolów's products gaining even wider access into the selections of modern retail chains where most of the market growth will be seen.
A restructuring where strong players are best equipped to succeed during the economic recession is underway in Poland as well as in the Baltics. Considerable increase in volume and improved earnings were reported in Poland.
HKScan has considerably enhanced its operational effi ciency in recent years. In connection with the industrial restructuring in Finland in 2006–2008, production from the plants in Turku and Tampere was centralized to Vantaa and Forssa and logistics operations from Tampere to the new logistics centre built in Vantaa. Streamlining the operations of Scan AB is the Group's overriding consideration at present. Greater effi ciency in production has also been achieved in the Baltics through centralization.
HKScan is seeking direction for this development through heightened sensitivity to the changing needs of customers and consumers, and the company strives to streamline and hone its operations in all market areas.
Various processes relating to the harmonization of operational models in the different business segments are underway at HKScan, the aim being to achieve consolidation benefi ts with certain functions centralized at the level of the entire Group. These processes
also involve reorganization of management systems as well as streamlining of fi nancial reporting and internal supervision. The arrangement put into place at the beginning of January 2010, whereby HKScan Corporation transitioned to a holding company structure in its Finnish business, is yet another means employed towards this end.
Management of the entire meat value chain, from animal rearing to the customer, is central to HKScan's business model. HKScan seeks to ensure compliance with all legal and ethical requirements in the treatment of production animals. Total value chain management enables e.g. meat raw material to be traced from farm to store, which in turn allows the company to responsibly report the origin of the main raw material of the meat products which it sells.
The wellbeing of production animals became a topic of public debate in Sweden and Finland in the year under review. The safety of food production was also discussed in Finland when a fi nding of salmonella in the production animal feed chain called for additional action on the part of the entire chain. Consumer confi dence in HKScan Group companies was retained but, to further boost confi dence, Group companies reviewed their guidelines and stepped up control in the various stages of production.
The year 2010 will see the completion of HKScan's corporate responsibility scheme extending throughout the chain, from primary production and animal wellbeing through to product safety and nutritional considerations.
In 2009, HKScan also further developed its consolidated risk management policies and devised the requisite tools and indicators.
HKScan's business and profi tability developed in the right direction over the course of 2009. In the current year, consumer demand for food is expected to remain steady in the company's domestic markets while export markets are expected to pick up somewhat towards the end of the year. In addition, the ongoing streamlining programmes and the restructuring programme in Sweden in particular provide the foundation for solid business development.
I would like to thank HKScan's employees, shareholders, customers, producers and other stakeholders for their contributions and support in the past year.
A special 'thank you' and appreciation goes to consumers whose purchases are a signal of their trust in the quality, delicious taste and enjoyability of HKScan products.
Turku, March 2010
Matti Perkonoja
HKScan is one of the leading meat and food companies in Northern Europe with a domestic market consisting of Finland, Sweden, the Baltics and Poland. HKScan as a whole is active in nine countries and it has roughly 10 000 employees.
The company produces, sells and markets pork, beef and poultry meat, processed meats and convenience foods to retail, the HoReCa sector, industry and export customers.
Since the beginning of 2007, the Company's business has been divided into four business segments: Finland, Sweden, the Baltics and Poland. HKScan's business in Finland, Sweden and the Baltics is carried out mainly through wholly owned subsidiaries while the business segment of Poland consists of the company's 50 percent indirect holding in Sokolów S.A.
HKScan is a responsible food company which creates economic value added for its stakeholders through its meat-based product portfolio, food concepts and tasty products that are designed to contribute to the lives of consumers by making cooking easy and enjoyable.
Skellefteå
Luleå
Uppsala
Ullånger
Kristianstad
Halmstad
Skara Örebro
Strövelstorp
Bjæverskov
Production plant Sales offi ce
Visby
Linköping
Stockholm
Säkylä Eura
Turku Vantaa Forssa Mellilä
Viiratsi
Vilnius
Outokumpu
Tallinn Rakvere
Riga
St Petersburg
Vision
HKScan is a responsible food company which sets the standard for best practices in the meat industry in Europe through strong brands, innovative products, an effi cient and transparent production chain and skilled employees.
| Finland | Sweden | The Baltics | Poland |
|---|---|---|---|
| Net sales in 2009: | Net sales in 2009: | Net sales in 2009: | Net sales in 2009: |
| EUR 732.5m | EUR 1 037.4m | EUR 156.9m | EUR 251.7m** |
| • HKScan Finland Oy | • Scan AB | • AS Rakvere | • Saturn Nordic |
| Managing director | Managing director | Lihakombinaat | Holding AB |
| Jari Leija | Denis Mattsson | Managing director | -> Sokolów S.A. |
| Anne Mere | Managing director | ||
| • AS Tallegg | Boguslaw Miszczuk | ||
| Managing director | |||
| Teet Soorm | |||
* Between segments EUR -53.9 million
** Joint venture Saturn Nordic Holding owned 50/50 by HKScan and Danish Crown holds 100% of shares in Sokolów. In 2009, half of Sokolów's net sales i.e. EUR 251.7 million were accounted for in HKScan Group fi gures.
| EBIT: | over 5 percent of net sales |
|---|---|
| Return on equity: | over 15 percent |
| Equity ratio: | over 40 percent |
EBIT: over 5 percent of net sales Dividend distribution: at least 30 percent of net earnings
FURTHER BUILDING ON STRONG MARKET STANDING IN CURRENT MARKET AREAS AND IN NEIGHBOURING AREAS
HKScan is one of the largest producers of processed meats in Northern Europe. The company aims to further build on its strong market standing in its current market areas and to continue to grow its market share especially in those market areas where its standing is lower than average.
The company's strategy in the long term is to continue to grow and consolidate the meat market in its current market areas and in neighbouring areas both organically and through acquisitions.
HKScan aims to be among the most profi table companies in its sector. The company seeks to enhance its profitability and operational effi ciency in all of its markets. The company has accomplished an important industrial restructuring in Finland in recent years, and the focus in enhancing the effi ciency of operations is presently on Sweden in particular. According to the plan announced in September 2009, this will be achieved in Sweden through an extensive reorganization of operations. Besides delivering a more methodical business approach, the company believes the development measures currently underway will also allow it to improve its profi tability through the cost savings arising from the development measures as well as the more effective control of business operations and allocation of funds.
The company aims to serve the most satisfi ed customer base in the industry. This aim is pursued through competitive products, delivery reliability and collaboration with customers.
The competitiveness of products refers not only to attractiveness in the eyes of consumers but also competitiveness from the customers' point of view. Delivery reliability in turn stands for both the timely arrival of products to customers and the consistent and high quality of the products.
The foundation for product development in the company is to meet the needs and preferences of consumers at different points of life. In addition to responsible operations, the company also pursues this aim through the means of offering products of high quality in traditional product groups and building on its product offering through new and innovative products and solutions. Consumption patterns vary in different markets by country and region, and local tastes matter; this is a challenge which the company has successfully met. By building on its leading brands, the company strives to further enhance the positive image of its products in the eyes of consumers.
HKScan's management believes that the company's position as one of the leading food companies in Northern Europe is based on the following key strengths:
HKScan enjoys a strong market position in Northern Europe. It is the market leader in the Swedish and Baltic markets, while in Finland and Poland, the company is the second-largest operator in the meat industry and the market leader in several important market segments.
In Sweden, the company holds a share of approximately 30 percent of the processed meats market and its market share in the slaughter of pork and beef is nearly 60 percent. The company's management estimates the company's share of the Finnish processed meats market at roughly 30 percent. HKScan's management estimates that owing to the concentrated structure of retail, the company benefi ts from its strong market position especially in its largest markets of Sweden and Finland, where the concentrated structure of retail offers large operators an advantage over smaller rivals.
In all of its markets, HKScan owns the leading local brands that count among the best-known brands in the meat industry in their respective markets. The company's brand names HK and Kariniemen in Finland and Scan in Sweden are highly respected in their respective product groups. Correspondingly, the company's brands in the Baltics (Rakvere and Tallegg) and in Poland (Sokolów) enjoy a strong standing among consumers. HKScan also maintains subbrands in support of its main brands.
HKScan's structure, diversifi ed across several geographic areas, and its multiple product segments bring stability to the company's business. The business model reduces the effect of changes taking place in individual geographic areas and may thus mitigate the effect on the entire Group of risks pertaining to the company.
Management of the entire value chain relating to meat, from animal rearing to the customer, is central to HKScan's business model. Total supply chain management allows the company to optimize its activities through management of the various stages of the chain, establishing the conditions for cost-effective operations. Total supply chain management also allows the tracking of meat raw material from farm to shop shelf, enabling the company to responsibly report on the origin of the principal raw material of the meat products that it sells.
HKScan has enhanced its operational effi ciency in recent years. One of the most important undertakings was the major industrial restructuring implemented in Finland between 2006 and 2008, which involved the company centralizing production from the plants in Turku and Tampere to Vantaa and Forssa and logistics operations from Tampere to a new logistics centre built in Vantaa. The aim of the major restructuring programme launched in Sweden in March 2009 is likewise to streamline operations. Greater effi ciency in production has also been achieved in the Baltics through centralization.
The company's strong market position in selected business sectors creates the foundation for strong customer relationships. HKScan's customer relationships are based on close cooperation with key customers.
HKScan's long history as a maker of meat products and the company's knowledge of consumers provide a solid basis for the company's product development. The company's local product development efforts in the various business sectors allow both the launch of new products adapted to local tastes and the reworking of traditional favourites to refl ect the changing needs of consumers.
HKScan has a workforce of committed, responsible and skilled employees. Company management estimates that this will provide the foundation for the successful operations of the company also in the future.
Headlines in 2009 HKScan's business is divided into four business segments as profi t centres, according to the Group's geographical areas of operation. The company's business segments are Finland, Sweden, the Baltics and Poland.
| Key indicators (EUR million) | 2009 | 2008 | |
|---|---|---|---|
| HKScan Corporation • The Group's competitiveness grew stronger and supplier shares increased in all market areas. • Reported EBIT increased by 45% and came to EUR 55.1 million. • EBIT exclusive of non-recurring items, which totalled EUR 12.7 million, was EUR 67.8 million. • Owing to improved profi tability and reduced fi nancing costs, pre-tax profi t quadrupled to EUR 37.3 million. • Owing to movements in exchange rates, full-year net sales in euro declined by 7.4 percent but remained at the previous year's level when calculated at fi xed rates. • The share offering executed in December strengthened the Group's balance sheet structure. |
Net sales EBIT EBIT margin, % Profi t before taxes Earnings per share, EUR |
2 124.7 55.1 2.6 37.3 0.64 |
2 294.6 38.1 1.7 9.0 0.10 |
| Finland • Profi tability continued to rise in line with plans and improved considerably from 2008. • The fall of 1.1% in net sales came from a planned cutback in export sales. • In 2009 HK Ruokatalo • grew domestic market sales by 10% and gained higher supplier shares • maintained excellent delivery reliability, thus enhancing customer satisfaction • enjoyed rising sales of processed meats throughout the year • delivered good holiday season sales • paid particular attention to responsibility in business. |
Net sales EBIT EBIT margin, % |
732.5 27.0 3.7 |
740.4 14.4 1.9 |
| Sweden • Scan AB's performance improved throughout the year. In terms of profi tability of operations, the year 2009 was the best in the company's history. • Non-recurring charges of EUR 10.3 million were recognized in 2009. • The weakening of the Swedish crown against the euro resulted in lower euro-denominated net sales and EBIT. • The year 2009 at Scan: • Launch of 3-year streamlining programme • Establishment of procurement company SLS • Introduction of new organization and management model • Introduction of higher value added products • Streamlining of commercial operations |
Net sales EBIT EBIT margin, % |
1 037.4 16.7 1.6 |
1 179.3 18.0 1.5 |
| The Baltics • HKScan's Baltic Group posted an excellent fi nancial result. • Net sales fell by 6.7% on the year. • The deep economic recession and decline in consumer purchasing power were clearly refl ected in demand in all Baltic states. • The year 2009 at Rakvere Lihakombinaat and Tallegg: • Highly demanding business environment • EBIT increased and market standings grew stronger • Successful cost control • Operational fl exibility • Product launches in line with the spirit of the times |
Net sales EBIT EBIT margin, % |
156.9 9.8 6.3 |
168.2 6.4 3.8 |
| Poland • In Poland, Sokolów grew its net sales and improved its profi tability. • Measured in zloty, Sokolów's net sales grew by 14% on the year but in euro fell short of the year 2008 due to movements in exchange rates. • The year 2009 at Sokolów: • Sales grew by volume and value, domestic market sales successful. • Exports increased. • Costs under control • The economic recession had no signifi cant impact on the food-buying decisions of Polish consumers. |
Net sales ) EBIT ) EBIT margin, % *) |
251.7 9.3 3.7 *) The fi gures refer to HKScan's share (50%) of the Sokolów Group's fi gures. |
270.9 4.2 1.6 |
HKScan's operations in Finland are carried out by HK Ruokatalo Oy and LSO Foods Oy. HK Ruokatalo Oy is in charge of industrial operations, sales, marketing, logistics and transportation while LSO Foods procures pork and beef for HK Ruokatalo. The product brands in Finland are HK and Kariniemen.
| Finland | 2009 | % | 2008 | % |
|---|---|---|---|---|
| Net sales, EUR million | 732.5 | 33.6 | 740.4 | 31.4 |
| EBIT, EUR million | 27.0 | 43.0 | 14.4 | 33.5 |
| EBIT margin, % | 3.7 | 1.9 | ||
| Employees, average | 2 361 | 31.8 | 2 377 | 30,7 |
The percentage indicates the market area's share of the corresponding Group fi gure.
For HK Ruokatalo, the year 2009 marked the fi rst year of operations uninterrupted by changes relating to the restructuring effort. Stronger market standing wrought by higher supplier shares, increased sales of basic products, excellent delivery reliability and more cost-effective operations were pivotal contributors to the marked improvement in performance compared to a year earlier. HK Ruokatalo's domestic market sales by both volume and value increased by roughly 10 percent.
The decline in the Finnish economy was manifested as increased consumer interest in tried and tested basic products such as processed meats and ground meat.
Matters pertaining to responsibility and the environment were underscored in the operations of HK Ruokatalo and procurement company LSO Foods in the year under review.
Pork production in the EU declined in all major producing countries except for Denmark and the Netherlands. The average reduction was 2.5 percent from 2008. In Finland, 205.6 million kg of pork was produced (-5.2%). Besides farm closures, other factors contributing to the decline in Finland were the purity issues involving factory-produced feeds experienced in the early part of the year, which forced the removal of piglets from the production chain. The decline in production was also refl ected in export volume.
Beef production in the year under review declined in all major producing countries in the EU except for Poland and the Netherlands. In Finland, production increased to 81.0 million kg (+1.0%) mainly as a result of higher average weights. The economic recession fuelled a temporary decline in the demand for beef and prime beef cuts in particular towards the end of the year.
Poultry production in the EU Member States held more or less steady in 2009. Prices in the United States and Brazil clearly undercut EU prices, giving rise to import pressures in the EU and hampering exports. In Finland, poultry meat production totalled 94.8 million kg (-6.0%).
Meat consumption in Finland fell by 1.8 percent on the year. The decline was distributed among all kinds of meat, with chicken affected the least.
Procurement company LSO Foods Oy is in charge of procuring the live pork and beef raw materials required by HK Ruokatalo for its industry. It also attends to animal logistics and advisory services relating to farm development. Järvi-Suomen Portti Osuuskunta has moreover outsourced its pork and beef procurement to the company. LSO Foods' operations are based on production contracts with producers, who at year-end numbered 5 450.
During the year under review, LSO supplied 100.7 million kg of pork and beef (108.2 million kg). At year-end, its market share was 39 percent in pork procurement and 26 percent in beef procurement. Over the course of the year, the company supplied farms with 646 000 piglets and 36 000 calves for rearing.
Poultry meat is supplied to HK Ruokatalo by some 140 contract suppliers, which met the company's full chicken demand of 47.1 million kg (47.6 million kg), equal to a share of 56 percent of all poultry procurement. Associated company Länsi-Kalkkuna Oy responsible for turkey procurement supplied HK Ruokatalo with 4.8 million kg (5.5 million kg) of turkey meat sourced from its own contract producers, equal to nearly 56 percent of all turkey meat produced in Finland.
At the beginning of 2009, LSO Foods concluded an agreement with wholesalers Lihatukku Harri Tamminen Oy on supplying the latter with beef breed meat. The agreement opened up a steady and constant marketing channel for this choice beef while also enabling the transparency and traceability of the meat chain required by consumers.
Industrial processes at HK Ruokatalo are responsible for slaughtering, cutting and production at the company's six production plants. In the year under review, the company focused on the development of internal process-like operations and better management of the various interfaces as well as raising the share of own production and degree of value-added. The more effective management of the volume and quality of purchased services as well as increasing process yields and operational reliability also came under the umbrella of this priority.
The measures implemented manifested as improvements in industrial processes enterprise resource planning and customer satisfaction, which in turn contributed to the favourable earnings development of the Finnish business. HK Ruokatalo will continue to develop operations in Finland to achieve its long-term fi nancial objectives.
HK Ruokatalo has responded to fi ercer competition and rapid changes in the entire business environment through substantial investments allowing operational structure and cost-effi ciency in production and logistics to further improve in the year under review.
The logistics centre in Vantaa achieved its functional objectives during 2009. Delivery reliability remained excellent throughout the year and matched customer expectations. Growing confi dence in the company's ability to deliver showed in the rise of supplier shares.
The downturn in the economy was refl ected in consumer choices. The sales of basic products such as ground meat fi rst started to rise in late 2008 and the trend continued throughout 2009, a development highly suited to a high-volume producer like HK Ruokatalo. In the summer season, demand was successfully steered towards the strong HK brand products, and the sales of grilling sausages, for example, increased on the year in terms of both volume and value. The holiday season, vital to the company's earnings performance, was likewise a great success, and HK Ruokatalo was the nation's largest supplier of Christmas hams.
Sales to customers in the HoReCa sector declined somewhat owing to the overall economic situation in Finland and the ensuing changes in consumption. HK Ruokatalo's HoReCa sector HK Pro nonetheless fared well in this diffi cult market.
As the name implies, HK Pro provides raw materials and services from professionals to professionals. The year under review was one of networking for HK Pro, marked by collaboration with the Finnish Heart Association and the Finnish Chefs Association, among others.
The HoReCa sector is poised for growth in the future and HK Pro is seeking to forge even closer ties with professionals in the fi eld by fostering and intensifying partnerships. During the course of the year, HK Pro launched the new HK Makkarabaari concept to great success.
HK Ruokatalo solidifi ed its standing in the meat and processed meats markets in particular in the year under review. For the poultry business as well, earnings in the year were among the best ever despite a slight decline in consumption.
One of the success stories of 2009 was HK Kabanossi Savu-
pekoni, a premium grilling sausage seasoned with generously sized bacon bits. Another winner, HK Sininen Lenkkiviipale, was launched in response to consumer preferences, as surveys showed that nearly half of those eating the traditional HK Sininen Lenkki sliced the ring sausage cold and used it as a sandwich topping.
Exports in the HKScan Group were centralized to a single umbrella organization. The arrangement allowed enhanced risk management and provided the conditions for seeking better profi tability across the entire Group. The international economic situation was manifested as a decline in the export demand for pork as well as prices below those seen a year earlier. Movements in the exchange rates of currencies important to exports, especially the US dollar and the Russian rouble, also eroded export prices.
As an element in the ongoing development of its operations, HK Ruokatalo set up in 2009 a responsibility scheme extending throughout the supply chain. It comprises e.g. product safety, nutrition and environmental matters as well as the wellbeing of employees and the wellbeing of animals in primary production. As a major food industry operator, the company is actively involved in industry-wide research and development projects.
An extensive four-part responsibility programme was launched in the marketing communications of HK Ruokatalo's poultry brand Kariniemen in the autumn. Its four themes were the importance of farm, environment, taste and nutrition throughout the chain, from farm to fork. The Kariniemen website was also re-designed as a part of this programme.
The year 2009 saw civic debate in Finland as well on the topics of food safety and ethically sustainable production. HK Ruokatalo has built its operations on the principles of highly controlled and verifi ed production processes as well as ongoing improvement. More detailed instructions were issued and controls boosted at various points of the process during the year under review. HK Ruokatalo and LSO Foods also require all farms supplying meat raw material to comply with all local, national and EU regulations in effect as well as with good production practice. These procedures allow consumer confi dence in the meat industry and industry operators to be maintained and strengthened.
The Group maintained its sustained focus to promote the good taste of its products and healthy eating in general in 2009. HK Ruokatalo further expanded the range of its heart-healthy Sydänmerkkituote products, which now number 87.
HK Ruokatalo's Kariniemen poultry brand is the most popular in Finland. During autumn 2009, the sodium chloride content of Kariniemen products was reduced by 20 percent, leaving most Kariniemen products with a salt content of only 0.8 percent. The aim is to reduce the salt content of the entire product range by 25 percent during 2010. The use of monosodium glutamate (E621) will also be discontinued in respect of those Kariniemen products where it is still used, which even now account for only about ten percent of the entire Kariniemen range.
HK Ruokatalo became a sponsor and nutrition partner of the Finnish Olympic team in autumn 2008 with an eye to increasing the visibility of the HK brand and strengthening its reputation as a nutrition expert and a maker of tasty and healthy food. HK Ruokatalo also wishes to use the sponsorship as a means to encourage Finns to eat right and exercise more.
Measures within the sponsorship in 2009 included exercise campaigns directed at consumers and people exercising for fi tness as well as nutrition-related communications. The measures culminated in the Olympic Winter Games taking place in Vancouver in February 2010.
HK Ruokatalo has in place at all of its production plants an environmental management system certifi ed to ISO 14001:2004. In the interests of reducing carbon dioxide emissions, HK Ruokatalo has e.g. switched over to Carbon Free electricity, the generation of which gives rise to no CO 2 emissions.
Renewable energy sources are used at Kariniemen farms. Finnish bioenergy currently accounts for two thirds of the heating requirements of the poultry farms, and the aim is to further increase its share. Environmental effi ciency at the farms is fi rst-rate and recycling widely implemented; for example the peat litter used on the fl oors of the chicken pens is recycled as a soil-improving agent for farmland. Short distances between farm and production plant also contribute to a lower environmental load.
In autumn 2009, HK Ruokatalo re-designed its sandwich meat packages to consume less plastic. The change cuts the use of package plastic by as much as half while also streamlining deliveries. HK Ruokatalo has taken part in projects having to do with the development of renewable materials for use as food packaging.
HK Ruokatalo is invested in the ongoing improvement of the standard of operations and product safety. A set of mutually agreed policies and principles is observed throughout the company's chain of operations. All production plants as well as procurement company LSO Foods have in place quality management systems extending throughout the production chain and certifi ed to ISO 9001.
Each production facility also features an in-house control system approved by the authorities. The plants in Vantaa, Forssa, Mellilä and Säkylä moreover hold food safety management certifi cation to ISO 22000.
The fulfi lment of quality criteria for raw materials, processes and products is monitored on a daily basis by the FINAS-accredited testing laboratories located in conjunction with the plants in Vantaa, Forssa, Eura and Outokumpu.
Scan AB and its subsidiaries are responsible for the HKScan Group's business operations in Sweden. Scan engages in the diverse processing and marketing of pork, beef and lamb, processed meats and convenience foods. Scan's industrial base is in Sweden, and some industrial activities are also carried out in Poland and Denmark. A part of the HKScan Group since 2007, Scan's most important and best-known brands are Scan and Pärsons. Scan is the largest meat industry business in Sweden and its brands make up a part of the culinary identity of Sweden.
| Sweden | 2009 | % | 2008 | % |
|---|---|---|---|---|
| Net sales, EUR million 1 037.4 | 47.6 | 1 179.3 | 50.0 | |
| EBIT, EUR million | 16.7 | 26.6 | 18.0 | 41.8 |
| EBIT margin, % | 1.6 | 1.5 | ||
| Employees, average | 3 270 | 44.0 | 3 529 | 45.5 |
The percentage indicates the market area's share of the corresponding Group fi gure.
The year 2009 was the best to date for Scan AB in terms of profi tability. The company's performance improved throughout the year and the fi nal quarter in particular was in line with long-term orientations. When non-recurring charges are excluded, Scan already then delivered EBIT surpassing the 5-percent target level set by the Group.
A new three-year streamlining programme designed to enhance and improve Scan AB's profi tability and competitiveness was launched in March 2009. The new programme was deemed warranted because programmes implemented earlier had not been suffi cient to bring the company's profi tability up to the desired level.
Scan AB' size, fi rm market leadership and leading brands provide a solid foundation for the measures. The key tools for improving Scan's competiveness will be a considerably leaner cost structure, the introduction of higher value-added products and more effi cient commercial operations.
The streamlining programme kicked off with an organizational restructuring to make Scan's operating model more process-like, thus even better meeting customer and consumer needs in Sweden. The management organization was also restructured accordingly. Mr Olli Antniemi, BSc (Econ), VP in charge of HKScan's Baltic Group, was appointed new managing director of Scan in early March 2009. He was replaced in June 2009 by his deputy, Mr Denis Mattsson, eMba, MSch.
Tangible measures within the streamlining programme were taken starting in September. The programme comprises both structural and operational measures that are envisioned to deliver annual streamlining benefi ts of EUR 30 million by the end of 2012.
In September, Scan resolved to discontinue all production in Uppsala. In keeping with the streamlining programme, production will be optimized at the Bjaeverskov, Denmark-based Kreatina A/S and scaled down considerably in Skara. These measures aim to enhance effi ciency by centralizing production to the company's other plants and cultivating specialization. In December, Scan signed a letter of intent with an external partner concerning the continuation of operations in Visby.
Construction of the new distribution centre (Nationella distributionscenter, NDC) in Linköping proceeded on schedule and the centre will come online in 2010.
The streamlining programme will also affect jobs. When implemented to its full extent, it will result in Scan's workforce being reduced by approximately 500, from roughly 3 000 employees to 2 500 by the end of 2012.
With an eye to the sustained development of meat raw material procurement and producer relations, Scan established in spring 2009 a separate procurement company Svenska Livdjur och Service (SLS). The establishment of this new company was also a part of the wider restructuring underway at Scan.
The economic recession of 2009 did not punish the food industry with quite the same brutality as many other industries. Consumers maintained their confi dence in the Scan brand and product range also in the recession. During the year under review, sales increased in the retail sector but fell in the HoReCa sector. The strengthening of the company's position in the processed meats
market, evidenced by the clear rise in sales volume and sales value from a year earlier, was a pleasing development in the review year.
Scan is the Swedish market leader in meats and sandwich meats, and its supplier shares increased above all in sausages and other processed meats. The ranges of pork and beef for grilling were well received in summer 2009, and the vital Christmas season was also a success: Scan was the largest supplier of Christmas hams in Sweden.
The consumption of sandwich meats and basic products such as bacon, sausages and meatballs rose in Sweden, while some decline in consumption was seen in respect of beef and certain prime cuts in particular. At the same time, the movements in the value of the Swedish crown had a positive effect on the company's exports.
Pärsons Sverige AB saw positive development in its sales volume in 2009 and it gained higher market share in Sweden in the product group of sandwich meats in particular. Unlike parent company Scan, Pärsons was adversely affected by movements in foreign exchange rates. The favourable development of Pärsons' business in the Danish market continued with higher numbers of customers and products.
The streamlining of operations was fostered by the transfer of second Scan subsidiary Skånekött AB's operations to Pärsons.
For Annerstedt Flodin AB, the year 2009 was a diffi cult one, as the prices of frozen inventory had to be adjusted to refl ect lower market prices. Annerstedt was also adversely affected by foreign exchange movements.
The sales organization of subsidiary Scan Foods AB, Scan's UK arm, was restructured in the early part of the year. The Scan brand was re-positioned for the UK market and all products for sale there were given a facelift.
Associate Nyhléns & Hugosons Chark AB based in northern
Sweden fared well in 2009, its Christmas sales for instance increasing by roughly 10 percent on the year.
Scan was considerably invested in 2009 in the development of its sandwich meats concept. The company launched to great success the Scan Variation range, part of the Smörgåsmat & Deli category and comprising 12 varieties of sandwich meat in small packages averaging only 50 grams each. The consumer can buy three Variation packages for the price of one large product package and thus enjoy more choice and variety in sandwich toppings.
Barbecuing is extremely popular in Sweden in the summer months. Accordingly, Scan focused on the grilling season with the market launch of several new products in pork, beef and lamb. The launches paid off and the grilling season proved profi table for Scan.
Issues relating to corporate social responsibility were given widespread public consideration in Sweden in the review year. Public debate focused above all on climate issues, food additives and the wellbeing of production animals. Scan was an active participant in the debate on pork production in particular, a concern shared by the entire industry. One outcome of this debate was the proposed introduction in Sweden of a dedicated certifi cation system maintained by an independent party and extending to all meat producers.
In November, Scan set up a blog on its website to discuss topics such as food, meat and processed meats, the environmental impacts of food production, and animal wellbeing. The blog also provides an avenue for contributing to topical debates in the media.
Scan continued to work together with the Foundation for the Astrid Lindgren Children's Hospital for the third year running. The Christmas drive, during which a portion of the sales price of every Scan product package was donated to the Foundation, raised 756 000 crowns in all.
All Scan production plants have in place a quality management system certifi ed to ISO 9001 and an environmental management system certifi ed to ISO 14001. In keeping with consumer wishes, all of the company's production plants in Sweden are also certifi ed to British Retail Consortium (BRC) standards. All slaughterhouses furthermore meet the Swedish national organic production KRAV standards as well as EU standards for organic production.
Sustained efforts to improve the work environment and maintain employee health and ability to work have borne fruit. Scan's investments in a higher degree of automation as well as faster and more effective rehabilitation, among others, are reaping results in the form of fewer extended medical leaves. All in all, absenteeism due to illness has been halved over the past fi ve years.
HKScan's Baltic Group is active in Estonia, Latvia and Lithuania. Group company Rakvere Lihakombinaat along with its subsidiaries is the largest meat industry company in the Baltics while AS Tallegg is the largest producer of eggs and poultry in Estonia. The Rakvere group comprises the Estonian AS Ekseko, the Latvian Rigas Miesnieks and the Lithuanian Klaipedos Maisto Mesos Produktai, each of which maintains its own brands. The best known brand in Estonia is Rakvere, in Latvia Rigas Miesnieks and in Lithuania Klaipedos Maistas. Tallegg products are sold in Latvia under the Rigas Miesnieks brand and in Lithuania under the Klaipedos Maistas brand.
| The Baltics | 2009 | % | 2008 | % |
|---|---|---|---|---|
| Net sales, EUR million | 156.9 | 7.2 | 168.2 | 7.1 |
| EBIT, EUR million | 9.8 | 15.6 | 6.4 | 14.9 |
| EBIT margin, % | 6.3 | - | 3.8 | - |
| Employees, average | 1 798 | 24.2 | 1 844 | 23.8 |
The percentage indicates the market area's share of the corresponding Group fi gure.
HKScan's Baltic Group continued to gain stronger market standing in Estonia, Latvia and Lithuania in 2009. Rakvere and its subsidiaries as well as Tallegg delivered the best result in the Group in an exceptionally demanding business environment, posting EBIT of 6.3 percent of net sales when the Group target is set at fi ve percent. Determined cost control was the crucial factor in strengthening competitiveness.
The accomplishment is made only more remarkable by the fact that the Baltic Group's net sales fell by an average of 6.7 percent on the year in real terms. The decline was caused above all by the deep recession and rising unemployment in the Baltic states and the ensuing decline in consumer purchasing power. Disposable incomes in the Baltics declined by an estimated one-quarter from the previous year.
Rakvere and Tallegg were able to capitalize on the fall in costs caused by the recession, which was signifi cant in respect of feed, energy and labour costs in particular compared to the economic boom of the preceding years. Decreases in pivotal cost items combined with the functional fl exibility of employees and the market launch of products in keeping with the spirit of times and refl ective of demand translated into solid earnings, even despite sales prices to retail chains declining due to competitive pressures.
Retail chain expansion slowed down in the year under review owing to the recession. Competition nonetheless continued to grow fi ercer and the largest retail chains expanded operations throughout the Baltic states. This also occasioned a better bargaining position for retail in price talks with industry.
In the judgment of the HKScan Group, the meat industry in the Baltics is undergoing restructuring fuelled by the recession. Under these circumstances, market leaders such as Rakvere Lihakombinaat, Tallegg and Rigas Miesnieks have the advantage.
Clear-cut changes were seen in buying habits as consumers sought out the alternatives most advantageous to them. Demand thus turned to familiar basic products.
The home cooking trend gained momentum throughout the year in Estonia, with decreases in both purchases of convenience foods and eating out. Convenience food sales in large supermarkets were almost halved. Cooking at home resulted in an increase in Rakvere's sales of fresh meat and ground meat, yet the same trend also made the Baltics an attractive market for low-priced imported meat.
Consumers favoured retail meat cuts as well as tried and tested processed meats such as frankfurters and hams of various kinds. A distinct bump was also seen in the demand for chicken, which is perceived as affordable and healthy.
Rakvere's most important product launches in the year under review were meatballs fi lled with fl avoured cream cheeses. The new ground meat packing line enabled an expansion of the product range as well as higher delivery reliability. As usual, seasonal new items were introduced in the product range for the summer and winter.
Rakvere opened 20 new shops-in-shop, thus providing the company with another sales channel for the sale of fresh and marinated meat. In Latvia, the retail chain which houses Rakvere's meat counters had to close down fi ve outlets due to fi nancial diffi culties.
Changes in structure and personnel were made in the sales organization of Rakvere Lihakombinaat, its Latvian subsidiary Rigas Miesnieks and Lithuanian subsidiary Klaipedos Maisto Mesos Produktai in autumn 2009. In Latvia, the company also came under new management. The measures were designed to inject greater effi ciency into sales and marketing.
Fixed costs were cut by centralizing Rigas Miesnieks' frankfurter production from Latvia to the new and effi cient production line deployed in Rakvere, Estonia in September 2008.
In 2009, Estonia's leading poultry company Tallegg invested in chicken breeder hen production. The new facility houses over 20 000 breeder hens which produce roughly 3.8 million eggs per year. Tallegg now satisfi es approximately 85 percent of its chicken demand with its own production. The company also invested in poultry feed production in the year under review. Ekseko in turn opened in 2009 a new 2000-hog facility to produce pork for Rakvere's needs.
In HKScan's Baltic Group, Rakvere, Ekseko and Rigas Miesnieks have in place a quality management system certifi ed to ISO 9001. Rakvere and Ekseko also have an environmental management system certifi ed to ISO 14001 while Tallegg has in place a product safety management system certifi ed to ISO 22000.
During 2009, successful internal measures to increase effi ciency and trim costs were implemented at Rakvere. Rakvere also commenced renovation of a by-product processing plant. The renovation, which is slated for completion in 2010, will reduce the plant's air emissions and wastewaters.
HKScan acquired a minority holding in meat company Sokolów in 2002. It was the Polish market leader, had good growth potential and held some of the nation's best known brands.
Owing to the size of the Polish market and to balance the risks involved, in summer 2004 HKScan entered into partnership with Danish Crown. The joint venture Saturn Nordic Holding established to this end started to systematically increase its holding, and since summer 2006 Sokolów has been completely in Finnish-Danish hands.
| 2009 | % | 2008 | % |
|---|---|---|---|
| 251.7 | 11.6 | 270.9 | 11.5 |
| 9.3 | 14.8 | 4.2 | 9.8 |
| 3.7 | - | 1.6 | - |
| 5 569 | - | 5 515 | - |
The fi gures represent the share (50%) accounted for in HKScan Group fi gures. The employee fi gure refers to the entire personnel of Sokolów and has not been included in Group fi gures. The percentage indicates the market area's share of the corresponding Group fi gure.
The rise in Sokolów's profi tability fi rst seen in autumn 2008 carried on throughout 2009. The fi nal three months of the year in particular were successful and Sokolów posted the best quarterly results in its history.
Sokolów solidifi ed its market standing while delivering improved performance both in its home market of Poland and in the export market. Thanks to good sales in the domestic market, a rise in exports, and stringent cost control, Sokolów's net sales in zloty increased by 14 percent on the year, yet declined in euro owing to foreign exchange movements.
The economic recession had no material effect on the foodbuying decisions of Polish consumers in 2009. Exports gained momentum from the decline of the Polish zloty against the euro.
Subsidiary Pozmeat and primary production company Agro-Sokolów also made headway in 2009 towards achieving the planned level of business activities.
As the Baltics, the Polish market area is also undergoing a restructuring where strong players such as Sokolów are best equipped to succeed in an economic recession.
The year 2009 was not a carbon copy of the preceding year but still a diffi cult one for the meat industry. Many small and mediumsized businesses fell on hard times or exited the industry altogether. The effects of the recession in Poland, though visible there as well, were lesser than in other European countries on the whole. A slight bump was even recorded in the retail sales of food. Industrial production fell and the unemployment rate rose to 11.1 percent. Infl ation accelerated to 4.0 percent in April but had slowed down to 3.3 percent in November. Poland was the only EU Member State to record rising GDP. The gradual improvement in the economies of the EU Member States along with the weak Polish zloty had a positive effect also on the growth of the company's exports.
The meat industry in Poland remains in fl ux. The largest operators weathered the recession fairly well while small and mediumsized businesses were less fortunate. Sokolów grew its sales in the year under review. Wider inclusion in the selections of modern retail chain supermarkets and hypermarkets, where most of the future market growth is expected to be seen, contributed to this development. Private label brands are expected to account for an increasing portion of retail sales in Poland as well. Sokolów's major product launches in the year under review were pork and beef skewers in the sector of meat along with beef carpaccio, steak tartar and soups in the sector of convenience foods.
The supply of pork in Poland remained low in the year under review and the mean price of meat rose on the year, which is why the per-capita consumption of pork is estimated to have declined by approximately 2 kg in the review year. This decline was partially offset by rising poultry meat consumption as well as the slight increase in beef consumption. The demand for sliced products held steady while a slow rise was seen in the demand for convenience foods.
Meat imports into Poland in 2009 were high owing to underproduction and higher meat prices. Despite imports, Sokolów successfully grew its sales in both the domestic and export market. Exports benefi tted from the weak Polish zloty.
The year 2009 saw a fi ne-tuning of Sokolów's operational structure through the centralization of activities. Logistics was integrated with sales and marketing, as were exports effective 2010. Production was also modernized. New production lines were introduced at the Jaroslaw plant for soups and at the Tarnów plant for meat skewers. A skinless meat products production line was commissioned at the Kolo plant and a frankfurter packing line at Pozmeat.
In December 2009, subsidiary Pozmeat S.A. was merged with Sokolów S.A. to become one of its offi ces.
In the year under review, Sokolów continued to work towards maintaining high quality standards, improving environmental management and ensuring animal wellbeing.
Quality certifi cates were renewed and new certifi cates obtained in respect of third-world countries. New energy and water effi cient equipment was purchased for the heat-processing and refrigeration of products. Equipment designed to reduce the amount of waste arising in production was also taken into use.
The HKScan Group has employees in nine European countries. Group companies have nearly 7 000 white-collar and blue-collar employees on payroll, with joint venture Sokolów bringing another just under 5 600 employees into the Group's sphere of infl uence. The table below presents a breakdown of employees by country.
In 2009, roughly 78 percent of employees were blue-collar and 22 percent white-collar.
Since European countries have developed along different historical and cultural lines, the traditions and customs relating to work thus also vary from country to country. In HKScan, each country's executive management ensure that Group companies have regard to the legislation and agreements governing employment, remuneration and other terms of employment as well as occupational safety in their respective countries.
In keeping with its principles, HKScan regards as important the right of both white and blue collar employees to unionize and bargain collectively.
The HKScan Group had an average of 7 429 employees in 2009 (7 750). The reduction of roughly 320 employees, equal to 4 percent of the total workforce, is attributable to the ongoing streamlining and cost-effectiveness measures in the market areas of Sweden and the Baltics in particular, by which measures Group companies are seeking to enhance their competitiveness and profi tability.
In other respects HKScan, along with the meat industry in general, was able to preserve jobs also in the recession better than many other industries, and the downsizing measures implemented were only undertaken after careful deliberation.
The average number of employees in each market area was as follows: 2 361 in Finland, 3 270 in Sweden and 1 798 in the Baltics. In addition, the Sokolów group had an average of 5 569 employees.
HKScan paid a total of EUR 234.0 million (EUR 262.9m) in salaries and fees in 2009. When pension costs and other social security costs are included, the total rises to EUR 306.7 million (EUR 319.0m).
| 2009 | % | 2008 | % | 2007 | % | |
|---|---|---|---|---|---|---|
| Sweden | 2 689 | 38.6 | 2 794 | 39.4 | 3 050 | 41.6 |
| Finland | 2 210 | 31.7 | 2 229 | 31.4 | 2 236 | 30.5 |
| Estonia | 1 552 | 22.3 | 1 548 | 21.8 | 1 630 | 22.2 |
| Poland (Scan) | 235 | 3.4 | 192 | 2.7 | 100 | 1.4 |
| Latvia | 181 | 2.6 | 227 | 3.2 | 219 | 3.0 |
| Lithuania | 44 | 0.6 | 51 | 0.7 | 43 | 0.6 |
| Denmark | 43 | 0.6 | 44 | 0.6 | 45 | 0.6 |
| Russia | 5 | 0.1 | 5 | 0.1 | 5 | 0.1 |
| UK | 4 | 0.1 | 5 | 0.1 | 5 | 0.1 |
| HKScan total | 6 963 | 100.0 | 7 095 | 100.0 | 7 333 | 100.0 |
| Sokolów | 5 577 | - | 5 732 | - | 5 419 | - |
Additionally, the Sokolów Group employed 5 577 persons.
Employees by country at the end of 2008
Additionally, the Sokolów Group employed 5 732 persons.
Additionally, the Sokolów Group employed 5 419 persons.
| 2009 | 2008 | 2007 | |
|---|---|---|---|
| HKScan Corporation | 12 | 13 | 14 |
| Scan Group | 2 971 | 3 035 | 3 200 |
| HK Ruokatalo Oy | 2 064 | 2 084 | 2 080 |
| Rakvere Lihakombinaat Group | 1 311 | 1 378 | 1 402 |
| AS Tallegg | 466 | 448 | 490 |
| LSO Foods Oy | 61 | 67 | 75 |
| Other | 78 | 70 | 72 |
| HKScan Group total | 6 963 | 7 095 | 7 333 |
| Sokolów Group | 5 577 | 5 732 | 5 419 |
In 2010, the company will particularly focus on nutrition, environmental matters and the wellbeing of production animals.
The concept of corporate responsibility in respect of food-producing companies has a wide range of aspects. Debate on matters pertaining to human nutrition and the environmental impacts of food production is a global phenomenon. The meat industry is the focus of particular attention due to e.g. the treatment and wellbeing of production animals.
HKScan is cognizant of its responsibility as a major Northern European meat company. Responsibility in operations is rooted in the very history of the company established in 1913 by local cattle farmers. Ever since, building production on a platform of local raw materials has been an overriding principle for HKScan. HKScan knows the origin of the meat raw material used for products in all of its market areas.
Responsibility extends throughout the production chain, from primary production through to the fi nished products. HKScan complies with and often exceeds the requirements imposed in legislation and regulatory guidelines and policies. In addition, HKScan and its subsidiaries based in the various market areas are active participants in joint industry undertakings in order to further build on the standard of their operations.
Although responsible action and sustainable development have always been important to the company, in 2009 HKScan resolved to start drafting its own corporate responsibility scheme. During 2010, this scheme will bring HKScan's measures in seven selected sectors under a single umbrella. These sectors are product safety, nutrition, environmental matters, employee wellbeing at work, wellbeing of production animals, local aspects and economic responsibility.
The responsibility scheme will be integrated into the Group's management system and a set of indicators will be devised to monitor its realization. Designated persons within the Group will also be tasked with coordination and management of the programme and its various sectors.
Consumers the world over are growing increasingly interested in the nutrition values of food. Besides taste, key issues include fat content and fat quality in food as well as the amounts of salt and additives in food. HKScan seeks to respond to consumer wishes by catering for these considerations as well in its extensive product range.
Meat is an important component of a balanced and healthy diet. Since 96% of Finns, for example, eat meat, meat and meat dishes play a pivotal role in our diet to satisfy protein requirements. Meat proteins are always of good quality because they contain all the essential amino acids which the body requires. Meat is an excellent source of iron and a good source of other minerals such as zinc and magnesium. It is also rich in vitamins B, especially vitamins B12 and B6.
Since meat and products prepared from meat play a key role in the diet of consumers in HKScan's area of operations, the company and its subsidiaries can infl uence national health through the product ranges offered. HKScan invests in ongoing research and product development so that it may develop new, tasty and increasingly healthy meat-based products.
In Finland, the salt content of HK Ruokatalo's products has been systematically reduced since 2007. The salt reduction was carried out in respect of convenience foods in the years 2007– 2008. In 2009, the salt content of processed meats, marinated meats and poultry products was reduced. However, the pursuit of healthfulness objectives is never allowed to compromise the taste and enjoyability of the products.
HK Ruokatalo aims at nutritionally smart products. The topic has been given particular consideration since 2007.
HK Ruokatalo will furthermore launch on the Finnish market in 2011 a new heart-healthy type of pork meat in which the fat content has been modifi ed to conform to nutrition recommendations. Hearthealthy pork has been achieved through a new pig-feeding concept where the quality and administration method of vegetable oil play a key role. The new meat is unique because the transition to healthier meat is achieved through wholly natural means. The transition is accomplished in all parts of the animal and the share of trans fat has been reduced to less than the required one third of total fat. At the same time, the amount of essential omega 3 fatty acids, obtained through diet, has been increased by a factor of 3.5. The change can be both seen and tasted: the pork is softer and more tender, and it also has an excellent taste.
The new heart-healthy pork meat will in future also be used as the raw material for processed meats, i.e. sausages and sandwich meats, putting these as well in line with recommendations with regard to fat quality.
In Sweden, Scan has been reducing the amount of additives in its products since 2008 in response to consumer wishes. Monosodium glutamate (E621) is no longer used in any products sold under the Scan brand, for example, nor is the aroma enhancer added to any new products.
HKScan operates on the principle of causing minimum adverse environmental impact during production. This principle is put into practice in all market areas, taking into account existing regulations and certifi cation processes. Executive management in each market area are responsible for ensuring the appropriate organization of environmental management.
In Sweden, Scan AB is committed to a 35-percent reduction in greenhouse gas emissions by 2010 and a 50-percent reduction by 2020. Scan AB takes action in furtherance of these objectives in its own production, deliveries, energy consumption and purchasing.
An ISO 14001-certifed environmental management system is in place at all HK Ruokatalo production plants in Finland, the Rakvere Lihakombinaat and Tallegg plants in Estonia and six production plants in Sweden. Other Scan facilities apply the BAS system, in which environmental efforts are managed by a local steering group responsible for setting environmental targets for plants and monitoring compliance. In Poland, the Sokolów plants operate according to good production practice under the ongoing supervision of the Polish veterinary authority.
Environmental responsibility at HKScan extends across the entire production chain: from primary production through to consumers, for instance product packages.
HKScan pays attention to reducing the carbon footprint and other environmental impacts of its operations and products at all stages of the production process. One of the key environmental objectives is to reduce CO 2 emissions. As the meat industry is a large consumer of water, reduced water consumption and optimal water usage likewise count among HKScan's environmental objectives.
However, in the meat industry the greatest environmental impacts arise from primary production, i.e. the rearing of production animals at the farms of contract producers. HKScan engages in active measures together with its contract producers to reduce the environmental impacts of primary production as well.
Efforts have also been made to minimize environmental loading in investments. The modernization of HK Ruokatalo's slaughterhouse in Forssa implemented in the years 2006–2007 resulted in the plant's water consumption and waste generation falling substantially. The switchover to natural gas at the Vantaa production plant in 2007 reduced CO2 emissions. In Outokumpu, improved recovery of slaughter animal blood led to a reduction in non-environmentally friendly wastewaters.
HK Ruokatalo's re-design of product packages in Finland has also been a part of its environmental programme. The sandwich meats package re-design implemented in autumn 2009 spelled a marked reduction in the use of package plastic. The new packages give rise to up to 50 percent less packaging waste than before. This translates into over 100 000 kg less package plastic used each year. Moreover, the new packages allow more compact packing and delivery trucks thus transport considerably less packing materials and sheer air.
In Sweden, Scan streamlined sandwich meat packages by removing the lid, thus reducing package material usage by 70 000 kg annually. As in Finland, the resulting environmental impact is signifi cant, and it is only boosted by the greater compactness and reduced weight of shipments.
The wellbeing of production animals was a topic of public debate in both Sweden and Finland in 2009. The debate focused on the wellbeing of pigs in particular.
Healthy and well-kept production animals are not only vital but in fact fundamental to the operation and profi tability of the entire meat chain. Accordingly, HKScan requires its own employees, contract producers and the supervisory authorities to act in a manner that ensures that production animal treatment in all of the company's market areas complies with legislation and regulations. The aim is to further build on operations so as to expose abuses at an early a stage as possible. This calls for good cooperation among all actors in the meat chain.
In order to ensure and further enhance the wellbeing of production animals, HKScan lists among its objectives the provision of training and advisory services to contract producers. HKScan and its subsidiaries are furthermore actively involved in joint industry ventures designed to improve the treatment of production animals.
Greater production animal wellbeing manifests not only as higher farm profitability but also as meat raw material of higher quality, as the wellbeing of animals reduces stress, morbidity and thus also the need for antibiotics. Animal wellbeing must also be catered for in the breeding, housing and transportation of animals.
In Sweden, Scan AB has already in a place a system requiring meat producers to sign an affi davit testifying to the health and origin of the animals sold. Independent certifi cation seeking to ensure the wellbeing of animals will furthermore be introduced in Sweden during 2010. Certifi cation will only be granted to those pig farms that meet the requirements imposed for production animal care. Scan AB has actively promoted the introduction throughout the Swedish meat industry of this new system designed to ensure the wellbeing of pigs.
In Finland, HK Ruokatalo has started to establish its own quality scheme for responsible pork production. The scheme encourages meat producers towards responsibility in the rearing of production animals. The new quality scheme of HK Ruokatalo and LSO Foods will focus on both the wellbeing of animals and greater consideration for the environment while also catering for profi table production.
The responsible production quality scheme within the contract production system comprises three components: animal health and wellbeing, environmental considerations and profi table production.
Indicators that best measure the respective key elements will be developed for each sector, and boundary values monitored by the company's experts will be determined for each indicator.
In addition to the three priorities presented above, HKScan's corporate responsibility scheme extends to measures beyond the self-evident sector of product safety. These further sectors are employee wellbeing at work, local aspects and economic responsibility.
With regard to product safety, development measures comprise actions to promote traceability in the production chain and to ensure quality as well as production and product hygiene.
With regard to employee wellbeing, measures target management cultures alongside working conditions. Many studies indicate that supervisory practices are one of the key contributors to wellbeing at work.
Local aspects are important to HKScan for a number of reasons. Consumers are to an increasing degree basing their buying decisions on the origin of food. As a major employer, HKScan has a signifi cant impact on employment and the economy in many of its production locations. This impact also extends to the company's contract meat producers, which number roughly 5 500 in Finland and about 15 000 in Sweden. The company carries out its own primary or contract production also in the Baltics and Poland.
Economic responsibility arises above all from profi table business activities. This calls for realistic fi nancial objectives and action plans for their achievement. Risk management and the prevention of abuses as well as supervision likewise play a pivotal role with regard to business activities. At HKScan, these matters have been thoroughly addressed.
• The HKScan Group's competitiveness grew stronger and supplier shares increased in all market areas in 2009.
• Reported EBIT increased by 45 percent and came to EUR 55.1 million (EUR 38.1m). EBIT exclusive of non-recurring items, which totalled EUR 12.7 million, climbed to EUR 67.8 million (EUR 38.1 m).
• Owing to improved profi tability and reduced fi nancing costs, pre-tax profi t quadrupled to EUR 37.3 million (EUR 9.0m).
• Owing to exchange rate fl uctuations, full-year net sales in euro declined by 7.4 percent but remained at the previous year's level when calculated at fi xed rates.
• The share offering executed in December strengthened the Group's balance sheet structure.
The HKScan Group's net sales in 2009 came to EUR 2 124.7 million (EUR 2 294.6m in 2008). The decline of approximately 7.4 percent in net sales in euro was due to movements in the exchange rates of the Group's main currencies. Measured at fi xed rates, net sales were at the previous year's level. HK Ruokatalo Oy in Finland and Sokolów S.A. in Poland grew their net sales when measured in real prices. No mergers or acquisitions with a signifi cant impact on net sales were concluded in the year under review.
Group net sales in 2009 broke down among market areas as follows: Finland 33.6% (31.4%), Sweden 47.6% (50.0%), Baltics 7.2% (7.1%) and Poland 11.6% (11.5%).
Group operating profi t (EBIT) at EUR 55.1 million increased as anticipated from the previous year's fi gure of EUR 38.1 million (+44.7%). The market area of Finland delivered the greatest increase in euro while in relative terms, the growth rate was the highest in Poland.
Breakdown of net sales by market area in 2009 (%) EUR 2 124.7 million
Breakdown of EBIT by market area in 2009 (%) EUR 55.1 million
Net sales and EBIT by segment (EUR million)
| 10-12/2009 10-12/2008 1-12/2009 1-12/2008 | ||||
|---|---|---|---|---|
| Net sales | ||||
| - Finland | 185.4 | 197.3 | 732.5 | 740.4 |
| - Sweden | 278.3 | 301.6 | 1 037.4 | 1 179.3 |
| - The Baltics | 38.1 | 43.0 | 156.9 | 168.2 |
| - Poland | 65.1 | 66.3 | 251.7 | 270.9 |
| - Between segments | -9.5 | -16.0 | -53.9 | -64.3 |
| Total | 557.5 | 592.3 | 2 124.7 | 2 294.6 |
| EBIT | ||||
| - Finland | 6.4 | 6.4 | 27.0 | 14.4 |
| - Sweden | 9.1 | 8.6 | 16.7 | 18.0 |
| - The Baltics | 2.0 | 0.6 | 9.8 | 6.4 |
| - Poland | 2.9 | 1.9 | 9.3 | 4.2 |
| - Between segments | 0.0 | 0.0 | 0.0 | 0.0 |
| - Group administration costs -1.9 | -2.2 | *) -7.7 | -4.9 | |
| Total | 18.4 | 15.3 | 55.1 | 38.1 |
HK Ruokatalo's solid earnings development carried through until the end of the year.
Group EBIT in 2009 broke down among market areas as follows: Finland 43.0% (33.5%), Sweden 26.6% (41.8%), Baltics 15.6% (14.9%) and Poland 14.8% (9.8%).
best quarterly results in its history. In the market area of Finland,
Of the Group's main currencies, the Swedish crown and the Polish zloty started to plunge against the euro in autumn 2008 and hit bottom in February-March 2009. Both currencies have picked up since then but remain below their long-term levels. Movements in currency exchange rates become visible upon the consolidation of the fi gures of foreign business segments. At the closing date, an average of two thirds of the equities of foreign subsidiaries had been hedged.
Profi tability in the market area of Finland continued to rise in line with plans throughout the fi nancial year and showed a considerable improvement when compared to the previous year.
HK Ruokatalo's domestic market sales by both volume and value increased by roughly 10 percent and the company achieved greater supplier shares. The excellent delivery reliability maintained all year further contributed to customer satisfaction. The sales of processed meats, which fi rst picked up in late 2008, continued to rise all through the year. The holiday season, vital to the company's earnings performance, was highly successful, and HK Ruokatalo was the nation's largest supplier of Christmas hams.
Matters pertaining to responsibility were underscored in business operations.
The fall of 1.1 percent in net sales in HKScan's Finnish market area is attributable to the planned decrease of export sales.
A cost provision totalling of EUR 1.1 million and relating to personnel cuts at HK Ruokatalo's Forssa production facilities in 2006 is recognized in the fi gures for 2009. Severance pay of EUR 1.3 million to HKScan Corporation's former CEO is included in Group administration costs.
The performance of Scan AB and its subsidiaries improved throughout the year and especially in the fi nal quarter, the best of the year. EBIT exclusive of non-recurring items rose to EUR
*) Includes EUR 1.3 million in non-recurring severance pay relating to the termination of the former CEO's employment and recognized in Q1.
The division of segments is based on the Group's organization and Board of Directors and management reporting. Management tracks the profitability of business operations by market area. The Group's primary reporting segments are geographical segments: Finland, Sweden, the Baltics and Poland.
Reported EBIT rose by 45 percent and EBIT exclusive of nonrecurring items, which totalled EUR 12.7 million, climbed to EUR 67.8 million (EUR 38.1 m).
The company's performance in terms of both sales and earnings was particularly good in the fi nal quarter of the year in all market areas. In the Baltics, Rakvere Lihakombinaat and Tallegg exceeded the Group's EBIT target of fi ve percent. The market area of Sweden enjoyed favourable development in the last three months of the year and had it not been for non-recurring charges of EUR 5.8 million, EBIT in Sweden as well would have climbed to fi ve percent of net sales. The fact that this was accomplished amidst the restructuring and reorganization ongoing in the Scan Group only makes the achievement more remarkable. In Poland, Sokolów posted the 14.9 million (EUR 8.6m) or 5.4 percent (2.9%) of net sales. The profi tability of operations was successfully enhanced despite the challenges presented by the market and restructuring. In terms of profi tability, the year 2009 was the best in the company's history.
All in all, non-recurring charges of roughly EUR 10.3 million (EUR 0m) were recognized in Sweden in 2009. These had to do with the ongoing streamlining programme and changes in management. Non-recurring charges recognized in Q4 amounted to EUR 5.8 million (EUR 0m).
The weakening of the Swedish crown against the euro resulted in lower euro-denominated net sales and EBIT. Measured in crowns, net sales declined by 2.9 percent on the year.
March 2009 saw the launch of a three-year streamlining programme designed to bring Scan's profi tability up to the Group's EBIT target level of 5 percent. The tools employed to this end are a leaner cost structure at Scan, the introduction of higher valueadded products and more effi cient commercial operations.
To allow a sustained approach to developing the procurement of meat raw material, Scan established a separate procurement company Svenska Livdjur och Service (SLS) that in future will attend to Scan's producer contracts, meat purchases and production counselling in a centralized manner.
Scan AB's management changed on 4 March 2009 when managing director Magnus Lagergren and senior VP/director Matts Rosendahl decided to leave the company. Olli Antniemi, BSc (Econ) replaced Lagergren as managing director and was replaced in turn by Denis Mattsson eMBA on 23 June 2009.
HKScan's Baltic Group posted an excellent fi nancial result. This accomplishment is made even more remarkable by the fact that it was delivered by AS Rakvere Lihakombinaat and Tallegg in a highly demanding business environment. Successful cost management, operational fl exibility and product launches matching the spirit of the times kept fi nancial performance sound despite a 6.7-percent decline in net sales over the year.
The deep economic recession and decline in consumer purchasing power were clearly refl ected in demand in all Baltic states. Nonetheless, Rakvere Lihakombinaat and Tallegg managed to grow their EBIT and further strengthen their market standing.
In Poland, Sokolów continued to grow its net sales and improve its profi tability in the fi nal quarter of the year to deliver an EBIT margin of 4.4 percent (2.9%) The company's sales increased in terms of both volume and value. Measured in zloty, Sokolów's net sales grew by 14 percent on the year, yet fell short of the euro-denominated fi gure a year earlier due to changes in exchange rates.
The increase in net sales in 2009 was attributable to successful sales in the domestic market, higher exports, and cost management. The ongoing recession had little effect on the food-buying decisions of Polish consumers in 2009.
The Group's production-related gross investments in 2009 totalled EUR 41.3 million (EUR 84.0m). Breakdown of investments by market area: Finland EUR 8.0 million, Sweden EUR 18.5 million and the Baltics EUR 7.3 million. HKScan's share of Sokolów investments in Poland added a further EUR 7.5 million.
The most important undertaking in Sweden was the new distribution centre rising in Linköping, where installations of machinery and equipment continued. The centre will come online in spring 2010. No major investments were underway in Finland or the Baltics.
Group funding is based on a EUR 550 million syndicated credit facility signed in June 2007, comprising a EUR 275 million sevenyear amortizing term loan and a EUR 275 million fi ve-year credit limit with two one-year extension options, one of which has been exercised. Untapped credit facilities at 31 December 2009 stood at EUR 207 million (EUR 140m). In addition, the Group had other untapped overdraft and other facilities of EUR 39 million (EUR 37m). The EUR 100 million commercial paper programme had been drawn in the amount of EUR 5 million (EUR 0m). The increase in untapped facilities was due to the share offering, the net proceeds of which were used to pay down debt. In connection with the offering, the company also paid back its EUR 20 million hybrid bond.
The company has experienced no problems with re-fi nancing and sees no signifi cant need for further fi nancing before the year 2013. The company's current loan agreements are subject to ordinary terms relating to profi t and balance sheet. The fi nancial covenants are net gearing ratio and ratio of net debt to EBITDA.
The share offering executed in December 2009 strengthened
the company's capital structure and the equity ratio climbed to 37.1 percent at year-end (29.5%). Consolidated cash fl ow from operating activities improved owing to better fi nancial performance while prudent consideration of investments delivered stronger net cash fl ow from investing activities.
The Group's taxes for January to December 2009 totalled EUR -4.9 million (EUR -1.4m). The effective tax rate was 13.0 percent (15.3%). The low effective tax rate was the result of a number of distinct factors, with the greatest impacts originating in the Baltics and Sweden. In Baltic operations, advantage was taken of Estonia's zero tax rate on retained profi ts. In Sweden, the company utilized losses on which a deferred tax asset had not been recognized earlier.
Pursuant to an authorization granted by the Extraordinary Meeting of Shareholders on 24 November 2009, HKScan's Board of Directors between 2 and 17 December 2009 executed a directed share
issue in which shareholders had pre-emptive right to subscribe for new A Shares in proportion to their existing holding of the company's series A and/or K shares. The share offering was warranted in order to strengthen the company's capital structure and to increase its operational and strategic fl exibility. The subscription price was EUR 5.30 per share.
A total of 14 720 329 new A Shares were subscribed for, approximately 99.0 percent in the primary subscription and the remaining shares in the secondary subscription. The proceeds of the share offering amounted to approximately EUR 78.0 million before fees and expenses related to the offering.
As a result of the share offering, the total number of HKScan shares increased to 54 026 522 shares and the number of A Shares to 48 626 522 shares. The new shares entitle shareholders to dividend and other rights effective 29 December 2009, on which date the shares were entered in the Trade Register. The company's registered share capital did not increase as a result of the offering, as the proceeds were recognized in full in the reserve for invested unrestricted equity (RIUE).
offering to repaying in late December the hybrid bond which it had issued to its majority shareholders in September 2008. The bond was originally issued to strengthen the company's capital structure. It carried an interest rate of 8.5 percent p.a. and had no maturity. The bond was treated as equity in the IFRS fi nancial statements. HKScan paid the interest on the bond for 2009 in cash, though the holders of the bond also had the option of accepting company shares in lieu of cash. The remaining proceeds of the offering were used to pay other interest-bearing debts.
At 1 January 2009, HKScan held a total of 4 474 of its A Shares. Over the course of the year, 47 508 shares assigned in the years 2006–2008 as part of the key employees' share bonus scheme reverted back to the company. At 31 December 2009, the company held a total of 51 982 of its A Shares. These had a market value of EUR 0.41 million (EUR 7.85 each) and accounted for 0.10% of all shares and 0.03% of all votes. No dividend is paid on treasury shares.
HKScan Corporation's management changed on 5 January 2009 when the Board of Directors relieved CEO Kai Seikku of his duties. Seikku had served as CEO since April 2006. CFO Matti Perkonoja was appointed CEO effective 12 January 2009. He had been the CFO of HKScan since 2000 and had also served in commercial and industrial executive positions in the Group which he joined in 1993. It was agreed that Mr Perkonoja would serve as CEO until the end of 2010. In January 2010, however, the Board and Mr Perkonoja agreed that he would stay on as CEO until the end of February 2012, after which time he plans to retire.
The Group's Management Team was augmented in January with the inclusion of CFO Irma Kiilunen and VP of strategy and development Tero Hemmilä. VP Tero Hemmilä left HKScan at the beginning of 2010.
In Sweden, Scan AB's managing director Magnus Lagergren resigned on 4 March 2009. Olli Antniemi, BSc (Econ) replaced Lagergren as managing director and was replaced in turn by Denis Mattsson eMBA on 23 June 2009.
The company allocated EUR 20 million of the proceeds of the
2005 2006 2007 2008 2009
0510
HKScan Corporation Board member Lars Hultström announced his resignation from the Board on 1 December 2009, effective immediately. Hultström was elected to the Board as a new member by the Annual General Meeting of Shareholders of 23 April 2009.
The company established in November 2009 a subsidiary by the name of HKScan Finland Oy and resolved to transfer to this company its production-related property, plant and equipment in Finland as well as its holdings in Finnish subsidiaries and associates. The transfer took place on 1 January 2010 and it is reported under the heading "Events taking place after 31 December 2009".
In Sweden, the long-prepared sale of Scan AB subsidiary Kontrollhudar International AB to the Danish Scan-Hide cooperative was executed in October.
In the Baltics, AS Rakvere Lihakombinaat increased its holding in its Latvian subsidiary A/s Rigas Miesnieks to 100 percent through a buyout of the 5.1 percent of company shares held by minority shareholders.
The Articles of Association were amended on two occasions during the year under review. The Annual General Meeting of Shareholders of 23 April 2009 passed a resolution to amend Article 7 to read as follows: "Notice of general meetings of shareholders shall be given by announcement published in at least two (2) newspapers designated by the Board of Directors no earlier than three (3) months and no later than three (3) weeks prior to the meeting."
The Extraordinary General Meeting of Shareholders of 24 November 2009 passed a resolution to increase the number of A Shares mentioned in the Articles of Association. The amended Article 3 reads as follows: "At least 3 600 000 and at most 8 000 000 of the total number of shares in the company are Series K shares and at least 400 000 and at most 60 000 000 are Series A shares. Holders of Series K and Series A shares are entitled to exercise their right to vote at meetings of shareholders as provided in Article 5 of these Articles of Association."
(1) HKScan Corporation transitioned to a holding company structure in its Finnish business. The reorganization streamlines fi nancial reporting and internal auditing in the Group, as the business in each market area is kept separate from the parent company. The reorganization was accomplished as a business transfer on 1 January 2010 by transferring HKScan Corporation's production-related property, plant and equipment in Finland as well as its holdings in subsidiaries and associates to HKScan Finland Oy, a holding company wholly owned by HKScan Corporation.
The reorganization is technical and legal in nature and it will have no effect on operational activities. HK Ruokatalo Oy and LSO Foods Oy, the companies responsible for the Group's Finnish business, carry on as before. The arrangement has no effect on jobs or the standing of the parent company or its shareholders. Managing director Jari Leija of HK Ruokatalo Oy also serves as managing director of HKScan Finland Oy.
(2) In January, the Board and HKScan Corporation CEO Matti Perkonoja agreed that he would stay on as CEO for longer than initially announced. The appointment is effective until the end of February 2012, at which time Mr Perkonoja is to retire. He had earlier planned to retire after 2010.
(3) Olli Antniemi, BSc (Econ), was appointed senior vice president in charge of strategy and development as of 1 January 2010. He also joined the Management Team. Mr Antniemi is responsible for strategic business planning with an emphasis on Group synergies and management of the Group's strategy process. He previously served as executive vice president of the HKScan Group's Baltic Group, managing director of Scan AB and most recently as development director at HK Ruokatalo Oy.
HKScan Corporation's Management Team as of 1 January 2010 consists of CEO Matti Perkonoja as Chairman along with CFO Irma Kiilunen, senior vice president for strategy and development Olli Antniemi, HK Ruokatalo Oy managing director Jari Leija and Scan AB managing director Denis Mattsson. Management Team meetings are also attended by AS Rakvere Lihakombinaat managing director Anne Mere and AS Tallegg managing director Teet Soorm. Tero Hemmilä, Management Team member and VP in charge of strategy, left HKScan at the beginning of 2010. CFO Irma Kiilunen serves as deputy to the CEO of HKScan Corporation.
(4) In late January HKScan Corporation announced its better than anticipated Q4/2009 performance. According to preliminary data, sound commercial performance during Q4/2009 and the Christmas season in particular had resulted in higher-than-anticipated EBIT before non-recurring items.
HKScan had earlier estimated that EBIT for 2009 would clearly
surpass that for 2008. Based on preliminary fi gures, the HKScan Group's reported EBIT for 2009 would be around EUR 55 million and EBIT before non-recurring items around EUR 67 million. The company furthermore estimated that the non-recurring charges caused by the measures in the Swedish restructuring programme would amount to approximately EUR 8.6 million instead of the roughly EUR 5 million announced earlier.
The HKScan Group had an average of 7 429 employees in 2009 (7 750). The reduction is attributable to the ongoing streamlining and cost-effectiveness measures in the market areas of Sweden and the Baltics in particular, by which Group companies are seeking to enhance their competitiveness and profi tability.
The average number of employees in each market area was as follows: 3 270 in Sweden, 2 361 in Finland and 1 798 in the Baltics. In addition, Sokolów had an average of 5 569 employees.
The company had in place a share-based incentive scheme for key employees concerning the years 2006–2008. The company's Board has not launched a new share-based incentive scheme since the expiration of the earlier scheme at the end of 2008. No bonuses were paid under the scheme in 2008 or 2009. In accordance with the terms of the scheme, 47 508 A Shares assigned as a part of the incentive scheme in the years 2006–2008 reverted to the company in 2009.
Practically all research and development in the HKScan Group involves normal product development, meaning the development of new products over a span of one to two years and the updating of products already on the market. A total of EUR 8.9 million (EUR 13.1m) was spent on R&D in 2009, equal to 0.4 percent of net sales.
HKScan operates on the principle of causing minimum adverse environmental impact during production. This principle is put into practice in all market areas, taking into account existing local and Union-wide regulations and certifi cation processes. Executive management in each market area are responsible for ensuring the appropriate organization of environmental management.
The company has an ISO 14001-certifed environmental management system in place at all HK Ruokatalo production plants in Finland, the Rakvere Lihakombinaat and Tallegg plants in Estonia and six Scan plants in Sweden. Other Scan facilities apply the BAS system, in which environmental efforts are managed by a local steering group responsible for setting environmental targets for plants and monitoring compliance. In Poland, the Sokolów plants operate according to good production practice under the ongoing supervision of the Polish veterinary authority.
In the food industry, energy, water, waste arising from processing biological materials, wastewater and smoke gases from heating plants cause the greatest environmental loading. HKScan seeks to reduce the amount of energy and water consumed in relation to production (= specifi c consumption), to reduce all waste, particularly the relative amount of landfi ll waste, and to improve sorting. Since there are differences in operations and technology, focus areas vary from one production facility to another. Continuous improvement has been achieved by combining and rationalizing operations, by introducing new policies and by adjusting and improving technology.
All plants operated by the Group in Finland, Sweden and the Baltics furthermore have in place a quality management system certifi ed to the ISO 9001 standard. Most also hold either ISO 22000 certifi cation or the British BRC certifi cate for their product safety management system.
The Audit Committee of HKScan's Board of Directors has prepared a corporate governance statement which is published as part of the Annual Report and also on the company's website www.hkscan.com under Investor Information.
(1) The Board holds the authorization granted by the AGM on 23 April 2009 to decide on acquiring a maximum of 3 500 000 Series A shares as treasury shares, equivalent to approximately 8.9% of total registered shares and 10.3% of total A Shares.
Treasury shares may only be acquired using unrestricted shareholders' equity. The company's own shares may be purchased for a price quoted in public trading on the purchase day or for a price otherwise determined by the market.
The Board of Directors shall resolve upon the method of purchase. Among other means, derivatives may be utilized in purchasing the shares. The shares may be purchased in a proportion other than that of the shares held by the shareholders (directed purchase). The authorization is valid until 30 June 2010. To date, the Board of Directors has not exercised this authorization.
(2) The Board of Directors also holds an authorization to resolve on an issue of shares, options as well as other instruments entitling to shares as referred to in Chapter 10:1 of the Finnish Limited Liability Companies Act. The Board was authorized to resolve on the issue of a maximum of 5 500 000 A Shares, corresponding to ca. 14.0% of all registered shares in the company and ca. 16.2% of all A Shares.
The Board may resolve upon all the terms and conditions of the issue of shares and other special rights entitling to shares. The authorization to issue shares shall cover the issuing of new shares as well as the transfer of the company's own shares. The issue of shares and other special rights entitling to shares may be implemented as a directed issue. The authorization is valid until 30 June 2010.
The authorizations concerning purchases of own shares and share issue were granted to provide the company's Board with fl exibility in deciding on capital market transactions necessary to the company, e.g. to secure its fi nancing needs or to execute mergers and acquisitions. A directed acquisition of own shares or directed share issue can only be executed for reasons of weighty fi nancial consequence to the company and the authorization cannot be exercised in violation of the principle of shareholder equality.
The most signifi cant business risks faced by the HKScan Group involve developments in the price of raw materials and pork in particular, in future possibly the availability of these as well. Country-specifi c uncertainties involve the success of the business development programmes in Sweden and the development of the national economies in the Baltics.
The international economic situation is gradually stabilizing, yet bad debt remains a possibility. The problems experienced by customers are due to the state of the economy in their country of operation as well as the availability of fi nancing. Ongoing major fl uctuations in the Group's central currencies may affect the Group's net sales, earnings and balance sheet. Any devaluation of local currencies in particular may have a negative effect on the Group's Baltic operations.
Changes in demand owing to e.g. rising unemployment and attributable to the economic climate may occur in the Group's market areas or its export markets. These may erode Group net sales and earnings.
The possibility of animal diseases can never be fully excluded in the food industry.
The Group is currently involved in certain legal proceedings and civil litigation. Though the cases remain pending, they are estimated to have no signifi cant impact on the Group's fi nancial standing.
Consumer demand for food is expected to remain steady in the Group's domestic markets and export markets are anticipated to pick up somewhat towards the end of the year. In addition, the ongoing streamlining programmes and the restructuring programme in Sweden in particular provide the foundation for solid business development.
The Group's full-year EBIT exclusive of non-recurring items is estimated to surpass that in 2009 despite the considerable challenges posed by the markets in the early part of the year.
The parent company's distributable assets stand at EUR 156.7 million including the reserve for invested unrestricted equity (RIUE), which holds EUR 143.1 million. The Board of Directors recommends that the company pays a dividend of EUR 0.22 per share for 2009, i.e. a total of EUR 11.9 million.
There have been no material changes in the company's fi nancial standing since the end of the year under review. The company maintains good liquidity and the recommended distribution of dividend will not in the Board's estimation compromise the company's solvency.
| 2009 | 2008 | 2007 | 2006 | 2005 | |
|---|---|---|---|---|---|
| Net sales, EUR million | 2 124.7 | 2 294.6 | 2 107.3 | 934.3 | 883.3 |
| Operating profi t/loss (EBIT), EUR million | 55.1 | 38.1 | 55.3 | 40.4 | 24.1 |
| - as % of net sales | 2.6 | 1.7 | 2.6 | 4.3 | 2.7 |
| Profi t/loss before taxes, EUR million | 37.3 | 9.0 | 36.3 | 33.6 | 20.3 |
| - as % of net sales | 1.8 | 0.4 | 1.7 | 3.6 | 2.3 |
| Return on equity (ROE), % | 9.0 | 2.3 | 9.2 | 11.9 | 7.7 |
| Return on investment (ROI), % | 7.4 | 5.2 | 7.2 | 10.1 | 7.4 |
| Equity ratio, % | 37.1 | 29.5 | 29.3 | 43.7 | 44.7 |
| Net gearing ratio, % | 84.9 | 132.0 | 137.0 | 76.2 | 71.0 |
| Gross investments, EUR million | 41.3 | 84.0 | 129.3 | 82.6 | 59.2 |
| - as % of net sales | 1.9 | 3.7 | 6.1 | 8.8 | 6.7 |
| R&D expenses, EUR million | 8.9 | 13.1 | 15.6 | 8.5 | 8.0 |
| - as % of net sales | 0.4 | 0.6 | 0.7 | 0.9 | 0.9 |
| Employees, average | 7 429 | 7 750 | 7 840 | 4 418 | 4 541 |
| Per share data | |||||
| 2009 | 2008 | 2007 | 2006 | 2005 | |
| Earnings per share. EUR | |||||
| Earnings per share (EPS), undiluted, EUR 2) | 0.64 | 0.10 | 0.63 | 0.70 | 0.41 |
| Earnings per share (EPS), diluted, EUR 2) | 0.64 | 0.10 | 0.63 | 0.70 | 0.41 |
| Equity per share 2) | 7.21 | 7.13 | 7.36 | 6.04 | 5.60 |
| Dividends | |||||
| Dividend paid per share, EUR | 0.221) | 0.24 | 0.27 | 0.27 | 0.27 |
| Dividend per share, EUR 2) | 0.221) | 0.21 | 0.24 | 0.24 | 0.24 |
| Dividend payout ratio, undiluted, % | 34.51) | 199.3 | 37.7 | 34.2 | 58.2 |
| Dividend payout ratio, diluted, % | 34.51) | 199.3 | 37.7 | 34.2 | 58.2 |
| 2.81) | 5.4 | 1.9 | 1.9 | 2.7 | |
| Effective dividend yield, % | |||||
| Price/earnings ratio (P/E) | 12.3 | 36.7 | 19.6 | 18.4 | 21.2 |
| - undiluted | 12.3 | 37.8 | 19.6 | 18.4 | 21.2 |
| - diluted | 10.38 | 12.75 | 18.51 | 13.38 | 8.85 |
| Highest trading price, EUR 2) | 3.70 | 3.43 | 10.76 | 7.35 | 6.37 |
| Lowest trading price, EUR 2) | |||||
| Middle price during the fi nancial period, EUR 2) | 7.18 | 6.94 | 14.57 | 9.71 | 8.08 |
| Market capitalization, EUR million | 423.7 | 173.7 | 551.9 | 499.7 | 339.8 |
| Trading volume (1 000 shares) | 22 285 | 9 028 | 17 842 | 21 389 | 11 395 |
| Trading volume, % | 56.4 | 26.6 | 53.4 | 73.6 | 39.2 |
| No. of shares during the fi nancial period (1 000 shares) | |||||
| - adjusted weighted average | 44 937 | 44 606 | 44 036 | 39 130 | 39 130 |
1) Based on the Board of Directors' recommendation.
2) Per-share data has been adjusted for the share offering in 2009.
| Profi t before taxes – taxes | ||
|---|---|---|
| Return on equity (%) | Total shareholders' equity (average) | x 100 |
| Profi t before taxes + interest and other fi nancial expenses | ||
| Return on investment (%) | Total assets – non-interest-bearing debt (average) | x 100 |
| Total shareholders' equity | ||
| Equity ratio (%) | Total assets – advances received | x 100 |
| Net interest-bearing debt – interest-bearing loan receivables – cash and cash equivalents | ||
| Net gearing ratio (%) | Total shareholders' equity | x 100 |
| Profi t for the period attributable to equity holders of the parent | ||
| Earnings per share | Average adjusted number of shares during the fi nancial year | |
| Equity attributable to equity holders of the parent | ||
| Equity per share | Average adjusted number of shares at the end of the fi nancial year | |
| Dividend per share | ||
| Dividend per share | Coeffi cient of share issues after the fi nancial year | |
| Adjusted dividend per share | ||
| Dividend payout ratio (%) | Earnings per share | x 100 |
| Dividend per share | ||
| Effective dividend yield (%) | Adjusted closing price on the last trading day of the fi nancial year | x 100 |
| Adjusted closing price on the last trading day of the fi nancial year | ||
| P/E ratio | Earnings per share | |
| Market capitalization | The number of outside shares at the end of the fi nancial year x closing price on the last trading day of the fi nancial year |
|
| Employee numbers | Average of workforce fi gures calculated at the end of calendar months |
| Note | 2009 | 2008 | |
|---|---|---|---|
| Net sales | 1 | 2 124.7 | 2 294.6 |
| Change in inventories of fi nished goods and work in progress | 5.1 | 0.4 | |
| Work performed for own use and capitalized | 0.9 | 1.3 | |
| Other operating income | 3 | 6.7 | 14.0 |
| Share of associates' results | 0.9 | 0.6 | |
| Materials and services | 4 | -1 474.5 | -1 642.6 |
| Employee benefi ts expenses | 5 | -306.7 | -319.0 |
| Depreciation and amortization | 6 | -57.2 | -54.8 |
| Impairment | 6 | 0.0 | 0.8 |
| Other operating expenses | 7 | -244.8 | -257.1 |
| EBIT | 55.1 | 38.1 | |
| Financial income | 8 | 5.2 | 5.5 |
| Financial expenses | 8 | -24.9 | -35.5 |
| Share of associates' results | 2.0 | 0.9 | |
| Profi t/loss before taxes | 37.3 | 9.0 | |
| Income taxes | 9 | -4.9 | -1.4 |
| Profi t/loss for the period | 32.5 | 7.6 | |
| Profi t for the period attributable to: | |||
| Equity holders of the parent | 29.9 | 4.7 | |
| Minority interests | 2.6 | 2.9 | |
| Total | 32.5 | 7.6 | |
| Earnings per share calculated on profi t attributable to equity holders of the parent | |||
| EPS, undiluted, continuing operations, EUR/share | 10 | 0.64 | 0.10 |
| EPS, diluted, continuing operations, EUR/share | 10 | 0.64 | 0.10 |
| Per-share data has been adjusted for the share offering in 2009. | |||
The Notes on pp. 45–75 form an integral part of the consolidated fi nancial statements.
| 2009 | 2008 | |
|---|---|---|
| Profi t/loss for the period | 32.5 | 7.6 |
| Other comprehensive income (after taxes): | ||
| Exchange differences on translating foreign operations | 1.8 | -23.4 |
| Available-for-sale investments | 0.4 | -0.2 |
| Cash fl ow hedging | -7.1 | -2.0 |
| Total other comprehensive income | -4.8 | -25.6 |
| Total comprehensive income for the period | 27.6 | -18.0 |
| Total comprehensive income for the period attributable to: | ||
| Equity holders of the parent | 24.8 | -20.5 |
| Minority interests | 2.8 | 2.5 |
| Total | 27.6 | -18.0 |
| Note | 2009 | 2008 | |
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Intangible assets | 11 | 65.7 | 57.8 |
| Goodwill | 12 | 88.2 | 81.7 |
| Property, plant and equipment | 13 | 469.1 | 479.3 |
| Shares in associates | 14 | 20.9 | 17.8 |
| Trade and other receivables | 15 | 18.2 | 17.4 |
| Other long-term investments | 15 | 10.5 | 9.9 |
| Deferred tax asset | 16 | 12.3 | 10.1 |
| Total non-current assets | 685.0 | 673.9 | |
| Current assets | |||
| Inventories | 17 | 118.7 | 128.3 |
| Trade and other receivables | 18 | 194.3 | 198.4 |
| Income tax receivable | 18 | 0.2 | 1.5 |
| Other fi nancial assets | 19 | 2.0 | 2.2 |
| Cash and cash equivalents | 19 | 73.9 | 92.2 |
| Total current assets | 389.0 | 422.6 | |
| Total assets | 1 074.0 | 1 096.5 | |
| Equity and liabilities | |||
| Share capital | 20 | 66.8 | 66.8 |
| Share premium reserve | 20 | 74.2 | 73.5 |
| Treasury shares | 20 | -0.0 | -0.0 |
| Revaluation reserve and other reserves | 20 | 149.7 | 96.8 |
| 20 | -13.1 | -15.8 | |
| Translation differences | 20 | 111.6 | 97.0 |
| Retained earnings | 389.3 | 318.3 | |
| Equity attributable to equity holders of the parent | 9.4 | 5.4 | |
| Minority interest | 398.7 | 323.7 | |
| Total equity | |||
| Non-current liabilities | 16 | 32.2 | 33.6 |
| Deferred tax liability | 23,24 | 329.9 | 442.1 |
| Interest-bearing liabilities | |||
| Non-interest bearing liabilities | 23 | 5.9 | 7.9 |
| Pension obligations | 21 | 3.6 | 3.7 |
| Provisions | 22 | 8.5 | 1.4 |
| Total non-current liabilities | 380.1 | 488.7 | |
| Current liabilities | |||
| Interest-bearing liabilities | 23,24 | 87.5 | 82.4 |
| Trade and other payables | 23 | 202.0 | 199.4 |
| Income tax liability | 23 | 2.7 | 0.5 |
| Provisions | 22 | 2.8 | 1.9 |
| Total current liabilities | 295.1 | 284.2 | |
| Total equity and liabilities | 1 074.0 | 1 096.5 | |
| 2009 | 2008 | |
|---|---|---|
| Operating activities | ||
| EBIT | 55.1 | 38.1 |
| Adjustments to EBIT | -0.4 | -1.3 |
| Depreciation and amortization | 57.2 | 54.0 |
| Change in provisions | 7.6 | 1.4 |
| Change in net working capital | 2.5 | 1.3 |
| Financial income | 5.2 | 5.5 |
| Financial expenses | -24.9 | -35.5 |
| Taxes | -4.9 | -1.4 |
| Net cash fl ow from operating activities | 97.4 | 62.2 |
| Investing activities | ||
| Gross investments in property, plant and equipment | -43.7 | -84.1 |
| Disposals of property, plant and equipment | 2.9 | 12.0 |
| Investments in subsidiary | -4.7 | 0.0 |
| Shares in associates purchased | -0.2 | 0.0 |
| Loans granted | -0.0 | -0.2 |
| Repayments of loan receivables | 5.1 | 2.0 |
| Net cash fl ow from investing activities | -40.8 | -70.3 |
| Cash fl ow before fi nancing activities | 56.6 | -8.1 |
| Financing activities | ||
| Proceeds from share offering | 76.8 | 0.0 |
| Payments received on hybrid bond | 0.0 | 20.0 |
| Repayments of hybrid bond | -20.0 | 0.0 |
| Current borrowings raised | 46.6 | 187.9 |
| Current borrowings repaid | -82.3 | -164.2 |
| Non-current borrowings raised | 74.7 | 27.4 |
| Non-current borrowings repaid | -160.8 | -7.3 |
| Interest paid on hybrid bond | -2.1 | 0.0 |
| Dividends paid | -9.4 | -10.6 |
| Purchase of treasury shares | 0.0 | -0.1 |
| Net cash fl ow from fi nancing activities | -76.5 | 53.0 |
| Change in cash and cash equivalents | -19.9 | 44.9 |
| Cash and cash equivalents at 1.1. | 94.4 | 56.8 |
| Effect of changes in exchange rates on cash and cash equivalents | 1.4 | -7.3 |
| Cash and cash equivalents at 31.12. | 75.9 | 94.4 |
| Share Share premium Revaluation | RIUE | Other | Other | Transl. | Treasury | Ret. | Total | Minority | Total | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| capital | reserve | reserve | equity item *) | reserves | diff. | shares | earnings | interest | |||||
| Shareholders' equity at 1.1.2009 | 66.8 | 73.5 | -2.2 | 66.7 | 20.0 | 12.2 | -15.8 | 0.0 | 97.0 | 318.2 | 5.4 | 323.7 | |
| Income and expenses recognized | |||||||||||||
| in the period, total | - | 0.0 | -6.7 | - | - | -0.1 | 2.7 | 0.0 | 29.0 | 24.8 | 2.8 | 27.6 | |
| Share-based compensation expense | - | 0.8 | - | - | - | - | - | - | - | 0.8 | - | 0.8 | |
| Other change | - | - | - | - | -20.0 | 0.2 | - | - | - | -19.8 | - | -19.8 | |
| Direct recognition in retained earnings**) | - | - | - | - | - | - | - | - | -2.0 | -2.0 | - | -2.0 | |
| Transfers between items | - | - | 0.6 | - | - | 2.3 | - | - | -2.9 | 0.0 | - | 0.0 | |
| Share offering | - | - | - | 76.8 | - | - | - | - | - | 76.8 | - | 76.8 | |
| Purchase of treasury shares | - | - | - | - | - | - | - | - | - | 0.0 | - | 0.0 | |
| Increase in holdings in subsidiaries | - | - | - | - | - | - | - | - | - | - | 2.1 | 2.1 | |
| Dividend distribution | - | - | - | - | - | - | - | - | -9.4 | -9.4 | -0.9 | -10.3 | |
| Total shareholders' equity at 31.12.2009 | 66.8 | 74.2 | -8.4 | 143.5 | 0.0 | 14.6 | -13.1 | 0.0 | 111.6 | 389.3 | 9.4 | 398.7 | |
| Share Share premium Revaluation | RIUE | Other | Other | Transl. | Treasury | Ret. | Total | Minority | Total | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| capital | reserve | reserve | equity item *) | reserves | diff. | shares | earnings | interest | |||||
| Shareholders' equity at 1.1.2008 | 66.8 | 73.4 | 0.8 | 66.7 | 0.0 | 10.8 | 3.0 | -0.7 | 105.5 | 328.5 | 2.9 | 331.5 | |
| Income and expenses recognized | |||||||||||||
| in the period. total | - | -0.1 | -3.1 | - | - | 0.3 | -21.1 | - | 3.4 | -20.5 | 2.5 | -18.0 | |
| Share-based compensation expense | - | 0.2 | - | - | - | - | - | - | - | 0.2 | - | 0.2 | |
| Other change | - | - | - | - | 20.0 | - | - | - | - | 20.0 | - | 20.0 | |
| Direct recognition in retained earnings | - | - | - | - | - | - | - | - | - | 0.0 | 1.4 | 1.4 | |
| Transfers between items | - | - | - | - | - | 1.2 | - | - | -1.2 | 0.0 | - | 0.0 | |
| Purchase of treasury shares | - | - | - | - | - | - | - | -0.1 | - | -0.1 | - | -0.1 | |
| Payments made in treasury shares | - | - | - | - | - | - | - | 0.8 | - | 0.8 | - | 0.8 | |
| Dividend distribution | - | - | - | - | - | - | - | - | -10.6 | -10.6 | -1.4 | -12.0 | |
| Total shareholders' equity at 31.12.2008 | 66.8 | 73.5 | -2.2 | 66.7 | 20.0 | 12.2 | -15.8 | 0.0 | 97.0 | 318.2 | 5.4 | 323.7 |
*) Comprising a hybrid bond classifi ed as equity
**) Comprising interest paid on hybrid bond
In the fi nancial statements for 2008, the company reported re-measurement of net investment hedges in the revaluation reserve.
In the fi nancial statements for 2009, the manner of reporting has been changed and hedging is recognized as an adjustment to translation differences.
The fi gures for the comparison year have been modifi ed to correspond to the current practice.
HKScan Corporation is a Finnish public limited company established under the law of Finland. The Company is domiciled in Turku.
HKScan Corporation and its subsidiaries (together the Group) produce, sell and market pork, beef and poultry meat, processed meats and convenience foods to retail, the HoReCa sector, industry and export customers. The Group's brands are among the most recognized in their fi elds. Major brand names include HK, Kariniemen, Via, Scan, Pärsons, Rakvere, Tallegg, Rigas Miesnieks, Klaipedos Maistas and Sokolów.
The Group is active in Finland, Sweden, Estonia, Latvia, Lithuania, Poland, Denmark, the UK and Russia.
HKScan Corporation's A Share has been quoted on the NAS-DAQ OMX Helsinki exchange since 1997.
HKScan Corporation is a subsidiary of LSO Osuuskunta and part of the LSO Group. LSO Osuuskunta's registered offi ce is in Turku.
The Board of Directors of HKScan Corporation approved the publication of these fi nancial statements at its meeting of 18 February 2010. Under the Finnish Limited Liability Companies Act, shareholders may approve or reject the fi nancial statements at the Annual General Meeting held subsequent to their publication. The Annual General Meeting is also entitled to modify the fi nancial statements.
A copy of the HKScan Group's consolidated fi nancial statements can be viewed on the company's website at www.hkscan.com under Investor information/Annual and interim reports, or obtained from the parent company's head offi ce at Kaivokatu 18, FI-20520 Turku, Finland.
The consolidated fi nancial statements have been prepared in compliance with the International Financial Reporting Standards (IFRS) and the IAS and IFRS standards and SIC and IFRIC interpretations effective at 31 December 2009. International Financial Reporting Standards refers, in the Finnish Accounting Act and in the provisions given thereupon, to the standards approved for application within the EU according to the procedure as established in EU Regulation (EC) No. 1606/2002 and the interpretations thereof. The notes to the fi nancial statements also conform to Finnish accounting and corporate legislation supplementing IFRS requirements.
The consolidated fi nancial statements have been prepared under the historical cost convention except for fi nancial instruments and biological assets, which have been measured at fair value. The goodwill in respect of business mergers taking place before 2004 corresponds to the book value based on earlier accounting norms that has been used as the deemed cost according to IFRS.
The accounting policies in respect of subsidiaries have been changed to correspond to those of the parent company if required.
The preparation of the fi nancial statements in accordance with IFRS standards requires management to make certain estimates and judgments in applying the accounting policies. Information on the judgments made by management in applying the accounting policies with the greatest impact on the reported fi gures is disclosed in the accounting policies under "Accounting policies requiring management judgments and factors of estimation uncertainty" and subsequently in the notes under "Impairment" and "Impairment testing".
Unless otherwise stated, the information in the consolidated fi nancial statements is given in millions of euros.
The consolidated fi nancial statements have been prepared in compliance with the same accounting policies as in 2008 except for the following new standards, interpretations and standard amendments, which are effective as of 1 January 2009.
As of 1 January 2009, the Group has applied the following new or revised standards and interpretations:
IAS 1 (revised) Presentation of Financial Statements. The revision is aimed at improving users' ability to analyze and compare the information given in fi nancial statements. The means to achieve this include separating changes in a company's equity resulting from transactions with owners in their capacity as owners from other changes in equity. Non-owner-related changes are presented in the statement of comprehensive income. The Group will report a separate income statement and statement of comprehensive income.
IAS 23 (revised) Borrowing Costs. The standard requires that borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, such as a production facility, are included in the cost of that asset. The Group has previously recognized borrowing costs as an expense during the period in which they are incurred, in the manner permitted. The revised standard means that borrowing costs concerning construction projects undertaken on or after 1 January 2009 are allocated to the project and capitalized in the balance sheet. The Group had no such projects underway in the fi nancial year under review.
IFRS 8 Operating Segments. The standard replaces IAS 14 and requires adoption of the 'management approach' to presenting segment information, meaning that information is reported in the same manner as in internal reporting. The standard has not altered the Group's segment reporting breakdown.
Improving Disclosures about Financial Instruments: Amendments to IFRS 7 Financial Instruments: Disclosures. The amendments introduce a three-level hierarchy for disclosing the fair values of fi nancial instruments. The amended standard also calls for additional disclosures to help judge the relative reliability of fair value measurements. The amendments furthermore enhance and clarify earlier disclosure requirements concerning liquidity risk.
Improvements to IFRSs. The Annual Improvements process allows minor and non–urgent amendments to IFRSs to be presented and implemented once each year in a single document. The amendments presented concern a total of 34 standards and the impacts vary for each standard. The amendments have had no signifi cant impact on HKScan's consolidated fi nancial statements, however.
IFRIC 16. Hedges of a Net Investment in a Foreign Unit. The interpretation clarifi es the accounting treatment in consolidated fi nancial statements in respect of the hedge of a net investment in a foreign unit. It has not had any signifi cant effect on the Group's fi nancial statements.
Amendments to IFRS 2. Share–based Payments – Vesting Conditions and Cancellations. The amendments require that non-vesting conditions be taken into account in the estimation of the fair value of the equity instrument at the grant date and also clarify instructions relating to the accounting treatment of cancellations. The amendments have not affected the consolidated fi nancial statements.
The Group has elected to apply the following standard early, in the fi nancial statements for the fi nancial year ended 31 December 2009:
The years 2009 and 2008 are mutually comparable. With regard to the fi ve-year historical data, it should be noted that the consolidated fi gures for Scan AB have been consolidated into the Group as of 1 January 2007.
The consolidated fi nancial statements include the accounts of the parent company HKScan Corporation and its subsidiaries. Subsidiaries are companies over which the Group exercises control. Control arises when the parent company either directly or indirectly holds over half the voting rights or otherwise exercises control, for example through agreements concluded with principal owners. Control is defi ned as the power to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities.
The consolidated fi nancial statements include the accounts of the parent company HKScan Corporation and the following subsidiaries that have or had business operations: HK Ruokatalo Oy, LSO Foods Oy and its subsidiary Lounaisfarmi Oy, Lihatukku Harri Tamminen Oy, Helanderin Teurastamo Oy and HK International Ab. The accounts of Kivikylän Kotipalvaamo Oy have been included as of 31 December 2009. HKScan Corporation has a 49-percent stake in Lihatukku Harri Tamminen Oy and Kivikylän Kotipalvaamo Oy yet exercises control in the companies by virtue of a shareholder agreement.
The consolidated fi nancial statements also include the accounts of the Scan AB subgroup (Sweden), the AS Rakvere Lihakombinaat subgroup (Estonia, Latvia and Lithuania), and AS Tallegg (Estonia).
Intragroup share ownership has been eliminated using the historical cost convention. Subsidiaries acquired are consolidated from the date the Group acquires a controlling interest in them. Purchase price is allocated to assets and liabilities according to their fair value at the time of acquisition. What remains is goodwill. All intragroup transactions, receivables and liabilities are eliminated upon consolidation. Intragroup distribution of profi t has also been eliminated.
Distribution of profi t for the period between holders of the parent and minority shareholders is presented in the separate income statement and the distribution of comprehensive income between holders of the parent and minority shareholders is presented in the statement of comprehensive income. Minority interest in equity is presented as a distinct component of equity in the balance sheet. The share of minority interests of accumulated losses is recognized in the consolidated accounts up to a maximum of the investment.
Associates are companies over which the company exercises a signifi cant infl uence which arises when the Group holds 20–50% of a company's voting rights. Associates have been consolidated using the equity convention. If the Group's share of the losses of an associate exceeds the investment's carrying amount, the investment is recognized as having no value and, unless the Group is committed to meeting the obligations of associates, no losses exceeding the carrying amount are consolidated. Investments in associates include the goodwill arising on their acquisition. Dividends received from associates have been eliminated in the consolidated fi nancial statements. The associates mentioned below in Note 30, "Related party transactions", have been consolidated into the consolidated fi nancial accounts. As a rule, the share of associates' results is presented below EBIT. If a function important to the Group's business is managed by an associate, the share of the associate's results is presented above EBIT. Scan AB associates Siljans Chark AB (from 1 January 2007), Höglandsprodukter AB (from 1 January 2007), daka a.m.b.a (from 1 January 2008) and Conagri AB (from 1 January 2008) are associates of this kind. The status of Nyhléns & Hugosons Chark AB has changed from an associate presented above EBIT to a subsidiary, resulting in a change in its consideration on 30 September 2008 with cumulative effect from the beginning of the said fi nancial period.
A joint venture is a company in which the Group exercises joint control with another party. The Group's share in the joint venture is consolidated proportionately line by line. The consolidated fi nancial statements include the Group's share of the joint venture's assets, liabilities, income and expenses. Since the start of 2005, the HKScan Group's joint venture Saturn Nordic Holding Group has been consolidated proportionately as a joint venture line by line. Saturn Nordic Holding AB holds 100 percent of the Polish Sokolów S.A.
More detailed information about Group companies and holdings in associates is presented in Note 30, "Related party transactions".
The result and fi nancial position of each of the Group's business units are measured in the currency of the main operating environment for that unit. The consolidated fi nancial statements are presented in euro (EUR), the functional and reporting currency of the Group's parent entity.
The assets and liabilities of foreign subsidiaries and the foreign joint venture are translated into euros at the closing exchange rates confi rmed by the European Central Bank at the balance sheet date. The income statements are translated into euros using the average rate for the period. A translation difference arises from translating the result for the period at different rates in the income statement and balance sheet. This is recognized under equity. The translation differences arising in eliminating the acquisition cost of foreign subsidiaries and the joint venture are recognized in translation differences in the Group's equity.
The following exchange rates have been used in consolidation
| Income statement *) | Balance sheet | ||||||
|---|---|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | ||||
| EEK | 15.6466 | 15.6466 | 15.6466 | 15.6466 | |||
| SEK | 10.6200 | 9.6169 | 10.2520 | 10.8700 | |||
| PLN | 4.3298 | 3.5151 | 4.1045 | 4.1535 | |||
| *) calculatory value of monthly average rates |
Group companies recognize transactions in foreign currencies at the rate on the day the transaction took place. Trade receivables, trade payables and loan receivables denoted in foreign currencies and foreign currency bank accounts have been translated into the functional currency at the exchange rates quoted at the balance sheet date. Exchange rate gains and losses on loans denoted in foreign currencies are included in fi nancial income and expenses below EBIT except for gains and losses arising from loans which are designated as hedges of net investments made in foreign units and which perform effectively. These gains and losses are recognized under translation differences in equity. As a rule, exchange rate gains and losses related to business operations are included in the corresponding items above EBIT.
Property, plant and equipment have been measured at cost less accumulated depreciation and any impairment. Depreciation of assets is made on a straight-line basis over the expected useful life. No depreciation is made on land.
The expected useful lives are as follows:
| Buildings and structures | 25–50 years |
|---|---|
| Building machinery and equipment | 8–12.5 years |
| Machinery and equipment | 2–10 years |
The residual value and useful life of assets are reviewed in each fi nancial statement and if necessary adjusted to refl ect changes taking place in expected useful life.
Depreciation on property, plant and equipment ends when an item is classifi ed as being for sale in accordance with IFRS 5, Non– Current Assets Held for Sale and Discontinued Operations. Gains and losses arising on the disposal and discontinuation and assignment of property, plant and equipment are included either in other operating income or expenses.
Maintenance and repair costs arising from normal wear and tear are recognized as an expense when they occur. Major refurbishment and improvement investments are capitalized and depreciated over the remaining useful life of the main asset to which they relate.
Government grants, for example grants from the State or the EU relating to PPE acquisitions, have been recognized as deductions in the carrying amounts of PPE when receipt of the grants and the Group's eligibility for them is reasonably certain. The grants are recognized as income in the form of lower depreciations over the useful life of the item. Grants received in reimbursement of expenses incurred are recognized as income in the income statement at the same time as the costs relating to the object of the grant are recognized as an expense. Grants of this kind are reported under other operating income.
Investment properties are properties that are held because of their rental income or a rise in value. The Group has no property classifi ed as investment properties.
Goodwill is that part of the acquisition cost exceeding the Group's share of the fair value of the net assets of a company acquired after 1 January 2004 at the time acquisition took place. Goodwill on the combination of transactions prior to this corresponds to the carrying amount based on the earlier accounting norm which has been used as the deemed cost. The classifi cation or accounting treatment of these acquisitions has not been adjusted when preparing the opening IFRS balance sheet of 1 January 2004. Goodwill increased in the fi nancial period owing to the acquisitions of Lounaisfarmi Oy and Kivikylän Kotipalvaamo Oy.
Goodwill and other intangible items that have an unlimited useful life are not subject to regular depreciation, being instead tested yearly for impairment. For this reason goodwill is allocated to cash-generating units (CGU) or, in the case of an associate, is included in the acquisition cost of the associate concerned. Goodwill is measured according to the historical cost convention less impairments. Impairment losses are recognized in the income statement. Impairment losses recognized in respect of goodwill are not reversed. See "Impairment" and "Impairment testing".
Research and development costs are charged as incurred and are included in other operating expenses in the income statement. Group development costs (e.g. information management costs) do not satisfy the requirements for capitalization.
An intangible asset is recognized in the balance sheet only if its acquisition cost can be reliably determined and it is likely that the company will reap the expected economic benefi t of the asset. Intangible rights include trademarks and patents while items such as software licences are included in other intangible assets. Patents and software licences are recognized in the balance sheet at cost and are depreciated on a straight-line basis during their useful life, which varies from fi ve to ten years. No depreciation is made on intangible assets with an unlimited useful life. These are, however, subject to annual cash fl ow-based impairment testing. Assets with an unlimited useful life are allocated to CGUs for impairment testing. See under "Impairment" and "Impairment testing".
Brands have been estimated to have unlimited useful life. The good recognition of the brands and analyses performed support the view of management that the brands will affect cash fl ow generation for an indeterminate period of time.
Inventories are measured at the acquisition cost or probable net realizable value, whichever is the lower. The acquisition cost is determined using the weighted average price method. The acquisition cost of fi nished and unfi nished products is calculated to include the cost of raw materials, indirect work, other direct costs, variable acquisition and production costs, fi xed overheads and depreciation on acquisition and production. Overheads and depreciation are allocated to inventories in accordance with the normal used capacity. Net realizable value is the estimated sales price obtainable in the course of ordinary business less the costs of completion and selling expenses.
Biological assets, which in the case of the HKScan Group mean living animals, are recognized in the balance sheet at fair values less estimated sales-related expenses, in accordance with IAS 41. The group's live slaughter animals are measured at market price. Animals producing slaughter animals (sows, boars, mother hens) have been measured at cost, less an expense corresponding to a reduction in use value caused by ageing. Since animals producing slaughter animals are not traded in, they have no market price.
Leases applying to tangible assets where the Group assumes a substantial part of the risks and benefi ts of ownership are classifi ed as fi nance leases. These items are recognized in the balance sheet at the fair value of the asset leased at the commencement of the lease or at the present value of minimum lease payments, whichever is the lower. Assets acquired under fi nance leasing are subject to depreciation within the useful life of the asset or the lease period, whichever is the shorter. Lease payments are divided into fi nance expenses and debt amortization during the lease period. Leasing commitments are included in interest-bearing liabilities. The Group companies in the Baltics, Poland and Sweden have concluded a small number of fi nance leasing agreements.
Leases where the lessor retains a substantial part of the risks and
benefi t of ownership are treated as other leases. These payments are recognized as an expense in the income statement on a linear basis.
The carrying amounts of the Group's assets are reviewed at each balance sheet date to see whether there are any indications of impairment. If such an indication exists, the recoverable amount of the asset is estimated. An impairment loss is recognized if the carrying amount of the asset exceeds the recoverable amount for the asset. The recoverable amount is estimated annually for goodwill and intangible assets with unlimited useful life regardless of whether there are indications of impairment. The need for impairment is reviewed at the level of cash-generating units, in other words the smallest group of assets that includes the asset under review which is largely independent of other units and has a cash fl ow that can be separated from other cash fl ows. No indications of impairment were observed in 2009 or 2008. See "Accounting policies requiring management judgments and factors of estimation uncertainty" and "Goodwill".
Goodwill was tested for impairment applying IAS 36 as required by the transition standard on 1 January 2004, the transition date to IFRS. Testing has since been performed annually and has shown no need for depreciation arising from impairment.
Pension plans are classifi ed as defi ned benefi t plans and defi ned contribution plans. In defi ned contribution plans, the Group makes fi xed payments to a separate entity. The Group is under no legal or actual obligation to make additional payments in the event that the entity collecting pension payments is unable to meet its obligations to pay the pension benefi ts in question. Any pension plan that does not meet these criteria is a defi ned benefi t plan.
Statutory pension cover for Finnish Group companies has been arranged through pension insurance. Pension plans in respect of companies outside Finland have been made in accordance with local regulations and practice. In defi ned contribution plans, such as the Finnish employment pension scheme (TyEL) and the Swedish ITP-plan, pension plan contributions are recognized in the income statement during the fi nancial period in which they are incurred. All pension cost calculations are based on actuarial valuations prepared annually by the local authorities or authorized actuaries.
The obligations arising from the Group's defi ned benefi t plans are calculated separately for each plan. Pension costs are recognized as an expense over the relevant persons' employment on the basis of calculations performed by authorized actuaries. The Group has no defi ned benefi t plans apart from the pension liability for the former CEO of the parent company. The company's pension commitment in respect of the defi ned benefi t relating to this was EUR 3.2 million at 31 December 2009.
Owing to the outsourcing of pension funds, the insurance company invoices the future index-linked increments on pensions each year. The pension obligations appearing in the balance sheet comprise the pension commitment in respect of the parent company's former CEO and the estimated additional daily unemployment allowances arising from personnel arrangements in the Finnish business.
The Board of HKScan resolved on 21 December 2006 to introduce a share incentive scheme as part of the incentive and commitment scheme for key employees. The share incentive scheme offers its target group an opportunity of receiving shares in HKScan as a reward for achievement of set targets during three earning periods. The proportion of the maximum award paid to key employees is determined on how well the targets are met. The Board decides the criteria and targets for each earning period at the beginning of the earning period. The award payable under the scheme in the 2006 and 2007 earning periods was tied to Group operating profi t (EBIT, 70% weight) and return on capital employed (ROCE, 30% weight). The award under the scheme is paid to the key employees after the earning period as a combination of shares and cash. Cash is paid in the amount needed for taxes and fi scal charges arising from the shares granted at the grant date. No award is paid to persons whose employment ends before the end of the earning period.
A maximum of 528 000 shares and cash in the amount needed Basic information at 31 December 2009 to reimburse the key employees for taxes and fi scal charges arising at the time of transfer of the shares could be granted on the basis of the entire scheme.
The share incentive scheme covered the years 2006–2008.
According to IFRS 2, share incentive schemes shall be measured at fair value at time of grant and expensed over the vesting period. As the share incentive award is paid as a combination of shares and cash, fair value measuring is split into two parts as provided in the IFRS 2 standard: equity-settled and cash-settled transactions. Equity-settled transactions are recognized under shareholders' equity and cash-settled transactions under liabilities. The fair value of the share-based payment at the time of grant was the trading price of the HKScan share. Comparably, the fair value of the cash-settled award is re-assessed at each reporting date until the end of the earning period and the fair value of the liability thus refl ects changes in HKScan's share price.
The combined earnings impact of the share awards in effect in the year under review came to EUR -0.21 million (EUR -0.38m in 2008). The basic information and events concerning the share incentive schemes appear in the following table:
| Earning period 2006 | Earning period 2007 | Earning period 2008 | ||||||
|---|---|---|---|---|---|---|---|---|
| Grant date | 30.11.2006 | 23.4.2007 | 27.6.2008 | |||||
| Nature of award | Shares and cash | Shares and cash | Shares and cash | |||||
| Target group | Key employees | Key employees | Key employees | |||||
| Maximum number of incentive shares | 96 000 | 180 000 | 180 000 | |||||
| Equivalent cash portion (no. of shares) * | 113 109 | 195 444 | 211 304 | |||||
| Trading price at grant date, EUR | 13.90 | 17.28 | 9.24 | |||||
| Fair value at grant date, EUR ** | 13.63 | 17.01 | 8.97 | |||||
| Trading price at end of fi nancial year, EUR | 14.50 | 14.04 | 4.42 | |||||
| Earning period begins, date | 1.1.2006 | 1.1.2007 | 1.1.2008 | |||||
| Earning period ends, date | 31.12.2006 | 31.12.2007 | 31.12.2008 | |||||
| Release date of shares | 31.12.2009 | 31.12.2010 | 31.12.2011 | |||||
| Criteria | EBIT (70%) and ROCE (30%) | EBIT (70%) and ROCE (30%) | EBIT (70%) and ROCE (30%) | |||||
| Term of employment | Term of employment | Term of employment | ||||||
| Obligation to hold shares, years | 3 | 3 | 3 | |||||
| Remaining binding period, years | 0 | 1 | 2 | |||||
| Persons (31 December 2009) | 3 | 12 | 0 | |||||
| * Cash element of share award expressed in shares | ||||||||
| ** Trading price at grant date less anticipated dividend for earning period: EUR 0.27 per year | ||||||||
| Earning period 2006 | Earning period 2007 | Earning period 2008 | Financial year 2009 total | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Change | Change | Change | |||||||||||
| in fi nanc. | in fi nanc. | in fi nanc. | |||||||||||
| Gross amounts* | 1.1.2009 | year, no. | 31.12.2009 | 1.1.2009 | year, no. | 31.12.2009 | 1.1.2009 | year, no. | 31.12.2009 | 1.1.2009 31.12.2009 | |||
| Awards granted (shares + cash) | |||||||||||||
| expressed as shares | 219 521 | 0 | 219 521 | 375 444 | 0 | 375 444 | 391 304 | 0 | 391 304 | 986 270 | 986 270 | ||
| Shares forfeited | 24 000 | 64 143 | 88 143 | 24 000 | 37 634 | 61 634 | 0 | 0 | 0 | 48 000 | 149 777 | ||
| Shares paid | 141 220 | 0 | 141 220 | 92 056 | 0 | 92 056 | 0 | 0 | 0 | 233 276 | 233 276 | ||
| Shares lapsed (incl. forfeited shares) | 78 301 | 64 143 | 142 444 | 283 388 | 37 634 | 321 022 | 391 304 | 0 | 391 304 | 752 993 | 854 770 | ||
* The amounts include the cash element (as shares) granted under the share incentive scheme.
| Parameters used in calculating fair value | Earning period 2006 | Earning period 2007 | Earning period 2008 |
|---|---|---|---|
| Awards granted (share + cash) expressed as shares (no.) | 219 521 | 375 444 | 0 |
| Trading price at grant date, EUR | 13.90 | 17.28 | 9.24 |
| Presumed dividend, EUR | 0.27 | 0.27 | 0.27 |
| Fair value at grant date, EUR ** | 13.63 | 17.01 | 8.97 |
| Trading price at date of award payment/balance sheet date, EUR | 12.51 | 8.18 | 4.42 |
| Assumed shares to be forfeited before allocation | 11.9 % | 6.7 % | 0.0 % |
| Assumed shares to be forfeited during binding period | 50.0 % | 42.9 % | 0.0 % |
| Exercise assumption of criteria *** | 72.8 % | 29.2 % | 0.0 % |
| Fair value of share award at grant date, EUR | 1 938 543 | 3 679 736 | 1 532 516 |
| Fair value of share award at 31 Dec 2009, EUR | 1 422 411 | 912 532 | 0 |
| Impact on earnings in 2009 fi nancial year, EUR | 139 797 | 68 657 | 0 |
** Trading price at grant date less anticipated dividend for earning period: EUR 0.27 per year
*** The amount of the award for the earning period is determined by the end of the April following each earning period on the basis of achievement of targets.
A provision is recognized when the Group has a legal or actual obligation as the result of a past event, it is likely that the payment obligation will be realized and the magnitude of the obligation can be reliably estimated.
A restructuring provision is made when the Group has compiled a detailed restructuring plan and launched its implementation or announced the plan. No provision is made for expenses relating to the Group's continuing operations.
The income tax expense in the income statement consists of tax based on taxable income and deferred tax. Taxes are recognized in the income statement except when related to items recognized directly in equity or the statement of comprehensive income, in which event the tax is also recognized in the said items. Tax based on taxable income in the fi nancial year is calculated from taxable income on the basis of the tax law of the domicile of each company. Taxes are adjusted with any taxes relating to previous fi nancial years.
Deferred tax assets and liabilities are calculated on all temporary differences in bookkeeping and taxation using the tax rate valid at the balance sheet date or expected date the tax is paid. The most signifi cant temporary differences arise from depreciation on PPE, measurement to fair value of derivative instruments, defi ned benefi t pension plans, unclaimed tax losses and measurements to fair value in connection with acquisitions. No deferred tax is recognized on non-deductible goodwill.
Deferred taxes are calculated using the tax rates which have been enacted or which in practice have been adopted by the reporting date.
The deferred tax liability relating to the retained earnings of foreign Group companies has not been recognized, as the assets are used to safeguard the foreign companies' own investment needs. The distributable assets of the Baltic companies came to a total of EUR 65.0 million.
Net sales is presented as revenue from the sales of products and services measured at fair value and adjusted for indirect taxes, discounts and translation differences resulting from sales in foreign currencies.
Revenue from the sale of goods is recognized when the signifi cant risks and benefi ts of ownership have been transferred to the buyer. Revenue from service provision is recognized in the fi nancial year in which the service is performed.
Non-current assets and assets and liabilities relating to discontinued operations are classifi ed as being held for sale when an amount equal to their carrying amount will accrue mainly through sale of the assets rather than ongoing use. The conditions for classifi cation as held for sale are deemed to be met when the sale is highly probable and the asset is available for immediate sale in its present condition at ordinary terms when management is committed to the plan of sale and the sale is expected to take place within a year of classifi cation.
Immediately prior to classifi cation as held for sale, the carrying amount of the asset is measured in accordance with applicable IFRSs. From the moment of classifi cation, assets held for sale are measured at the lower of carrying amount and fair value less costs to sell. Depreciation on these assets ceases at the moment of classifi cation.
Depending on their nature, the Group's fi nancial assets are classifi ed on acquisition into the following categories: 1) fi nancial assets recognized at fair value through profi t or loss, 2) held-to-maturity investments, 3) loans and other receivables, and 4) available-forsale fi nancial assets. The Group recognizes fi nancial assets and liabilities in the balance sheet in accordance with the settlement date method except for derivatives, which are recognized according to the transaction date. Transaction costs are included in the original carrying amount of fi nancial assets in the case of items not measured at fair value through profi t or loss. Financial assets are derecognized from the balance sheet when the Group's contractual right to the cash fl ows has expired or when the risks and rewards of ownership have to a signifi cant degree transferred outside the Group.
The category of fi nancial assets recognized at fair value through profi t of loss comprises fi nancial assets designated as such at inception or acquired to be held for trading. Derivatives that are not contracts of guarantee or do not satisfy hedge accounting are classifi ed as held for trading. Currency futures are measured at the forward exchange rates at the reporting date. The fair values of interest rate swaps are defi ned as the present value of future cash fl ows.
Gains and losses arising from changes in fair value, whether realized or unrealized, are recognized through profi t or loss in the fi nancial year in which they arise. The majority of the Group's fi nancial assets consist of loan receivables and other receivables. Loan receivables are recognized in the balance sheet at acquisition cost and are regularly and systematically assessed in relation to the security available. Loans and other receivables are included in the balance sheet under current or non-current assets as determined by their nature, under the latter if maturing in more than 12 months. Interest on receivables is included in fi nancial items. Available-for-sale fi nancial assets consist of assets not belonging to derivative assets which have been specifi cally designated into this category or which have not been classifi ed in another category. These comprise e.g. shares and interest-bearing investments.
Cash and cash equivalents comprise cash, demand deposits and other highly liquid short-term investments maturing in less than three months and subject to a low risk of change in value. Current accounts with overdraft facilities are included in current interestbearing liabilities in the balance sheet.
The Group's fi nancial liabilities comprise primarily short- and long-term bonds and credit limit facilities from fi nancial institutions as well as exercise of the commercial paper programme. Financial liabilities are classifi ed as current unless the Group has an unconditional right to defer payment for at least 12 months from the reporting date.
Financial liabilities are initially recognized at fair value. Transaction costs are included in the original carrying amount of fi nancial liabilities measured at amortized cost. Financial liabilities except for derivative contract liabilities are subsequently measured at amortized cost using the effective interest method.
Borrowing costs directly attributable to the acquisition, construction or manufacture of a qualifying asset are capitalized as a part of the cost of the said asset when it is likely that these will generate future economic benefi ts and when the costs can be measured reliably. Other borrowing costs are recognized as an expense in the period in which they are incurred.
Accounts receivable sold through factoring are derecognized from the balance sheet at the moment of transfer to the buyer. All rights and obligations relating to accounts receivable transfer in full to the buyer at the moment of transfer. Subsequent to the transfer, no liability in respect of the receivable remains in the balance sheet.
At each reporting date, the Group assesses whether there is any objective evidence of the impairment of an individual fi nancial asset item or a group of fi nancial assets. Trade receivables are recognized in accordance with the original amount invoiced. All credit losses on trade receivables have been recognized as an expense when there is objective evidence that the receivable is impaired. Signifi cant fi nancial diffi culties on the part of a debtor, the likelihood of bankruptcy or debt reorganization and payment default constitute evidence of the impairment of trade receivables.
Derivative contracts are initially accounted for at fair value on the date on which the Group becomes a party to the contract and subsequently continue to be measured at fair value. Fair value is the value at which two willing parties would execute the transaction at the balance sheet date. Fair values are defi ned by using several distinct methods and measurement techniques, and the underlying assumptions are based on the market quotations of the said balance sheet dates. The fair values of interest rate swaps are the present values of anticipated future cash fl ows. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash fl ow hedges is recognized under other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the income statement under fi nancial items. Amounts accumulated in equity are recycled in the income statement in the periods when the hedged items affects profi t or loss.
Gains and losses arising from the assessment of fair value are treated in the income statement in the manner determined by the purpose of the derivative. The impacts on profi t or loss arising from changes in the value of derivative contracts to which hedge accounting applies and which are effective hedges are presented in a manner consistent with the hedged item. When derivative contracts are concluded, the Group treats the derivatives as either fair value hedges for receivables, liabilities or fi xed commitments or, in the case of exchange rate risk, as cash fl ow hedges, cash fl ow hedges of a highly probable forecasted transaction, hedges of net investment in a foreign unit or derivatives that do not satisfy the criteria for applying hedge accounting.
The hedging of the net investment in a foreign unit is treated in accounting in the same manner as cash fl ow hedging. The effective portion of the change in the value of the hedging derivative is recognized under other comprehensive income and the ineffective portion through profi t or loss under fi nancial items. Gains and losses accumulated in translation differences within equity from net investment hedges are included in the income statement when the net investment is disposed of in part or in full.
At the start of a hedging relationship, both the risk to be hedged and the hedging relationship are documented in accordance with hedge accounting policies and in compliance with the company's adopted risk management principles. The effectiveness of a hedging relationship is established before hedge accounting commences and thereafter at least quarterly each year.
The fair values of derivatives to which hedge accounting applies are presented in the balance sheet under non-current assets or liabilities if the remaining maturity of the hedged item is more than 12 months. Otherwise they are included in current assets or liabilities.
During the year under review, cash fl ow hedge accounting was in use to hedge against a forecast change in the spot market price of electricity and to hedge against interest rate risks relating to variable-interest loans. The Group has used electricity forwards and interest rate derivatives, respectively, as the hedging instrument. Hedging of the net investment in a foreign unit has been used to hedge against changes in the value of the equity of Scan AB and Sokolów S.A. In these, currency-denominated loans and derivatives have been used as the hedging instrument.
Despite the fact that some hedging relationships satisfy the Group's risk management hedging criteria, the Group does not apply hedge accounting to them. These include currency forwards and options that the Group uses to hedge net currency positions and the hedging of the net investment denominated in EEK. Changes in fair value relating to net currency position hedges are recognized under other operating income or expenses in keeping with the Group's recognition policy.
Share capital is reported as the A and K Shares held outside the company. Any repurchase of its own shares by the company is deducted from shareholders' equity.
HKScan Corporation issued on 23 September 2008 a EUR 20 million hybrid bond aimed at its majority shareholders. The bond is treated as equity in HKScan's IFRS fi nancial statements. A hybrid bond is an equity bond that is subordinated to the company's other debt obligations. However, it is senior to other equity instruments. The date of interest payment on the hybrid bond is at the discretion of the issuer. The capital and accrued interest on the hybrid bond was paid back in full on 11 December 2009.
Dividends recommended by the Board of Directors to the Annual General Meeting are not deducted from distributable equity until approved by the Annual General Meeting.
EBIT is presented in accordance with IFRS accounting principles. The concept of EBIT is not defi ned in IAS 1: Presentation of Financial Statements. The Group employs the following defi nition: EBIT is the net sum arrived at by adding other operating income and the share of pre-determined associates' results (see Associates) to net sales, deducting from this purchase costs adjusted by change in stocks of fi nished and unfi nished products and costs arising from production for own use as well employee benefi t expenses, depreciation and impairment losses, if any, and other operating expenses. All other income statement items are presented below EBIT.
Where necessary, major gains and losses on disposal, impair-
ment and recognitions of discontinuations or reorganizations of operations, recorded as non-recurring items, as well as EBIT excluding non-recurring items may be presented separately in interim reports and fi nancial statement bulletins.
The preparation of the fi nancial statements requires management to make estimates and assumptions affecting the content and to exercise judgment in applying the accounting policies. Most of these estimates affect the possible impairment of goodwill and other assets as well as provisions. Actual results may differ from these estimates.
Group management makes judgment decisions on the choice and application of accounting policies. This applies in particular to cases where the IFRSs in force provide alternative manners of recognition, measurement and presentation.
The estimates made in preparation of the fi nancial statements are based on the best judgment of management at the reporting date. Underlying these estimates are previous experience and assumptions regarding the future considered most probable at the balance sheet date, having to do with inter alia the anticipated development of the Group's fi nancial operating environment with regard to sales and costs.
In major business combinations, the Group has consulted an external advisor in assessing the fair values of intangible and tangible assets. Management believes the estimates and assumptions employed to be suffi ciently accurate to serve as the basis for fair value measurement. In addition, both intangible and tangible assets are reviewed for any indications of impairment at each reporting date at the least.
Goodwill and those intangible assets with an unlimited useful life are tested for impairment each year and reviewed for indications of impairment in accordance with the policies set out above.
The Group has yet to apply the following new or revised standards and interpretations published by the IASB. These will be applied as from the effective date of each standard and interpretation or, if the effective date does not fall on the fi rst day of the fi nancial year, as from the start of the fi nancial year fi rst beginning after the effective date.
Revised IAS 27. Consolidated and Separate Financial Statements (effective for annual periods beginning on or after 1 July 2009). The revised standard requires the effects of changes in subsidiary ownership to be recognized directly in Group equity when the parent entity retains control. If control in the subsidiary is lost, any remaining investment is measured to fair value and any difference recognized in profi t or loss. A corresponding accounting treatment will in future apply also to investments in associates (IAS 28) and interests in joint ventures (IAS 31). As a result of the revision, the losses of a subsidiary can be allocated to the minority also when the losses exceed the minority's investment.
Improvements to IFRSs (as a rule, effective for annual periods beginning on or after 1 January 2010). The Annual Improvements process allows minor and non–urgent amendments to IFRSs to be presented and implemented once each year in a single document. The amendments presented concern a total of 12 standards and the impacts vary for each standard. The amendments have had no signifi cant impact on HKScan's consolidated fi nancial statements, however. The amendments are yet to be adopted for application in the EU.
ED 9 Joint Arrangements. The current IAS 31 Interests in Joint Ventures permits the proportionate consolidation of the fi gures for a joint venture (line by line consolidation). The standard (the new ED 9) is likely to be amended to permit the application of the equity method only. The new standard will signifi cantly alter both Group fi gures and the treatment of the Poland segment. No effective date has yet been determined.
The division into segments is based on the Group's organization and Board of Directors and Group management reporting. The management of the HKScan Group tracks the profi tability of business operations by market area. Group reporting on based on the geographical segments of Finland, Sweden, the Baltics and Poland. The Polish market has been shown as a separate segment since 1 January 2005 and the Swedish market since 1 January 2007.
The assets and liabilities of the segments are items that are either directly or fairly allocated to the business of the relevant segment. Segment assets include tangible and intangible assets, shares in associates, inventories and zero-interest receivables. Segment liabilities include current non-interest bearing liabilities. Unallocated items include fi nancial and tax items and items common to the entire Group.
| Finnish | Swedish | Baltic | Polish | Elimi- | Un- | Group | |
|---|---|---|---|---|---|---|---|
| operations | operations | operations | operations | nations | allocated | Total | |
| Income statement information | |||||||
| External sales | 725.3 | 997.0 | 151.9 | 250.5 | - | - | 2 124.7 |
| Internal sales | 7.2 | 40.5 | 5.0 | 1.1 | -53.9 | - | 0.0 |
| Net sales | 732.5 | 1 037.4 | 156.9 | 251.7 | -53.9 | - | 2 124.7 |
| Segment EBIT | 19.3 | 16.7 | 9.8 | 9.3 | - | - | 55.1 |
| Unallocated items | - | - | - | - | - | - | 0.0 |
| EBIT | 19.3 | 16.7 | 9.8 | 9.3 | - | - | 55.1 |
| Financial income and expenses | - | - | - | - | - | -19.7 | -19.7 |
| Share of associates' results | 1.7 | 0.2 | - | - | - | - | 2.0 |
| Income taxes | - | - | - | - | - | -4.9 | -4.9 |
| Result for the fi nancial year | |||||||
| from continuing operations | 12.6 | 10.1 | 10.0 | 5.3 | -5.4 | - | 32.5 |
| Result for the fi nancial year | 12.6 | 10.1 | 10.0 | 5.3 | -5.4 | - | 32.5 |
| Balance sheet information | |||||||
| Segment assets | 365.4 | 355.3 | 108.9 | 104.9 | -10.8 | - | 923.7 |
| Shares in associates | 7.9 | 13.0 | - | - | - | - | 20.9 |
| Unallocated assets | - | - | - | - | 129.4 | 129.4 | |
| Total assets | 373.3 | 368.3 | 108.9 | 104.9 | -10.8 | 129.4 | 1 074.0 |
| Segment liabilities | 81.0 | 102.0 | 14.2 | 20.4 | -8.6 | - | 208.9 |
| Unallocated liabilities | - | - | - | - | - | 466.3 | 466.3 |
| Total liabilities | 81.0 | 102.0 | 14.2 | 20.4 | -8.6 | 466.3 | 675.3 |
| Other information | |||||||
| Sales, goods | 719.5 | 997.0 | 151.7 | 238.3 | - | - | 2 106.5 |
| Sales, services | 5.8 | 0.0 | 0.1 | 12.3 | - | - | 18.2 |
| Investments | 8.0 | 18.5 | 7.3 | 7.5 | - | - | 41.3 |
| Depreciation and amortization | -22.0 | -20.0 | -8.2 | -7.0 | - | - | -57.2 |
| Impairment | 0.0 | 0.0 | 0.0 | 0.0 | - | - | 0.0 |
| Goodwill | 17.5 | 29.3 | 19.1 | 22.4 | - | - | 88.2 |
| Year 2008 (EUR million) | |||||||
|---|---|---|---|---|---|---|---|
| Finnish | Swedish | Baltic | Polish | Elimi- | Un- | Group | |
| operations | operations | operations | operations | nations | allocated | Total | |
| Income statement information | |||||||
| External sales | 734.4 | 1 125.1 | 165.1 | 270.0 | - | - | 2 294.6 |
| Internal sales | 6.1 | 54.3 | 3.1 | 0.9 | -64.3 | - | 0.0 |
| Net sales | 740.4 | 1 179.3 | 168.2 | 270.9 | -64.3 | 2 294.6 | |
| Segment EBIT | 9.5 | 18.0 | 6.5 | 4.2 | 0.0 | - | 38.1 |
| Unallocated items | - | - | - | - | - | - | 0.0 |
| EBIT | 9.5 | 18.0 | 6.5 | 4.2 | 0.0 | - | 38.1 |
| Financial income and expenses | - | - | - | - | - | -30.1 | -30.1 |
| Share of associates' results | 0.6 | 0.3 | - | - | - | - | 0.9 |
| Income taxes | - | - | - | - | - | -1.4 | -1.4 |
| Result for the fi nancial year | |||||||
| from continuing operations | 5.7 | 6.3 | 6.1 | -0.3 | -10.3 | - | 7.6 |
| Result for the fi nancial year | 5.7 | 6.3 | 6.1 | -0.3 | -10.3 | - | 7.6 |
| Balance sheet information | |||||||
| Segment assets | 406.5 | 362.3 | 112.5 | 102.6 | -25.7 | - | 958.2 |
| Shares in associates | 6.3 | 11.5 | - | - | - | - | 17.8 |
| Unallocated assets | - | - | - | - | 120.5 | 120.5 | |
| Total assets | 412.8 | 373.8 | 112.5 | 102.6 | -25.7 | 120.5 | 1 096.5 |
| Segment liabilities | 83.8 | 101.4 | 16.5 | 24.2 | -16.6 | - | 209.3 |
| Unallocated liabilities | - | - | - | - | - | 563.5 | 563.5 |
| Total liabilities | 83.8 | 101.4 | 16.5 | 24.2 | -16.6 | 563.5 | 772.8 |
| Other information | |||||||
| Sales, goods | 726.8 | 1 125.1 | 165.0 | 264.2 | - | - | 2 281.1 |
| Sales, services | 7.5 | 0.0 | 0.1 | 5.8 | - | - | 13.5 |
| Investments | 27.5 | 28.0 | 14.9 | 13.6 | - | - | 84.0 |
| Depreciation and amortization | -21.0 | -17.2 | -7.7 | -8.9 | - | - | -54.8 |
| Impairment | 0.8 | 0.0 | 0.0 | 0.0 | - | - | 0.8 |
| Goodwill | 12.6 | 27.6 | 19.1 | 22.4 | - | - | 81.7 |
The Group acquired 100% of the shares in Liha-Matti Oy on 2 January 2009 and a 49-% stake in Kivikylän Kotipalvaamo Oy on 31 December 2009. The combined purchase price of the acquisitions was EUR 7.8 million. The fair value of the net assets of the businesses acquired was EUR 6.6 million at the time of acquisition. Goodwill in the amount of EUR 4.3 million was recognized on the acquisitions. Liha-Matti Oy merged with and into Lihatukku Harri Tamminen Oy on 30 September 2009.
These fi gures have been calculated in accordance with the accounting policies observed in the HKScan Group.
| Fair value Carrying amount | ||
|---|---|---|
| Cash and cash equivalents | 2.5 | 2.5 |
| Non-current assets | 4.8 | 3.8 |
| Trademarks | 2.0 | 0.0 |
| Inventories | 0.8 | 0.6 |
| Trade and other receivables | 3.5 | 3.5 |
| Trade and other payables | -3.1 | -3.1 |
| Loans | -3.1 | -3.1 |
| Deferred tax liabilities | -0.9 | - |
| Fair value of net assets | 6.6 | 4.2 |
| Minority interest (51%) | -3.1 | - |
| Goodwill | 4.3 | - |
| Total acquisition cost | 7.8 | - |
| Cash consideration payable | - | 7.8 |
| Additional purchase prices and asset transfer taxes thereon | - | -2.0 |
| Cash and cash equivalents of business acquired | - | -2.5 |
| Cash fl ow arising from acquisition | - | 3.2 |
| 3. Other operating income | 2009 | 2008 |
| Rental income | 1.8 | 1.8 |
| Gain on disposal of non-current assets | 0.1 | 2.2 |
| Other operating income | 4.8 | 10.0 |
| Other operating income | 6.7 | 14.0 |
| 4. Materials and services | ||
| Purchases during the fi nancial year | -1 357.0 | -1 518.2 |
| Increase/decrease in inventories | 15.7 | 27.8 |
| Materials and supplies | -1 341.2 | -1 490.4 |
| External services | -133.3 | -152.2 |
| Materials and services | -1 474.5 | -1 642.6 |
| 5. Employee benefi ts expenses | -234.0 | -262.9 |
| Salaries and fees arising from reorganizations | -10.8 | 0.0 |
|---|---|---|
| Share incentive scheme expenses | -0.2 | -0.4 |
| Pension expenses, defi ned contribution plans | -54.4 | -48.1 |
| Pension expenses, defi ned benefi t plans | 0.1 | -0.1 |
| Total pension expenses | -54.3 | -48.2 |
| Other social security costs | -7.4 | -7.6 |
| Other social security costs | -7.4 | -7.6 |
| Employee benefi ts expenses | -306.7 | -319.0 |
| Managing directors and vice presidents | 4.7 | 3.9 |
| Board members | 0.3 | 0.3 |
| Management salaries, fees and benefi ts | 5.0 | 4.2 |
| Average number of employees during the fi nancial year | ||
| White-collar staff | 1 619 | 1 835 |
| Blue-collar staff | 5 810 | 5 915 |
| Total | 7 429 | 7 750 |
Additionally, the Sokolów Group in Poland employed an average of 5 569 persons in 2009.
| 6. Depreciation and impairment | ||
|---|---|---|
| Depreciation according to plan | -57.2 | -54.8 |
| Depreciation and amortization | -57.2 | -54.8 |
| Impairment charges for non-current assets | 0.0 | 0.0 |
| Impairment charge reversals for non-current assets | 0.0 | 0.8 |
| Impairment | 0.0 | 0.8 |
| Total | -57.2 | -54.0 |
| 7. Other operating expenses | ||
| Rents/leases | -9.7 | -8.6 |
| Losses on disposal of non-current assets | -0.4 | -0.2 |
| R&D costs | -8.9 | -13.1 |
| Non-statutory staff costs | -7.8 | -7.0 |
| Energy | -35.1 | -38.4 |
| Maintenance | -58.9 | -66.1 |
| Advertising, marketing and entertainment costs | -54.4 | -56.1 |
| Service, information management and offi ce costs | -41.6 | -42.5 |
| Other costs | -28.0 | -25.1 |
| Total other operating expenses | -244.8 | -257.1 |
The Group's audit fees paid to PricewaterhouseCoopers, its principal independent auditors, are presented in the table below. The audit fees are in respect of the audit of the annual accounts and legislative functions closely associated therewith. Other expert services include tax consulting and advisory services in corporate arrangements. The fi gures also include the audit fees in Poland (BDO Poland).
| 2009 | 2008 | |
|---|---|---|
| Audit fees | -0.7 | -0.6 |
| Certifi cates and statements | 0.0 | 0.0 |
| Tax consultation | 0.0 | 0.0 |
| Other expert services | -0.4 | -0.4 |
| Audit fees, total | -1.1 | -1.0 |
| 8. Financial income and expenses | 2009 | 2008 |
| Financial income | ||
| Dividend income from available-for-sale fi nancial assets | 0.0 | 0.0 |
| Change in value of fi nancial assets | ||
| recognized at fair value through profi t or loss | ||
| - Interest-rate derivatives | 0.0 | 0.0 |
| - Commodity derivatives | 0.1 | -0.1 |
| - Financial assets held for trading | 1.8 | -0.3 |
| Ineffective portion of hedges of net investments | ||
| in foreign units | 0.0 | 0.0 |
| Currency exchange gains on fi nancial loans and | ||
| receivables measured at amortized cost | -0.3 | 0.5 |
| Loan receivables measured at amortized cost | 2.5 | 5.3 |
| Other fi nancial income | 1.1 | 0.1 |
| Total | 5.2 | 5.5 |
| Items recognized through profi t or loss | ||
|---|---|---|
| Interest expenses on fi nancial loans | ||
| measured at amortized cost | -19.9 | -31.9 |
| Impairment charges on available-for-sale fi nancial assets | -3.5 | -1.6 |
| Other fi nancial expenses | -1.5 | -1.9 |
| Total | -24.9 | -35.5 |
Other fi nancial expenses include variable lease payments of EUR 0 million (EUR 0m in 2008) on fi nance leasing agreements recognized as an expense in the fi nancial year.
EBIT in 2009 includes translation differences of EUR 0.2m (EUR 0.2m).
The Group had an average of EUR 73 million (EUR 62m) in trade receivables sold to fi nancing companies and the Group's fi nancing expenses include the EUR 1.1 million (EUR 2.5m) in fi nancing expenses paid on these.
| 9. Income taxes | |||
|---|---|---|---|
| Cumulative tax rate reconciliation | 12 / 2009 | 12 / 2008 | |
| Income taxes | |||
| Income tax on ordinary operations | -5.1 | -3.8 | |
| Tax for previous fi nancial years | 0.0 | 0.2 | |
| Change in deferred tax liabilities and assets | 0.3 | 2.2 | |
| Other direct taxes | 0.0 | 0.0 | |
| Income tax on ordinary operations | -4.9 | -1.4 | |
| Accounting profi t/loss before taxes | 37.3 | 9.0 | |
| Deferred tax at parent company's tax rate | -9.7 | -2.3 | |
| Effect of different tax rates applied to foreign subsidiaries | 3.0 | 1.3 | |
| Share of associates' results | 0.8 | 0.4 | |
| Tax-free income | 0.1 | 0.2 | |
| Non-deductible expenses | -0.5 | -2.0 | |
| Use of tax losses not recognized earlier | 1.4 | 0.8 | |
| Tax for previous fi nancial years | 0.0 | 0.2 | |
| Tax expense in the income statement | -4.9 | -1.4 |
Earnings per share are calculated by dividing the profi t for the fi nancial year attributable to shareholders of the parent company by the weighted average number of shares issued. The interest accrued on the hybrid bond has been deducted from the profi t for the fi nancial year. The payment of interest on the hybrid bond using company shares has been taken into account in the diluted number of shares. EPS for the fi nancial year is not altered by catering for the dilution effect.
The company has in place a share incentive scheme, in addition to which it has a right of exchange in respect of the interest accrued on the hybrid bond. Neither of these had a diluting effect on EPS in the reporting period.
The undiluted and diluted EPS presented in the fi nancial statements for 2008, EUR 0.12, was calculated without deducting the interest accrued on the hybrid bond. The company has adjusted the comparison fi gure in this respect when adjusting for the share issue.
| 2009 | 2008 | ||
|---|---|---|---|
| Profi t for the period attributable to equity holders of the parent | 29.9 | 4.7 | |
| Interest on hybrid bond less taxes | -1.2 | -0.3 | |
| Total | 28.7 | 4.4 | |
| Weighted average no. of shares in thousands | 44 937 | 44 606 | |
| Dilution effect of share incentive scheme | 0 | 0 | |
| Possible payment of hybrid bond interest in shares | 0 | 0 | |
| Weighted average no. of shares adjusted for dilution effect | 44 937 | 44 606 | |
| Undiluted earnings per share (EUR) | 0.64 | 0.10 | |
| Earnings per share adjusted for dilution effect (EUR) | 0.64 | 0.10 |
| 11. Intangible assets 2009 | Intangible assets 2008 | ||
|---|---|---|---|
| Acquisition cost at 1.1. | 69.3 | Acquisition cost at 1.1. | 75.2 |
| Translation differences | 3.2 | Translation differences | -8.0 |
| Increase | 2.8 | Increase | 0.3 |
| Increase (acquisitions) | 2.0 | Decrease | -0.2 |
| Decrease | -0.9 | Transfers between items | 2.0 |
| Transfers between items | 2.8 | Acquisition cost at 31.12. | 69.3 |
| Acquisition cost at 31.12. | 79.2 | Accumulated depreciation at 1.1. | -9.8 |
| Accumulated depreciation at 1.1. | -11.5 | Translation differences | 0.3 |
| Translation differences | -0.2 | Accumulated depreciation on disposals | |
| Accumulated depreciation on disposals | and reclassifi cations | 0.1 | |
| and reclassifi cations | 0.9 | Depreciation for the fi nancial year | -2.1 |
| Depreciation for the fi nancial year | -2.7 | Accumulated depreciation at 31.12. | -11.5 |
| Accumulated depreciation at 31.12. | -13.4 | ||
| Carrying amount at 31.12.2008 | 57.8 | ||
| Carrying amount at 31.12.2009 | 65.7 |
Allocation to cash-generating units of assets with unlimited useful life
| 2009 | 2008 | |
|---|---|---|
| Finnish red meat | 2.0 | 0.0 |
| Business in Sweden | 53.2 | 50.2 |
| Total | 55.2 | 50.2 |
| 12. Goodwill 2009 | Goodwill 2008 | |
|---|---|---|
| Acquisition cost at 1.1. | 81.7 | 85.1 Acquisition cost at 1.1. |
| Translation differences | 1.6 | -4.1 Translation differences |
| Increase | 0.6 | 0.7 Increase |
| Increase (acquisitions) | 4.3 | 0.0 Decrease |
| Decrease | 0.0 | |
| Carrying amount at 31.12.2009 | 88.2 | Carrying amount at 31.12.2008 81.7 |
All acquisitions resulting in the Group recognizing goodwill have concerned the acquisition of the net assets or business of an individual CGU and goodwill has been allocated to the said CGU separately in respect of each acquisition. Goodwill has been allocated to a total of fi ve distinct CGUs.
| Specifi cation of goodwill 2009 | Specifi cation of goodwill 2008 | |||||
|---|---|---|---|---|---|---|
| Finnish red meat | 17.5 | Finnish red meat | 12.6 | |||
| Business in Sweden | 29.3 | Business in Sweden | 27.6 | |||
| Baltic white meat | 5.5 | Baltic white meat | 5.5 | |||
| Baltic red meat | 13.6 | Baltic red meat | 13.6 | |||
| Business in Poland | 22.4 | Business in Poland | 22.4 | |||
| Total | 88.2 | Total | 81.7 |
The company tests for impairment each year. The key assumptions in testing are the growth prospects of the business, cost trends and the discount rate employed.
In impairment testing, the recoverable amounts of the cash generating units are based on value-in-use calculations. The cash fl ow estimates employed are based on fi nancial plans adopted by management and the Board of Directors and spanning fi ve years. The plans are based on moderate and cautious net sales growth under the assumption that profi tability of fi ve percent on average will be achieved in the forecast period. The cash fl ow after the forecast period is extrapolated using a cautious growth factor (1.0%). The growth factors of the CGUs for the period following the forecast period do not exceed the long-term historical growth of the CGUs. Interest rates are defi ned taking into account market area risks. The interest rate has been defi ned as the weighted average cost of capital (WACC) so that the equity ratio of all cash generating units has been calculated in line with the Group's long-term average capital structure target excluding Poland, where actual capital structure has been used in the calculations. The interest rates used are 6.6% (7.0%) for Finland, 7.4% (8.0%) for Sweden, 8.0% (8.8%) for the Baltics and 8.9% (10.3%) for Poland. The change in the interest rates used is explained by the decline in longer-term interest rates and the reduction in the risk involving the Baltic and Polish currencies.
The sensitivity of each CGU to impairment is tested by varying both the discount rate and the growth factor refl ecting profi tability development. Based on the sensitivity analyses conducted, a hypothetical increase of 20 percent in WACC with the cash fl ows from operating activities projected would result in impairment of approximately EUR 6.6 million in respect of Baltic red meat. Correspondingly, a decrease of 20 percent in the growth factor refl ecting profi tability development would result in an impairment of approximately EUR 2.3 million in respect of Baltic red meat. With other units, testing indicated that no reasonably possible change in interest rates or growth factor refl ecting profi tability development resulted in impairment.
The recoverable amount for Baltic red meat exceeds the unit's carrying amount by EUR 12.4 million. A 12 percent increase in the discount rate would lead to a situation in which the recoverable amount for Baltic red meat equals its carrying amount. The same outcome would arise from a decrease of 17 percent in the growth factor.
As far as management is aware, reasonable changes in assumptions used in respect of other factors do not necessitate impairment for the goodwill of any cash-generating unit. Sudden and other than reasonably possible changes in the business environment of cash generating units may result in an increase in capital costs or in a situation where a cash-generating unit is forced to assess clearly lower cash fl ows. Recognition of an impairment loss is likely in such situations.
The annual impairment testing performed did not result in the recognition of impairment charges in 2008 or 2009.
| Land and | Buildings | Machinery | Other | Pre- | Total | ||
|---|---|---|---|---|---|---|---|
| water | and | and | property, | payments | |||
| structures | equipment | plant and | and works | ||||
| equipment | in progress | ||||||
| Acquisition cost at 1.1. | 6.8 | 408.4 | 432.2 | 13.5 | 24.2 | 885.1 | |
| Translation differences | 0.1 | 6.1 | 7.1 | 0.1 | 0.6 | 14.0 | |
| Increase | 0.2 | 3.2 | 13.5 | 0.4 | 24.0 | 41.2 | |
| Increase (acquisitions) | 0.0 | 1.9 | 1.6 | 0.0 | 0.0 | 3.5 | |
| Decrease | 0.0 | -0.7 | -15.0 | -0.8 | -0.0 | -16.5 | |
| Transfers between items | 0.0 | 5.6 | 21.8 | 0.2 | -30.2 | -2.6 | |
| Acquisition cost at 31.12. | 7.1 | 424.5 | 461.1 | 13.4 | 18.6 | 924.7 | |
| Accumulated depreciation at 1.1. | -0.1 | -165.7 | -229.8 | -10.2 | 0.0 | -405.8 | |
| Translation differences | -0.0 | -4.2 | -3.1 | 0.0 | - | -7.3 | |
| Accumulated depreciation | |||||||
| on disposals and reclassifi cations | 0.0 | 0.6 | 11.7 | 0.8 | - | 13.2 | |
| Accumulated depreciation | |||||||
| on acquisitions | 0.0 | 0.1 | 0.2 | 0.0 | - | 0.3 | |
| Depreciation for the fi nancial year | 0.0 | -14.0 | -40.7 | -1.1 | - | -55.8 | |
| Impairment charge reversals | 0.0 | 0.0 | 0.0 | 0.0 | - | 0.0 | |
| Accumulated depreciation at 31.12. | -0.1 | -183.3 | -261.6 | -10.5 | 0.0 | -455.4 | |
| Carrying amount at 31.12.2009 | 6.9 | 241.2 | 199.5 | 2.9 | 18.6 | 469.1 | |
| Property, plant and equipment 2008 | |||||||
| 6.6 | 387.2 | 395.5 | 12.9 | 72.9 | 875.1 | ||
| Acquisition cost at 1.1. | -0.3 | -21.3 | -21.7 | -0.5 | -2.7 | -46.5 | |
| Translation differences | 0.5 | 1.1 | 12.8 | 0.6 | 64.9 | 79.9 | |
| Increase | -0.1 | -10.5 | -25.6 | -0.8 | -0.1 | -37.1 | |
| Decrease | 0.1 | 51.9 | 71.2 | 1.3 | -110.8 | 13.7 | |
| Transfers between items | 6.8 | 408.4 | 432.2 | 13.5 | 24.2 | 885.1 | |
| Acquisition cost at 31.12. | |||||||
| Accumulated depreciation at 1.1. | -0.1 | -165.8 | -222.6 | -10.0 | 0.0 | -398.5 | |
| Translation differences | 0.0 | 11.8 | 10.4 | 0.4 | - | 22.6 | |
| Accumulated depreciation | |||||||
| on disposals and reclassifi cations | 0.0 | 2.1 | 15.8 | 0.5 | - | 18.4 | |
| Depreciation for the fi nancial year | 0.0 | -13.8 | -34.2 | -1.1 | - | -49.1 | |
| Impairment charge reversals | 0.0 | 0.0 | 0.8 | 0.0 | - | 0.8 | |
| Accumulated depreciation at 31.12. | -0.1 | -165.7 | -229.8 | -10.2 | 0.0 | -405.8 | |
| Carrying amount at 31.12.2008 | 6.7 | 242.6 | 202.4 | 3.3 | 24.2 | 479.3 | |
| Shares in associates 2009 | |
|---|---|
| Acquisition cost at 1.1. | 17.8 |
| Translation differences | 0.4 |
| Increase | 0.6 |
| Acquisition cost at 31.12. | 18.8 |
| Share of associates' results | 2.9 |
| Dividends from associates | -0.8 |
| Carrying amount at 31.12.2009 | 20.9 |
| Shares in associates 2008 | |
| Acquisition cost at 1.1. | 20.3 |
| Translation differences | -2.0 |
| Increase | 0.5 |
| Decrease | -1.9 |
| Impairment | -0.2 |
| Transfers between items | -0.1 |
| Acquisition cost at 31.12. | 16.6 |
| Share of associates' results | 1.5 |
| Dividends from associates | -0.3 |
| Carrying amount at 31.12.2008 | 17.8 |
A list of associates and their combined assets, liabilities, revenue and profi t/loss (EUR million) as well as holding percentage appears below. The fi gures given are gross and not proportional to Group ownership.
| 31.12.2009 31.12.2008 | |||
|---|---|---|---|
| Non-current loan receivables | 3.1 | 8.0 | |
| Other non-current receivables | 15.1 | 9.3 | |
| Non-current loan and other receivables 18.2 | 17.4 | ||
| Other non-current investments | 10.5 | 9.9 | |
| Deferred tax asset | 12.3 | 10.1 | |
| Total non-current receivables | 41.0 | 37.4 | |
| Associates 2009 | Associates 2008 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Assets Liabilities | Net | Profi t/loss Ownership | Assets Liabilities | Net | Profi t/loss Ownership | |||||||
| sales | for the | % | sales | for the | % | |||||||
| period | period | |||||||||||
| Owned by the Group's parent company | Owned by the Group's parent company | |||||||||||
| Honkajoki Oy group | 14.7 | 9.6 | 21.4 | 1.4 | 38.33 | Honkajoki Oy group | 12.9 | 9.2 | 18.3 | 0.4 | 38.33 | |
| Envor Biotech Oy | 7.1 | 5.0 | 3.3 | 0.1 | 24.62 | Envor Biotech Oy | 4.7 | 3.3 | 2.4 | 0.4 | 24.62 | |
| Pakastamo Oy | 11.1 | 8.5 | 11.0 | 0.4 | 50.00 | Pakastamo Oy | 11.0 | 9.9 | 9.9 | 0.2 | 50.00 | |
| Lihateollisuuden Tutkimuskeskus LTK | 10.2 | 2.0 | 22.9 | 1.0 | 44.80 | Lihateollisuuden Tutkimuskeskus LTK | 9.6 | 2.1 | 23.7 | 0.5 | 44.80 | |
| Best-In Oy | 1.6 | 0.8 | 5.6 | 0.1 | 50.00 | Best-In Oy | 1.7 | 0.9 | 4.8 | 0.1 | 50.00 | |
| Länsi-Kalkkuna Oy | 3.6 | 2.9 | 25.6 | 0.2 | 50.00 | Länsi-Kalkkuna Oy | 3.6 | 3.1 | 27.0 | 0.1 | 50.00 | |
| Owned by LSO Foods Oy | Owned by LSO Foods Oy | |||||||||||
| Finnpig Oy | 1.3 | 0.6 | 3.0 | 0.2 | 50.00 | Finnpig Oy | 1.1 | 0.6 | 2.8 | 0.1 | 50.00 | |
| Owned by Scan AB | Owned by Scan AB | |||||||||||
| Bondens Bästa i Svalöv AB | 0.2 | 0.1 | 1.3 | 0.0 | 50.00 | Bondens Bästa i Svalöv AB | 0.2 | 0.1 | 1.5 | 0.0 | 50.00 | |
| SDT Sveriges Djurproducenters | SDT Sveriges Djurproducenters | |||||||||||
| Tillväxt AB | 5.0 | 0.1 | 0.0 | 0.0 | 50.00 | Tillväxt AB | 4.8 | 0.1 | 0.0 | 0.1 | 50.00 | |
| Conagri AB | 6.9 | 6.3 | 22.1 | 0.0 | 49.00 | Conagri AB | 6.9 | 6.3 | 22.1 | 0.0 | 49.00 | |
| daka a.m.b.a | 105.4 | 78.7 | 119.1 | 9.0 | 33.60 | daka a.m.b.a | 114.0 | 92.7 | 121.5 | 3.4 | 33.60 | |
| Fastighets AB Tuben | 0.2 | 0.0 | 0.1 | 0.0 | 48.00 | Fastighets AB Tuben | 0.2 | 0.0 | 0.1 | 0.1 | 48.00 | |
| Höglandsprodukter AB | 3.4 | 1.8 | 28.0 | 0.5 | 30.00 | Höglandsprodukter AB | 2.4 | 1.8 | 30.2 | 0.5 | 30.00 | |
| Siljans Chark AB | 8.0 | 6.2 | 15.5 | 0.8 | 39.30 | Siljans Chark AB | 7.3 | 4.9 | 16.8 | 0.3 | 39.30 | |
| Svensk Köttinformation AB | 0.3 | 0.2 | 0.8 | 0.0 | 50.00 | Svensk Köttinformation AB | 0.2 | 0.1 | 0.9 | 0.0 | 50.00 | |
| Svensk Köttrasprövning AB | 0.1 | 0.0 | 0.3 | 0.0 | 35.00 | Svensk Köttrasprövning AB | 0.1 | 0.0 | 0.3 | 0.0 | 35.00 | |
| Svensk Lantbrukstjänst AB | 2.7 | 1.1 | 10.7 | 0.4 | 26.00 | Svensk Lantbrukstjänst AB | 2.1 | 0.9 | 10.9 | 0.2 | 26.00 | |
| Svenska Djurhälsovården AB | 3.0 | 0.4 | 7.6 | 0.0 | 50.00 | Svenska Djurhälsovården AB | 2.6 | 0.4 | 6.9 | 0.2 | 50.00 | |
| Taurus Köttrådgivning AB | 0.3 | 0.1 | 0.8 | 0.0 | 39.33 | Taurus Köttrådgivning AB | 0.2 | 0.1 | 0.5 | 0.0 | 39.33 | |
| Bertil Eriksson Slakteri AB | 1.5 | 1.1 | 5.2 | 0.4 | 35.00 | |||||||
| Svenska Pig AB | 0.5 | 0.2 | 0.8 | 0.2 | 22.00 | |||||||
| M R L Transport AB | 0.2 | 0.2 | 0.6 | 0.0 | 30.00 | |||||||
| Industrislakt Syd AB | 1.0 | 1.0 | 4.7 | 0.0 | 50.00 | |||||||
| Owned by SLP Pärsons AB | ||||||||||||
| Spjutstorps Smågris AB | 2.2 | 2.1 | 0.5 | 0.0 | 49.00 | |||||||
| Specifi cation of deferred tax assets | Recognized | Recognized | Companies | |||
|---|---|---|---|---|---|---|
| Transl. | in income | in | acquired/ | |||
| 1.1.2009 | difference | statement | equity | sold | 31.12.2009 | |
| Pension benefi ts | 1.1 | - | -0.0 | - | - | 1.1 |
| Impairment of PPE | 0.1 | - | - | - | - | 0.1 |
| Other matching differences | 2.9 | 0.1 | 0.3 | 2.6 | - | 5.9 |
| Arising from consolidation | 0.6 | - | -0.1 | - | - | 0.5 |
| Adopted losses | 5.3 | 0.3 | -1.0 | - | - | 4.6 |
| Total | 10.1 | 0.4 | -0.8 | 2.6 | - | 12.3 |
| Depreciation difference and voluntary provisions | 8.6 | -0.4 | 1.6 | - | - | 9.8 |
|---|---|---|---|---|---|---|
| Other matching differences | 11.7 | -0.5 | -3.9 | -1.3 | - | 6.0 |
| Arising from consolidation | 13.0 | -0.6 | 0.6 | - | - | 13.0 |
| Recognized directly in retained earnings | 0.4 | - | - | - | - | 0.4 |
| Pension benefi ts | - | - | 3.1 | - | - | 3.1 |
| Total | 33.6 | -1.5 | 1.4 | -1.3 | -- | 32.2 |
| Specifi cation of deferred tax assets | Recognized | Recognized | Companies | |||
|---|---|---|---|---|---|---|
| Transl. | in income | in | acquired/ | |||
| 1.1.2008 | difference | statement | equity | sold | 31.12.2008 | |
| Pension benefi ts | 1.2 | - | -0.1 | - | - | 1.1 |
| Impairment of PPE | 0.1 | - | - | - | - | 0.1 |
| Other matching differences | 2.1 | -0.3 | 0.3 | 0.7 | 0.1 | 2.9 |
| Arising from consolidation | 0.6 | - | - | -- | - | 0.6 |
| Adopted losses | 4.3 | -0.6 | 1.6 | - | - | 5.3 |
| Total | 8.3 | -0.9 | 1.9 | 0.7 | 0.1 | 10.1 |
| Depreciation difference and voluntary provisions | 9.5 | -0.9 | - | - | - | 8.6 |
|---|---|---|---|---|---|---|
| Other matching differences | 10.4 | -1.0 | -0.2 | 2.5 | - | 11.7 |
| Arising from consolidation | 13.7 | -1.3 | 0.6 | - | - | 13.0 |
| Recognized directly in retained earnings | 0.4 | - | - | - | - | 0.4 |
| Pension benefi ts | - | - | - | - | - | - |
| Total | 34.0 | -3.2 | 0.4 | 2.5 | - | 33.6 |
The Group has not recognized a deferred tax liability in respect of retained profi ts of subsidiaries.
The retained earnings of the Estonian companies include deferred tax liabilities of EUR 17.3 million.
| 17. Inventories | ||
|---|---|---|
| 31.12.2009 | 31.12.2008 | |
| Materials and supplies | 73.9 | 80.9 |
| Unfi nished products | 7.1 | 7.1 |
| Finished products | 23.7 | 25.6 |
| Goods | 0.0 | 0.0 |
| Other inventories | 4.1 | 4.2 |
| Prepayments for inventories | 2.1 | 2.2 |
| Live animals, IFRS 41 | 7.6 | 8.2 |
| Total inventories | 118.7 | 128.3 |
| 31.12.2009 | 31.12.2008 | |
|---|---|---|
| Trade receivables from associates | 0.3 | 0.4 |
| Loan receivables from associates | 0.6 | 0.6 |
| Current receivables from associates | 0.9 | 1.0 |
| Trade receivables | 133.2 | 135.5 |
| Other receivables | 51.5 | 47.1 |
| Current receivables from others | 184.7 | 182.6 |
| Commodity derivatives, hedge accounting | 0.0 | 0.0 |
| Current derivative receivables | 0.0 | 0.0 |
| Interest receivables | 0.7 | 1.0 |
| Matched staff costs, current receivables | 0.7 | 0.8 |
| Other prepayments and accrued income | 7.2 | 13.0 |
| Current prepayments and accrued income | 8.7 | 14.9 |
| Tax receivables (income tax) | 0.2 | 1.5 |
| Income tax receivable | 0.2 | 1.5 |
| Total current receivables | 194.5 | 199.9 |
| (EUR million) | |
|---|---|
| --------------- | -- |
| Impair- | Impair- | |||||
|---|---|---|---|---|---|---|
| ment | Net | ment | Net | |||
| 2009 | losses | 2009 | 2008 | losses | 2008 | |
| Unmatured 1) | 120.1 | 120.1 | 113.7 | 113.7 | ||
| Matured | ||||||
| Under 30 days | 10.4 | 0.4 | 10.0 | 14.4 | 0.0 | 14.4 |
| 30–60 days | 0.8 | 0.0 | 0.8 | 2.0 | 0.0 | 2.0 |
| 61–90 days | 0.2 | 0.0 | 0.3 | 0.3 | 0.1 | 0.3 |
| over 90 days 2) | 1.6 | 0.5 | 1.1 | 5.1 | 3.7 | 1.4 |
| Total | 133.2 | 0.9 | 132.3 | 135.5 | 3.7 | 131.8 |
1) The sale of receivables to fi nancial institutions must be taken into account in the amount of trade receivables. 2) Comprise i.a. receivables to be set off against payments for animals.
The fair values of receivables are presented in Note 28, "Fair values of fi nancial assets and liabilities".
| 31.12.2009 | 31.12.2008 | |
|---|---|---|
| Cash and bank | 63.0 | 74.6 |
| Short-term money market investments | 10.9 | 17.6 |
| Other fi nancial instruments | 2.0 | 2.2 |
| Total cash and cash equivalents | 75.9 | 94.4 |
Cash and cash equivalents according to the cash fl ow statement equal those in the balance sheet.
The effects of changes in the number of outstanding shares are presented below:
| Number of | Share | Share premium | Treasury | |||
|---|---|---|---|---|---|---|
| shares | capital | reserve | shares | Total | ||
| (1 000) | EUR mill. | EUR mill. | RIUE | EUR mill. | EUR mill. | |
| 1.1.2008 | 39 266 | 66.8 | 72.9 | 66.7 | -0.7 | 205.7 |
| Purchase of own shares | -15 | -0.1 | -0.1 | |||
| Assignment of treasury shares | 51 | 0.8 | 0.8 | |||
| 31.12.2008 | 39 302 | 66.8 | 72.9 | 66.7 | 0.0 | 206.4 |
| Revert of treasury shares | -48 | 0.0 | 0.0 | |||
| Share offering | 14 720 | 76.8 | 76.8 | |||
| 31.12.2009 | 53 974 | 66.8 | 72.9 | 143.5 | 0.0 | 283.2 |
The shares have no nominal value. All issued shares have been paid up in full. The company's stock is divided into Series A and K shares, which differ from each other in the manner set out in the Articles of Association. Each share gives equal entitlement to a dividend. K Shares produce 20 votes and A Shares 1 vote each. Before the share offering, A Shares numbered 33 906 193 and K Shares 5 400 000. After the share offering registered on 29 December 2009, A Shares number 54 026 522 and K Shares 5 400 000.
In share issues decided while the earlier Finnish Companies Act (734/1978) was in force, payments in cash or kind obtained on share subscription less transaction costs were recognized under shareholders' equity and the share premium reserve in accordance with the terms of the arrangements.
The reserve for invested unrestricted equity (RIUE) contains other investments of an equity nature and share issue price inasmuch as this is not recognized under shareholders' equity pursuant to express decision to that effect. The share of payment received on the directed issue to Swedish Meats in excess of nominal value was recognized in the RIUE. The share offering in 2009 was recognized in full in the RIUE.
At the beginning of 2009, HKScan held 4 474 A Shares as treasury shares. During 2009, a total of 47 508 A Shares reverted to the company. At year-end, the company held a total of 51 982 of its A Shares. These had a market value of EUR 0.4 million and accounted for less than 0.01% of all shares and less than 0.01% of all votes. The remaining acquisition cost is presented in the balance sheet as a deduction from equity.
The translation differences reserve includes exchange differences arising on the translation of foreign units' fi nancial statements as well as gains and losses arising on the hedging of net investments in foreign units when hedge accounting requirements are satisfi ed.
These reserves are for changes in the value of available-for-sale fi nancial assets and changes in the fair value of derivative instruments used in cash fl ow hedging. The following is an itemization of events in the hedging instruments reserve during the fi nancial year.
| Fair value reserve and hedging instruments reserve | 2009 | 2008 |
|---|---|---|
| Fair value reserve and hedging instruments reserve at 1.1. | -1.7 | 0.8 |
| Amount recognized in equity in the fi nancial year (effective portion), foreign exchange derivatives | 0.5 | -0.5 |
| Amount recognized in equity in the fi nancial year (effective portion), interest-rate derivatives | -11.3 | 0.0 |
| Amount recognized in equity in the fi nancial year (effective portion), commodity derivatives | 1.0 | -2.8 |
| Share of deferred tax asset of changes in period | 2.7 | 0.7 |
| Fair value reserve and hedging instruments reserve at 31.12. | -8.8 | -1.7 |
Dividend of EUR 0.24 per share, totalling EUR 9.4 million, was distributed in 2009 (EUR 0.27 per share totalling EUR 10.6 million in 2008). Since the reporting date, the Board of Directors has proposed that dividend of EUR 0.22 per share, totalling EUR 11.9 million, be declared.
| 21. Pension obligations | |||
|---|---|---|---|
| 31.12.2009 31.12.2008 | |||
| Pension liability/receivable in balance sheet, defi ned benefi t | |||
| Pension obligations | 3.6 | 3.7 | |
| Pension liability (+)/ receivable (-) in balance sheet | 3.6 | 3.7 | |
| Defi ned benefi t pension expense in income statement | |||
| Pension obligations | 0.1 | 1.0 | |
| Defi ned benefi t pension expense in income statement (IFRS) | 0.1 | 1.0 | |
| Change in liabilities/receivables arising from benefi ts in the fi nancial year | |||
| Balance at 1.1. | 3.7 | 4.7 | |
| Defi ned benefi t pension expense in income statement (IFRS) | -0.1 | -1.0 | |
| Other change | 0.0 | 0.0 | |
| Liabilities/receivables at end of fi nancial year | 3.6 | 3.7 | |
| Increase in | Exercised in | ||||
|---|---|---|---|---|---|
| 1.1.2009 | provisions fi nanc. year (-) | 31.12.2009 | |||
| Non-current provisions | 1.4 | 8.6 | -1.5 | 8.5 | |
| Current provisions | 1.9 | 1.5 | -0.5 | 2.8 | |
| Total | 3.3 | 10.1 | -2.0 | 11.3 | |
| Increase in | Exercised in | ||||
| 1.1.2008 | provisions fi nanc. year (-) | 31.12.2008 | |||
| Non-current provisions | 0.0 | 1.4 | 0.0 | 1.4 | |
| Current provisions | 1.3 | 1.0 | -0.4 | 1.9 | |
| Total | 1.3 | 2.4 | -0.4 | 3.3 | |
Non-current provisions mainly comprise costs relating to staffi ng arrangements having to do with the streamlining programme in Sweden. Current provisions include the cost estimated for the employment dispute at the Forssa plant in the business segment of Finland. The fi gure for Estonia includes a minor bad debt provision against future bad debt.
| 23. Liabilities | ||
|---|---|---|
| 31.12.2009 | 31.12.2008 | |
| Non-current liabilities | ||
| Interest-bearing | ||
| Loans from fi nancial institutions | 329.8 | 441.6 |
| Other liabilities | 0.1 | 0.4 |
| Non-current interest-bearing liabilities | 329.9 | 442.1 |
| Non-interest bearing | ||
| Other liabilities | 5.9 | 7.9 |
| Non-current non-interest bearing liabilities | 5.9 | 7.9 |
| Non-current provisions | 8.5 | 1.4 |
| Deferred tax liability | 32.2 | 33.6 |
| Pension obligations | 3.6 | 3.7 |
| Non-current liabilities | 380.1 | 488.7 |
| Current liabilities | ||
| Interest-bearing | ||
| Loans from fi nancial institutions | 78.0 | 70.5 |
| Other liabilities | 9.5 | 11.9 |
| Current interest-bearing liabilities | 87.5 | 82.4 |
| Trade and other payables | ||
| Advances received | 0.1 | 0.7 |
| Trade payables | 100.7 | 113.0 |
| Accruals and deferred income | ||
| - Short-term interest payable | 1.1 | 2.4 |
| - Matched staff costs | 46.5 | 45.6 |
| - Other short-term accruals and deferred income | 23.7 | 19.8 |
| Derivatives | 12.0 | 1.8 |
| Other liabilities | 17.9 | 16.1 |
| Trade and other payables | 202.0 | 199.4 |
| Income tax liability | 2.7 | 0.5 |
| Current provisions | 2.8 | 1.9 |
| Current liabilities | 295.1 | 284.2 |
| Liabilities | 675.3 | 772.8 |
HKScan Corporation issued on 23 September 2008 a EUR 20 million hybrid bond aimed at its majority shareholders. The bond is treated as equity in HKScan's IFRS fi nancial statements. A hybrid bond is an equity bond that is subordinated to the company's other debt obligations. However, it is senior to other equity instruments. The date of interest payment on the hybrid bond is at the discretion of the issuer. The capital and accrued interest on the hybrid bond was paid back in full on 11 December 2009.
| 31.12.2009 | 31.12.2008 | |
|---|---|---|
| Long-term interest-bearing fi nance lease liabilities | 0.9 | 1.5 |
| Short-term interest-bearing fi nance lease liabilities | 0.3 | 0.6 |
| Total fi nance lease liabilities | 1.2 | 2.1 |
| Broken down by property, plant and equipment | ||
| Buildings and structures | 0.5 | 0.5 |
| Machinery and equipment | 0.2 | 1.3 |
| Vehicles | 0.5 | 0.3 |
| Total fi nance lease liabilities | 1.2 | 2.1 |
| Finance lease liabilities – total minimum lease payments | ||||
|---|---|---|---|---|
| Within one year | 0.3 | 0.5 | ||
| After one year and within fi ve years | 0.9 | 1.6 | ||
| After more than fi ve years | 0.0 | 0.0 | ||
| Total | 1.2 | 2.1 | ||
| Finance leasing liabilities – present value of minimum lease payments | ||||
| Within one year | 0.3 | 0.4 |
| After one year and within fi ve years | 0.9 | 1.5 |
|---|---|---|
| After more than fi ve years | 0.0 | 0.0 |
| Total | 1.1 | 2.0 |
| Finance expenses accruing in future | 0.0 | 0.1 |
| Total fi nance lease liabilities | 1.2 | 2.1 |
| 31.12.2009 | 31.12.2008 | ||
|---|---|---|---|
| Non-current fi nancial liabilities measured at amortized cost | |||
| - Debt securities | 214.9 | 259.7 | |
| - Credit facilities | 108.9 | 174.3 | |
| - Leasing and factoring | 0.8 | 1.6 | |
| - Commercial paper | 0.0 | 0.0 | |
| - Other fi nancial liabilities | 5.4 | 6.5 | |
| Total | 329.9 | 442.1 | |
| Current fi nancial liabilities measured at amortized cost | |||
| - Debt securities | 44.9 | 38.5 | |
| - Credit facilities | 22.9 | 28.0 | |
| - Leasing and factoring | 2.8 | 3.3 | |
| - Commercial paper | 5.0 | 0.0 | |
| - Other fi nancial liabilities | 11.9 | 12.5 | |
| Total | 87.5 | 82.3 | |
The fair values of liabilities are presented in Note 28 "Fair values of fi nancial assets and liabilities".
The Group's bank loans are subject to both fi xed and variable interest rates. Taking into account derivative contracts and the sale of trade receivables, fi xed-rate loans account for 47% (37% in 2008). The average rate of interest paid by the Group is 3.2% (5.3% in 2008).
The duty of the Group Treasury in the HKScan Group is to ensure cost-effective funding and fi nancial risk management for Group companies and to attend to relations with fi nancial backers. The treasury policy approved by the Board provides the principles for fi nancial management.
Financial risks mean unfavourable movements taking place in the fi nancial markets that may erode accrual of the company's result or reduce cash fl ows. Financial risk management aims to use fi nancial means to hedge the company's intended earnings performance and equity and to safeguard the Group's liquidity in all circumstances. Risk management may employ various instruments such as currency forwards and options, interest-rate or currency swaps, foreign currency loans and commodity derivatives. Derivatives are used for the sole purpose of hedging, not for speculation. As a rule, Group funding is obtained through the parent company while funding to subsidiaries is arranged by the Treasury through intra-Group loans in the local currency of each subsidiary. Funding of the Group is centralized to a fi nance unit operating under the Chief Financial Offi cer.
The uncertainty in the fi nancial markets and the economic recession did not increase the Group's risks relating to the availability of fi nancing in the year under review and the Group's liquidity remained good in 2009. The Group nonetheless seeks to constantly assess and monitor the amount of funding required for operations through i.a. the analysis of cash fl ow forecasts. The Group must maintain adequate liquidity under all circumstances to cover its business and fi nancing needs in the foreseeable future. The availability of funding is ensured by spreading the maturity of the borrowing portfolio, fi nancing sources and instruments. The Group also has revolving credit facilities with banks, bank borrowings, insurance company borrowings, current accounts with overdraft facilities and the short-term, EUR 100 million Finnish commercial paper programme.
Group funding is based on a EUR 550 million syndicated credit facility signed in June 2007, comprising a EUR 275 million seven-year amortizing term loan and a EUR 275 million fi ve-year credit limit with two one-year extension options, one of which has been exercised. Untapped credit facilities at 31 December 2009 stood at EUR 207 million (EUR 140m). In addition, the Group had other untapped overdraft and other facilities of EUR 39 million (EUR 37m). The EUR 100 million commercial paper programme had been drawn in the amount of EUR 5 million (EUR 0m). The commercial paper market, which had come to a virtual standstill, was gradually reviving towards the end of the year. The credit available from the facility is subject to variable interest rates and the related interest rate risk is managed through derivative instruments.
In the committed credit facility agreement, EUR 25 million matures in 2010, EUR 25 million in 2012 and EUR 250 million in 2013. The overdraft facility agreement is in force until further notice.
Towards the end of the year the company executed a share offering, the proceeds of which were used to pay down variable-rate interest-bearing loans. The arrangement also increased the amount of available credit facilities. The company sees no signifi cant need for refi nancing before the year 2013. The company's current loan agreements are subject to ordinary terms relating to profi t and balance sheet. The fi nancial covenants are net gearing ratio and ratio of net debt to EBITDA. Financial backers are provided with quarterly reports on the loan covenants. If the Group is in breach of the covenants, the creditor may demand accelerated loan repayment. In the 2009 fi nancial year, the Group was able to meet all covenants relating to loans. Management monitors the fulfi lment of loan covenants on a regular basis.
Group management has identifi ed no signifi cant concentrations of liquidity risk in fi nancial assets or sources of funding.
The following table describes the numbers of the Group's commitments at the balance sheet date by type of credit:
| 31.12.2009 | ||||
|---|---|---|---|---|
| Credit type | Scope | Exercised | Available | |
| Overdraft facility | 49.7 | 10.5 | 39.2 | |
| Credit limit | 328.0 | 121.3 | 206.7 | |
| Commercial paper | ||||
| programme | 100.0 | 5.0 | 95.0 | |
| Total | 477.7 | 136.8 | 340.9 | |
| 31.12.2008 | ||||
| Credit type | Scope | Exercised | Available | |
| Overdraft facility | 52.2 | 14.8 | 37.4 | |
| Credit limit | 329.3 | 188.9 | 140.3 | |
| Commercial paper | ||||
| programme | 100.0 | 0.0 | 100.0 | |
| Total | 481.5 | 203.7 | 277.8 |
| Maturity of credit type | |||||||
|---|---|---|---|---|---|---|---|
| Credit type | 31.12.2009 | 2010 | 2011 | 2012 | 2013 | 2014 | >2014 |
| Debt securities | 259.8 | 45.4 | 34.8 | 36.6 | 31.5 | 109.8 | 1.7 |
| Credit facilities | 131.8 | 22.9 | 9.6 | 0.0 | 99.3 | 0.0 | 0.0 |
| Leasing and factoring | 3.6 | 2.8 | 0.2 | 0.6 | 0.0 | 0.0 | 0.0 |
| Commercial paper programme | 5.0 | 5.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Other borrowings | 17.2 | 11.8 | 3.2 | 2.2 | 0.0 | 0.0 | 0.0 |
| Total | 417.4 | 87.9 | 47.8 | 39.4 | 130.7 | 109.8 | 1.7 |
| Maturity of credit type | |||||||
| Credit type | 31.12.2008 | 2009 | 2010 | 2011 | 2012 | 2013 | >2013 |
| Debt securities | 298.3 | 38.5 | 43.0 | 33.8 | 34.5 | 28.1 | 120.3 |
| Credit facilities | 202.3 | 28.0 | 0.0 | 12.0 | 25.0 | 137.3 | 0.0 |
| Leasing and factoring | 4.8 | 3.3 | 0.3 | 0.3 | 0.9 | 0.0 | 0.0 |
| Commercial paper programme | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Other borrowings | 19.0 | 12.5 | 2.8 | 1.0 | 2.7 | 0.0 | 0.0 |
| Total | 524.4 | 82.3 | 46.2 | 47.1 | 63.1 | 165.4 | 120.3 |
Contractual maturity analysis of the Group's interest-bearing fi nancial liabilities by currency:
| Maturity | ||||||||
|---|---|---|---|---|---|---|---|---|
| 31.12.2009 | 2010 | 2011 | 2012 | 2013 | 2014 | >2014 | ||
| EUR | 174.2 | 33.4 | 15.7 | 14.0 | 70.4 | 40.7 | 0.0 | |
| SEK | 194.6 | 25.4 | 19.0 | 19.0 | 60.3 | 69.2 | 1.7 | |
| PLN | 41.3 | 26.3 | 12.8 | 2.2 | 0.0 | 0.0 | 0.0 | |
| EEK | 3.4 | 2.7 | 0.1 | 0.6 | 0.0 | 0.0 | 0.0 | |
| LVL | 3.6 | 0.0 | 0.0 | 3.6 | 0.0 | 0.0 | 0.0 | |
| DKK | 0.2 | 0.1 | 0.1 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Total | 417.4 | 87.9 | 47.8 | 39.4 | 130.7 | 109.8 | 1.7 | |
| Maturity | ||||||||
| 31.12.2008 | 2009 | 2010 | 2011 | 2012 | 2013 | >2013 | ||
| EUR | 232.8 | 40.4 | 42.5 | 33.3 | 36.5 | 80.0 | 0.0 | |
| SEK | 233.6 | 7.7 | 0.5 | 0.5 | 19.4 | 85.4 | 120.0 | The adjacent table presents a contractual maturity |
| PLN | 48.5 | 30.9 | 2.7 | 12.8 | 2.0 | 0.0 | 0.0 | analysis of the Group's interest-bearing fi nancial |
| EEK | 4.2 | 2.9 | 0.0 | 0.0 | 0.9 | 0.0 | 0.3 | liabilities. The fi gures are undiscounted and in |
| LVL | 3.6 | 0.0 | 0.0 | 0.0 | 3.6 | 0.0 | 0.0 | clude repayment of capital only. |
| DKK | 1.7 | 0.3 | 0.3 | 0.4 | 0.7 | 0.0 | 0.0 | |
| Total | 524.4 | 82.3 | 46.2 | 47.1 | 63.1 | 165.4 | 120.3 |
The table below analyzes the Group's non-derivative fi nancial liabilities and net-settled derivative fi nancial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. Derivative fi nancial liabilities are included in the analysis if their contractual maturities are essential for an understanding of the timing of the cash fl ows. Except for interest rate derivative liabilities, the amounts disclosed in the table are the contractual undiscounted cash fl ows.
Maturity analysis only applies to fi nancial instruments and statutory liabilities are therefore excluded. The amounts also include interest.
| Credit type | 2010 | 2011 | 2012 | 2013 | 2014 >2014 | ||
|---|---|---|---|---|---|---|---|
| Debt securities | 49.6 | 38.2 | 39.4 | 33.7 110.9 | 1.7 | ||
| Credit facilities | 25.0 | 11.5 | 1.8 100.1 | 0.0 | 0.0 | ||
| Leasing and factoring | 2.9 | 0.2 | 0.6 | 0.0 | 0.0 | 0.0 | |
| Commercial paper programme | 5.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Other borrowings | 12.0 | 3.2 | 2.2 | 0.0 | 0.0 | 0.0 | |
| Trade and other payables | 203.6 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Total | 298.1 | 53.2 | 44.0 133.9 110.9 | 1.7 | |||
| Maturity of derivative liabilities | |||||||
| Interest rate derivatives, hedge accounting | -5.1 | -3.6 | -1.8 | -0.6 | -0.1 | -0.1 | |
| Commodity derivatives, hedge accounting | -0.5 | -0.2 | -0.0 | -0.0 | -0.0 | -0.0 | |
| Foreign exchange derivatives | -0.9 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Foreign exchange derivatives, hedge accounting | -0.2 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Credit type | 2009 | 2010 | 2011 | 2012 | 2013 >2013 | ||
|---|---|---|---|---|---|---|---|
| Debt securities | 52.6 | 55.0 | 43.8 | 42.8 | 34.9 | 123.3 | |
| Credit facilities | 37.5 | 8.8 | 20.4 | 32.5 140.8 | 0.0 | ||
| Leasing and factoring | 3.4 | 0.4 | 0.4 | 0.9 | 0.0 | 0.0 | |
| Commercial paper programme | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Other borrowings | 13.2 | 3.1 | 1.1 | 2.7 | 0.0 | 0.0 | |
| Trade and other payables | 215.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Total | 321.7 | 67.2 | 65.8 | 79.0 175.7 | 123.3 | ||
| Maturity of derivative liabilities | |||||||
| Interest rate derivatives, hedge accounting | -3.3 | -4.7 | -1.4 | -1.1 | -0.6 | -0.4 | |
| Commodity derivatives, hedge accounting | -0.5 | -0.7 | -0.5 | -0.2 | 0.0 | 0.0 | |
| Foreign exchange derivatives | -2.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Foreign exchange derivatives, hedge accounting | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
A counterparty risk is defi ned as the risk that a counterparty will be unable to fulfi l its contractual obligations. The risks are mostly related to investment activities and counterparty risks in derivative contracts. Only fi nancial institutions and other actors with sound credit rating are used as counterparties. Cash may be invested in bank deposits, certifi cates of deposit and the commercial paper programmes of certain specifi ed companies listed on the Main List of the stock exchange.
The HKScan Group has productive activities in Finland, Sweden and the Baltics and, through a joint venture in Sweden, in Poland. Group companies also engage in foreign trade. Owing to income and expenses as well as equity investments and earnings denominated in foreign currencies, the Group is exposed to foreign exchange risk arising from movements in exchange rates. The US dollar, Japanese yen and Swedish crown are the most signifi cant exchange risks affecting the Group's commercial operations. The Group hedges commercial sale agreements but does not apply hedge accounting to these. Approximately 1% of the Group's sales is denominated in foreign currencies. Foreign exchange risk exposure in respect of each currency is reviewed monthly. Currency forwards, options and swaps can be used to hedge foreign exchange risks. Foreign exchange risk in commercial operations may be hedged for no more than 12 months into the future. As a rule, 30–70 percent of the projected net foreign exchange fl ow is hedged.
The Group has foreign net investments and is thus exposed to risks arising from translation of investments denominated in foreign currencies into the functional currency of the parent company. The largest foreign currency-denominated equities of Group companies are in Swedish crowns, Polish zloty and Estonian crowns. The Group observes the principle of hedging at least 50% and no more than 75% of the crown-denominated net investment in Sweden. As economic uncertainty continues in the Baltics, at least 50% and no more than 75% of equity in Estonian crowns is hedged in accordance with the Group's principles. Owing to the continuing instability of the Polish zloty, the Group started zloty hedging in the year under review in keeping with the above principles. Net investment may be hedged by taking out a loan in the relevant currency or through
the use of derivative instruments. The equities and hedging relationships of the Group's non-euro-denominated subsidiaries and associates are presented in the following table.
| Net investments | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Currency | Expo- | Hedged | Net | Hedging | Nominal | Hedging | |||||
| sure | amount | exposure | instrument | value | ratio | ||||||
| SEK | 108.2 | 72.3 | 35.9 | Foreign-currency loan | 72.3 | 67 % | |||||
| PLN | 53.1 | 29.8 | 23.3 Currency future and option | 29.8 | 56 % | ||||||
| EEK | 98.0 | 60.6 | 37.5 | Currency future | 60.6 | 62 % |
Hedging of the Group's net investments in the fi nancial statements 2008:
| Net investments | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Currency | Expo- | Hedged | Net | Hedging | Nominal | Hedging | |||||
| sure | amount | exposure | Instrument | value | ratio | ||||||
| SEK | 98.0 | 73.5 | 24.5 | Foreign-currency loan | 73.5 | 75.0 | |||||
| PLN | 46.9 | 0.0 | 46.9 | - | 0.0 | 0.0 | |||||
| EEK | 88.3 | 61.3 | 27.0 | Currency future | 61.3 | 69.4 | |||||
Hedging relations which meet hedge accounting requirements are treated as hedges of net investment made in a foreign unit.
Currency exposure has to do with fi nancial instruments denominated in a foreign currency and valued in the functional currency. The functional currency of the parent company is the euro. Assets and liabilities denominated in foreign currencies translated into euro at the exchange rates of the reporting date:
| 2009 | 2008 | |||||
|---|---|---|---|---|---|---|
| Nominal values | USD | JPY | SEK | USD | JPY | SEK |
| Non-current assets | ||||||
| - Financial assets | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| - Loans and other receivables | 0.0 | 0.0 | 129.3 | 0.0 | 0.0 | 138.5 |
| Non-current liabilities | ||||||
| - Interest-bearing liabilities | 0.0 | 0.0 | 111.7 | 0.0 | 0.0 | 147.7 |
| Current assets | ||||||
| - Financial assets | 1.4 | 0.0 | 3.1 | 0.4 | 0.0 | 17.5 |
| - Trade and other receivables | 1.6 | 0.6 | 3.3 | 8.1 | 0.9 | 7.5 |
| Current liabilities | ||||||
| - Interest-bearing liabilities | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| - Non-interest bearing liabilities | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
The following table analyzes the strengthening or weakening of the euro against the US dollar, Japanese yen and Swedish crown, all other things being equal. The movements represent average volatility over the past 12 months. Sensitivity analysis is based on assets and liabilities denominated in foreign currencies at the reporting date. The effects of currency derivatives, which offset the effects of changes in exchange rates, are also taken into account in sensitivity analysis. Net investments in foreign units and the instruments used to hedge these have been excluded from sensitivity analysis.
| 2009 | 2008 | |||||||
|---|---|---|---|---|---|---|---|---|
| USD | JPY | SEK | Total | USD | JPY | SEK | Total | |
| Movement, % | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | ||
| Effect on profi t after | ||||||||
| taxes (EUR mill.) | 0.2 | 0.0 | 1.8 | 2.0 | 0.6 | 0.1 | 1.2 | 1.9 |
The following assumptions were used in calculating sensitivity to currency risks:
• Forecast future cash fl ows have not been taken into account in the calculation but fi nancial instruments such as forward contracts used to cover these positions are included in the analysis.
• The calculation and estimates of reasonably possible changes in exchange rates are based on the assumption of ordinary market and business conditions.
In respect of the US dollar and the Japanese yen, the effect would mainly be due to changes in the exchange rates applicable to trade receivables. In respect of the Swedish crown, the most signifi cant factors are the crown-denominated loan and loan receivable.
The Group's short-term money market investments expose it to cash fl ow interest rate risk. The impact of these is not signifi cant, however. Group revenues and operative cash fl ows are mainly independent of fl uctuations in market rates. The Group's main exposure to interest rate risk arises through interest-bearing liabilities and trade receivables sold. The aim of interest rate risk management is to reduce the fl uctuation of interest expenses in the income statement.
To manage interest rate risks, Group borrowings are spread across fi xed and variable interest instruments. The company may borrow at either fi xed or variable interest rates and use interest rate derivatives to achieve a result in keeping with the treasury policy. The goal of the policy is to have some 40% of the Group's borrowings tied to a fi xed interest rate. At the balance sheet date and taking into account interest rate derivatives and trade receivable fi nancing, fi xed-rate loans accounted for roughly 47% (37%) of the loan portfolio. The proceeds from the share offering were used to pay down variable-rate loans. Trade receivable fi nancing has been taken into account in the amount of loans exposed to interest rate risk. The interest rate maturity of the loans was approximately 5 months (6 months). Interest rate maturity becomes approximately 13 months (12 months) when calculated based on the yield curve at the balance sheet date.
At the balance sheet date, the nominal amount of the Group's outstanding interest rate derivatives was EUR 203.5 million (EUR 276.8m). The average interest rate on the Group's interest-bearing liabilities, taking into account derivatives and margins on loans, stood at 3.2% at the balance sheet date (5.3%). The sensitivity of net fi nancial expenses at the balance sheet date to an increase/decrease of one percent in interest rates, all other things being equal, was ca. EUR 2.7 million (EUR 3.7m) before taxes over the next 12 months. The sensitivity analysis was prepared based on the amounts and maturities of interest-bearing liabilities and interest rate derivatives at the balance sheet date. The sale of accounts receivable has been included in interest-bearing liabilities.
The interest rate maturity of interest rate derivative contracts to be terminated has been calculated up to the fi rst maturity date of the option.
| 31.12.2009 | 31.12.2008 | |
|---|---|---|
| Under 6 months | 301.0 | 392.3 |
| 6–12 months | 72.6 | 62.3 |
| 1–5 years | 43.8 | 64.2 |
| Over 5 years | 0.0 | 5.6 |
| Total | 417.4 | 524.4 |
The duration of interest rate derivative instruments to be terminated has been calculated based on the yield curve at the balance sheet date. It ends when the yield curve reaches the fi xed rate of the interest rate derivative contracts.
| 31.12.2009 | 31.12.2008 | ||||
|---|---|---|---|---|---|
| Under 6 months | 191.2 | 308.1 | |||
| 6–12 months | 8.4 | 8.9 | |||
| 1–5 years | 217.8 | 201.8 | |||
| Over 5 years | 0.0 | 5.6 | |||
| Total | 417.4 | 524.4 |
Credit risk management and credit control in the Group is centralized to the Group Treasury which works together with the business units. The Group's trade receivables are spread among a wide customer base, the most important customers being central retail organizations in the various market areas. The credit quality of customers is subject to ongoing monitoring and evaluation. Almost all customers have credit limits that are systematically monitored. Some customers are insured through credit insurance. Credit is only extended to customers with an impeccable credit rating. Methods used to secure credit extended include fi nancial security, bank guarantees, confi rmed letters of credit, advance payments, title retention clauses, mortgage sureties and secondary pledges.
The Group treasury only concludes derivative contracts with reputable counterparties with a good credit rating.
The Group's maximum exposure to credit risk equals the carrying amount of fi nancial assets at year-end. The age breakdown of trade receivables in presented in Note 18.
The Group is exposed to commodity risk having to do with the availability of commodities and fl uctuation in their prices. In Finland, the Group uses electricity derivatives to hedge against fl uctuation in the price of electricity. Hedging level limits are defi ned in the electricity procurement policy. At least 70% of electricity procurement in the coming 12 months is hedged. Hedge accounting applies to the treatment of these derivatives.
The table below analyzes the effect that a rise or fall of 10% in the prices of commodity derivatives outstanding at the reporting date would have on profi t after taxes, all other things being equal.
| 2009 | 2008 | |||
|---|---|---|---|---|
| price | price | price | price | |
| rises by 10% | falls by 10% | rises by 10% | falls by 10% | |
| Electricity futures | 0.2 | -1.2 | -0.8 | -1.8 |
| 31.12.2009 31.12.2008 |
|
|---|---|
| Foreign exchange derivatives | |
| 89.3 83.8 - Currency forwards |
|
| 15.3 0.6 - Currency options |
|
| Interest-rate derivatives | |
| 203.5 276.8 - Interest rate swaps |
|
| Commodity derivatives | |
| 10.8 8.6 - Electricity forwards |
|
| 318.9 369.8 |
| 2009 | 2009 | 2009 | 2008 | ||
|---|---|---|---|---|---|
| Fair value | Fair value | Fair value | Fair value | ||
| positive | negative | net | net | ||
| Foreign exchange derivatives | 0.1 | -1.2 | -1.1 | -2.0 | |
| - Currency forwards | 0.1 | -1.2 | -1.1 | -1.9 | |
| - Currency options | 0.0 | 0.0 | 0.0 | -0.1 | |
| Interest-rate derivatives | |||||
| - Interest rate swaps | 0.0 | -11.3 | -11.3 | -11.5 | |
| Commodity derivatives | |||||
| - Electricity forwards | 0.4 | -1.0 | -0.6 | -1.9 | |
| 0.5 | -13.5 | -13.0 | -15.4 |
| 2009 | 2008 | ||
|---|---|---|---|
| Fair value | Fair value | ||
| effective portion effective portion | |||
| Foreign exchange derivatives | |||
| - Currency forwards | -0.2 | 0 | |
| Commodity derivatives | |||
| - Electricity forwards | -0.6 | -1.6 | |
| Interest-rate derivatives | |||
| - Interest rate swaps | -11.3 | -11.5 | |
| -12.1 | -13.1 | ||
The table below presents the nominal value and fair values of derivative instruments. The derivatives mature within the next 12 months except for interest rate derivatives and commodity derivatives, the maturity of which is presented separately.
| 2009 | 2009 | 2009 | 2008 | 2009 | 2008 | |
|---|---|---|---|---|---|---|
| Fair value | Fair value | Fair value | Fair value | Nominal | Nominal | |
| positive | negative | net | net | value | value | |
| Interest rate swaps | ||||||
| matured in 2009 | - | - | - | -0.1 | - | 100.0 |
| matures in 2010 | 0.0 | 0.0 | 0.0 | -1.0 | 0.0 | 20.0 |
| matures in 2011 | 0.0 | -0.4 | -0.4 | -0.4 | 10.0 | 10.0 |
| matures in 2012 | 0.0 | -1.8 | -1.8 | -0.6 | 29.8 | 9.2 |
| matures in 2013 | 0.0 | -2.1 | -2.1 | -1.4 | 39.8 | 34.2 |
| matures in 2014 | 0.0 | -1.5 | -1.5 | -1.1 | 39.5 | 20.0 |
| matures in 2015 or later | 0.0 | -5.5 | -5.5 | -6.8 | 84.5 | 83.4 |
| Interest rate swaps | ||||||
| total in the fi nancial year | 0.0 | -11.3 | -11.3 | -11.5 | 203.5 | 276.8 |
| of which defi ned as fair value | ||||||
| hedging instruments | 0.0 | -11.3 | -11.3 | -11.5 | 203.5 | 276.8 |
| Foreign exchange derivatives 0.1 | -1.2 | -1.1 | -2.0 | 104.6 | 84.4 | |
| of which defi ned as cash fl ow | ||||||
| hedging instruments | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| of which defi ned as net investment | ||||||
| hedging instruments | 0.0 | -0.2 | -0.2 | 0.0 | 36.9 | 0.0 |
| Commodity derivatives | 0.4 | -1.0 | -0.6 | -1.9 | 10.8 | 8.6 |
| matured in 2009 | -0.5 | 3.5 | ||||
| matures in 2010 | 0.2 | -0.6 | -0.4 | -0.7 | 3.4 | 2.7 |
| matures in 2011 | 0.1 | -0.3 | -0.2 | -0.5 | 2.8 | 1.8 |
| matures in 2012 | 0.1 | -0.1 | 0.0 | -0.1 | 2.3 | 0.5 |
| matures in 2013 | 0.0 | 0.0 | 0.0 | 0.0 | 1.6 | 0.0 |
| matures in 2014 or later | 0.0 | 0.0 | 0.0 | 0.0 | 0.8 | 0.0 |
The purpose of capital management in the Group is to support business through an optimal capital structure by safeguarding a normal operating environment and enabling organic and structural growth. An optimal capital structure also generates lower costs of capital.
Capital structure is infl uenced by controlling the amount of working capital tied up in the business and through reported profi t/loss, distribution of dividend and share issues. The Group may also decide on the disposal of assets to reduce liabilities.
The tools to monitor the development of the Group's capital structure are the equity ratio and net gearing ratio. Equity ratio refers to the ratio of equity to total assets. Net gearing ratio is measured as net liabilities divided by shareholders' equity. Net liabilities include interestbearing liabilities less interest-bearing loan receivables and cash and cash equivalents.
The Group has announced an equity ratio target of 40%. The acquisition of Scan AB brought the Group's equity ratio to below 30%. The share offering executed in December 2009 brought the equity ratio to 37%. The target in respect of net gearing ratio was also to return to the pre-Scan acquisition level, i.e. clearly below 100%. At the balance sheet date, the net gearing ratio was 84.9%.
| Net gearing ratio (EUR million) | ||
|---|---|---|
| 2009 | 2008 | |
| Interest-bearing liabilities | 417.4 | 524.4 |
| Interest-bearing loan receivables | 2.9 | 3.3 |
| Cash and bank | 75.9 | 94.4 |
| Interest-bearing net liabilities | 338.6 | 426.7 |
| Shareholders' equity | 398.7 | 323.7 |
| Net gearing ratio | 84.9 % | 132.0 % |
The table below presents the fair values of each class of fi nancial assets and liabilities and their carrying amounts, which are equal to the amounts in the consolidated balance sheet.
| Fair value | Carrying amount | |||
|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |
| Financial assets | ||||
| Other fi nancial assets | 2.0 | 2.2 | 2.0 | 2.2 |
| Financial assets recognized at fair value | ||||
| through profi t or loss | - | - | - | - |
| - assets held for trading | - | - | - | - |
| Trade and other receivables | 194.3 | 198.4 | 194.3 | 198.4 |
| Cash and cash equivalents | 73.9 | 92.2 | 73.9 | 92.2 |
| Non-current liabilities | ||||
| Debt securities | 212.7 | 251.8 | 214.9 | 259.7 |
| Credit facilities | 108.2 | 173.2 | 108.9 | 174.3 |
| Leasing and factoring | 0.7 | 1.4 | 0.8 | 1.6 |
| Commercial paper | 0.0 | 0.0 | 0.0 | 0.0 |
| Other long-term liabilities | 4.8 | 5.6 | 5.4 | 6.5 |
| Accruals and deferred income | 50.2 | 46.6 | 50.2 | 46.6 |
| Total non-current liabilities | 376.6 | 478.6 | 380.1 | 488.7 |
| - of which interest-bearing | 326.4 | 432.0 | 329.9 | 442.1 |
The carrying amounts of non-current liabilities have been calculated using the effective interest method and the fair values have been determined through the discounted cash fl ow method using the market interest rate or market value at the balance sheet date. The discount rate of interest thus equals the interest rate at which the Group could obtain corresponding credit from a third party at the reporting date.
| Fair value | Carrying amount | |||
|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | |
| Current liabilities | ||||
| Debt securities | 44.9 | 38.5 | 44.9 | 38.5 |
| Credit facilities | 22.9 | 28.0 | 22.9 | 28.0 |
| Leasing and factoring | 2.8 | 3.3 | 2.8 | 3.3 |
| Commercial paper | 5.0 | 0.0 | 5.0 | 0.0 |
| Other current liabilities | 11.9 | 12.5 | 11.9 | 12.5 |
| Advances received | 0.1 | 0.7 | 0.1 | 0.7 |
| Trade payables | 100.7 | 113.0 | 100.7 | 113.0 |
| Accruals and deferred income | 71.5 | 67.8 | 71.5 | 67.8 |
| Other liabilities | 35.4 | 20.3 | 35.4 | 20.3 |
| Total current liabilities | 295.1 | 284.2 | 295.1 | 284.2 |
| - of which interest-bearing | 87.5 | 82.4 | 87.5 | 82.4 |
The carrying amount of current non-interest bearing liabilities is a reasonable estimate of their fair value. The carrying amounts of current interest-bearing liabilities have been calculated using the effective interest method and the fair values have been determined through the discounted cash fl ow method using the market interest rate at the balance sheet date.
The fair values of currency forwards are determined by using the market prices for contracts of equal duration at the reporting date. The fair values of interest rate swaps are determined using the net present value method supported by the market interest rate or other market information at the reporting date. The fair values of commodity derivatives are determined by using publicly quoted market prices. The fair values are equal to the prices which the Group would have to pay or would obtain if it were to terminate a derivative instrument.
The original carrying amounts of non-derivative based receivables and trade and other payables are equal to their fair values, as discounting has no material effect taking into account the maturity of the receivables.
| 31.12.2009 | Level 1 | Level 2 | Level 3 | ||
|---|---|---|---|---|---|
| Assets measured at fair value | |||||
| Financial assets recognized at fair value | |||||
| through profi t or loss | |||||
| - Trading securities | 0.0 | 0.0 | 0.0 | 0.0 | |
| - Trading derivatives | |||||
| - Interest rate swaps | 0.0 | 0.0 | 0.0 | 0.0 | |
| - Foreign exchange derivatives | 0.1 | 0.1 | 0.0 | 0.0 | |
| - Commodity derivatives | 0.4 | 0.4 | 0.0 | 0.0 | |
| Available-for-sale fi nancial assets | |||||
| - Investments in shares | 0.0 | 0.0 | 0.0 | 0.0 | |
| Total | 0.5 | 0.5 | 0.0 | 0.0 | |
| Liabilities measured at fair value | |||||
| Financial liabilities recognized at fair value | |||||
| through profi t or loss | |||||
| - Trading derivatives | |||||
| - Interest rate swaps | -11.3 | 0.0 | -11.3 | 0.0 | |
| of which subject to cash fl ow hedging | -11.3 | 0.0 | -11.3 | 0.0 | |
| - Foreign exchange derivatives | -1.2 | -1.0 | -0.2 | 0.0 | |
| of which subject to net investment hedging | -0.2 | 0.0 | -0.2 | 0.0 | |
| - Commodity derivatives | -1.1 | -1.1 | 0.0 | 0.0 | |
| Total | -13.6 | -2.0 | -11.5 | 0.0 | |
The quoted prices of Level 1 foreign exchange and commodity derivatives are based on prices quoted on the market. The fair values of Level 2 instruments are to a signifi cant degree based on inputs other than the quoted prices included in Level 1 but nonetheless observable for the relevant asset or liability either directly or indirectly (derived from prices). In determining the fair value of these instruments, the Group uses generally accepted measurement models, the inputs of which are nonetheless to a considerable degree based on observable market information.
| 31.12.2009 | 31.12.2008 | |
|---|---|---|
| Debts secured by mortgages and shares | ||
| Loans from fi nancial institutions | 33.9 | 41.3 |
| Total | 33.9 | 41.3 |
| Real estate mortgages | 55.5 | 36.0 |
| Pledged securities | 30.4 | 15.4 |
| Floating charges | 20.7 | 19.7 |
| Total | 106.6 | 71.1 |
| Security for debts of participating interests | ||
| Guarantees | 5.0 | 5.5 |
| Total | 5.0 | 5.5 |
| Security for debts of others | ||
| Guarantees and pledges | 12.4 | 9.6 |
| Total | 12.4 | 9.6 |
| Other contingencies | ||
| Leasing commitments | ||
| Leasing commitments maturing in less than a year | 4.4 | 3.4 |
| Leasing commitments maturing in 1–5 years | 12.7 | 15.0 |
| Leasing commitments maturing in over 5 years | 1.9 | 4.6 |
| Other rent commitments | 40.6 | 42.4 |
| Other commitments | 5.8 | 4.7 |
| Total other contingencies | 65.4 | 70.1 |
| 2010 | 0.1 |
|---|---|
| 2011 | 0.1 |
| 2012 | 0.3 |
| 2013 | 0.7 |
| 2014 | 0.0 |
| >2015 | 16.3 |
| Total | 17.5 |
| 31.12.2009 | 31.12.2008 | ||
|---|---|---|---|
| Maturing in less than a year | 0.3 | 0.3 | |
| Maturing in 1–5 years | 0.1 | 0.2 | |
| Maturing in over 5 years | 0.0 | 0.0 | |
| Rent receivables, total | 0.4 | 0.5 | |
Parties are considered related parties if one of the parties is able to exercise control or a signifi cant infl uence over the other in decisions affecting its fi nances and business. The Group's related parties include the parent entity, subsidiaries, associates and joint ventures. Related parties also include the Supervisory Board and Board of Directors of the Group parent's parent entity (LSO Osuuskunta), the members of the Group's Board of Directors, the Group's CEO, vice presidents and their immediate family members. The Group strives to treat all parties equally in its business.
HKScan Corporation's principal owner, LSO Osuuskunta, is a cooperative comprising around 2 000 Finnish meat producers. The cooperative is tasked with fostering its members' meat production and marketing by exercising its power of ownership in HKScan. Today, LSO Osuuskunta has no actual business, but receives an income in the form of dividend paid by HKScan and to a lesser extent, income in the form of rent and other fi nancial assets. The HKScan Group applies pure market price principles to the acquisition of raw meat material. The sale of animals to the Group by persons on the Group's Board of Directors and on the Supervisory Board and Board of Directors of its parent entity LSO Osuuskunta totalled EUR 6.7 million in 2009 (EUR 6.9m in 2008). The said persons' purchase of animals from the Group came to EUR 2.2 million in 2009 (EUR 2.5m in 2008).
Related party individuals are not otherwise in a material business relationship with the company.
| Carrying amount | Ownership | |||
|---|---|---|---|---|
| Number of shares | (EUR 1 000) | (%) | ||
| Owned by the Group's parent company | ||||
| HK Ruokatalo Oy, Turku | 1 000 | 16 946 | 100.00 | |
| LSO Foods Oy, Turku | 3 000 | 946 | 100.00 | |
| Helanderin Teurastamo Oy, Loimaa | 1 000 | 3 179 | 100.00 | |
| Lihatukku Harri Tamminen Oy, Vantaa | 49 | 316 | 49.00 | |
| Kivikylän Kotipalvaamo Oy, Rauma | 49 | 6 019 | 49.00 | |
| Linocon Oy, Helsinki | 100 | 4 | 100.00 | |
| HK International AB, Sweden | 10 | 12 | 100.00 | |
| AS Rakvere Lihakombinaat, Estonia | 37 721 700 | 39 536 | 100.00 | |
| AS Tallegg, Estonia | 5 853 200 | 16 755 | 100.00 | |
| Scan AB, Sweden | 500 000 | 161 649 | 100.00 | |
| Total | 245 361 | |||
| Owned by LSO Foods Oy and HK Ruokatalo Oy | ||||
| Lounaisfarmi Oy, Turku | 20 000 | 1 043 | 100.00 | |
| Total | 1 043 | |||
| Owned by AS Rakvere Lihakombinaat *) | ||||
| AS Ekseko, Estonia | 6 984 | 272 | 100.00 | |
| AS Rigas Miesnieks, Latvia | 155 920 | 12 427 | 100.00 | |
| Klaipedos Maisto Mesos Produktai, Lithuania | 2 000 | 2 010 | 100.00 | |
| Total | 14 709 | |||
*) The carrying amounts are based on the carrying amounts in the companies' balance sheets and, in compliance with local accounting practice, include the movement in the subsidiary's equity, which has been taken into account using the equity convention.
| Carrying amount | Ownership | |||
|---|---|---|---|---|
| Number of shares | (EUR 1 000) | (%) | ||
| Owned by Scan AB | ||||
| Esca Food Fastighets AB, Linköping | 70 000 | 682 | 100.00 | |
| Esca Food Solutions KB, Linköping | 816 | 48.50 | ||
| Quality Genetics HB, Stockholm | 926 | 361 | 92.60 | |
| Scan Produktion AB, Stockholm | 1 000 | - | 100.00 | |
| SM Support Stenstorp AB, Stockholm | 10 200 | 1 115 | 100.00 | |
| Kreatina A/S, Denmark | 30 000 | 244 | 100.00 | |
| Kreatina Sp, Poland | 5 000 | - | 100.00 | |
| Swedish Meats Support AB, Stockholm | 80 000 | 4 389 | 100.00 | |
| Samfod S.A., Belgium | 24 999 | - | 100.00 | |
| Scan Foods UK Ltd., UK | 999 | 94 | 100.00 | |
| Swedish Meats RE AG, Switzerland | 1 997 | 1 229 | 99.90 | |
| Svenska Livdjur & Service AB, Stockholm | 200 | 98 | 100.00 | |
| Annerstedt Holding AB, Stockholm | 10 000 | 2 255 | 100.00 | |
| SLP Pärsöns AB, Helsingborg | 45 000 | 39 177 | 100.00 | |
| Skånekött AB, Skurup | 30 000 | 343 | 100.00 | |
| Slakteriprodukter i Helsingborg AB, Helsingborg | 6 000 | 1 964 | 100.00 | |
| Nyhléns & Hugosons Chark AB, Luleå | 9 800 | 1 532 | 49.00 | |
| Flodins Kött AB, Stockholm | 1 000 | 10 | 100.00 | |
| Annerstedt Flodins AB, Stockholm | 46 250 | 1 285 | 100.00 | |
| AB O. Annerstedt, Stockholm | 30 000 | 4 892 | 100.00 | |
| Total | 60 486 | |||
| Joint ventures | ||||
| Carrying amount | Ownership | |||
| Number of shares | (EUR 1 000) | (%) | ||
| Owned by the Group's parent company | ||||
| Saturn Nordic Holding AB, Sweden | 59 283 399 | 64 435 | 50.00 | |
Saturn Nordic Holding AB holds 100 percent of the Polish Sokolów S.A.
Assets, liabilities, income and expenses of Saturn Nordic Holding AB group included in the consolidated balance sheet and income statement (EUR million):
| 2009 | 2008 | ||
|---|---|---|---|
| Non-current assets | 81.3 | 80.4 | |
| Current assets | 47.4 | 46.7 | |
| Non-current liabilities | -5.8 | -8.5 | |
| Current liabilities | -46.3 | -49.0 | |
| Net sales and other operating income | 253.6 | 273.1 | |
| Operating expenses | -244.3 | -268.8 | |
Shares and holdings in associated undertakings
| Number | Carrying amount | Ownership | ||
|---|---|---|---|---|
| of shares | (EUR 1 000) | (%) | ||
| Owned by the Group's parent company | ||||
| Honkajoki Oy, Honkajoki | 690 | 708 | 38.33 | |
| Envor Biotech Oy, Forssa | 128 | 22 | 24.62 | |
| Pakastamo Oy, Helsinki | 660 | 564 | 50.00 | |
| Lihateollisuuden Tutkimuskeskus LTK osuuskunta, | ||||
| Hämeenlinna | 22 400 | 0 | 44.80 | |
| Best-In Oy, Kuopio | 500 | 50 | 50.00 | |
| Länsi-Kalkkuna Oy, Turku | 250 | 250 | 50.00 | |
| Total | 1 594 | |||
| Owned by LSO Foods Oy | ||||
| Finnpig Oy, Vaasa | 40 | 354 | 50.00 | |
| Owned by Scan AB | ||||
| Bondens Bästä i Svalöv AB, Kävlinge | 500 | 2 | 50.00 | |
| SDT Sveriges Djurproducenters Tillväxt AB, Stockholm | 135 500 | 2 799 | 50.00 | |
| Conagri AB, Malmö | 98 | 90 | 49.00 | |
| daka a.m.b.a, Denmark | 5 525 | 33.60 | ||
| Fastighets AB Tuben, Stockholm | 1 200 | 12 | 48.00 | |
| Höglandsprodukter AB, Halmstad | 1 500 | 734 | 30.00 | |
| Siljans Chark AB, Mora | 3 680 | 403 | 39.30 | |
| Svensk Köttinformation AB, Stockholm | 500 | 2 | 50.00 | |
| Svensk Köttrasprövning AB, Skara | 1 750 | 17 | 35.00 | |
| Svenskt Lantbrukstjänst AB, Lidköping | 650 | 0 | 26.00 | |
| Svenska Djurhälsövården AB, Stockholm | 4 400 | 612 | 50.00 | |
| Taurus Köttrådgivning AB, Stockholm | 118 | 12 | 39.33 | |
| M R L Transport AB, Simrishamn | 300 | - | 30.00 | |
| Skånska Andelsslakterier ek för, Malmö | 1 | - | 20.00 | |
| Industrislakt Syd AB, Hörby | 25 000 | 5 | 50.00 | |
| Bertil Eriksson Slakteri AB, Bäsinge | 1 050 | 537 | 35.00 | |
| Svenska Pig AB, Stockholm | 2 | 22.00 | ||
| Spjutstorp Smågris AB, Helsingborg | 4 900 | - | 49.00 | |
| Total | 10 752 |
The Group carries on business through associates by engaging in i.a. meatpacking and value added meat processing and the production and sale of pet food, by trading in spices and by using leasing, waste disposal and research and advisory services. All commercial contracts are negotiated on an arm's-length basis.
| 2009 | 2008 | ||
|---|---|---|---|
| Product sales | |||
| - Associates | 34.9 | 37.6 | |
| Sales of animals to related parties | 6.7 | 6.9 | |
| Product purchases | |||
| - Associates | 35.2 | 37.0 | |
| Purchases of animals | |||
| from related parties | 2.2 | 2.5 | |
| Severance pay to the CEO | 1.3 | 0.0 |
| Trade receivables | ||
|---|---|---|
| - Associates | 2.5 | 2.2 |
| Trade payables | ||
| - Associates | 8.5 | 9.0 |
| Salaries and fees | ||
|---|---|---|
| CEO and deputy CEO | 2.2 | 1.2 |
| Board members | ||
| and deputy board members | 0.2 | 0.2 |
The company transitioned to a holding company structure in its Finnish business at the beginning of 2010. The reorganization will streamline fi nancial reporting and internal auditing in the Group, as in future the business in each market area can be kept separate from the parent company. The reorganization was accomplished by transferring HKScan Corporation's production-related property, plant and equipment in Finland as well as its holdings in subsidiaries and associates to HKScan Finland Oy, a holding company wholly owned by HKScan Corporation. The transfer took place in the form of a business transfer on 1 January 2010. The Board of HKScan Corporation and CEO Matti Perkonoja have agreed that he will stay on as CEO for longer than initially announced. Mr Perkonoja has now agreed to serve as CEO until the end of February 2012, after which he will take retirement. He had earlier planned to retire after 2010.
| Note | 2009 | 2008 | ||
|---|---|---|---|---|
| Net sales | 1 | 30 774.3 | 31 678.5 | |
| Other operating income | 2 | 1 674.7 | 2 458.6 | |
| Materials and services | 0.0 | 0.4 | ||
| Staff costs | 3 | -4 092.2 | -2 788.6 | |
| Depreciation and impairment | 4 | -19 242.1 | -17 426.0 | |
| Other operating expenses | 5 | -4 986.1 | -4 087.9 | |
| EBIT | 4 128.7 | 9 835.1 | ||
| Financial income and expenses | 6 | -11 014.2 | -6 128.1 | |
| Profi t/loss before extraordinary items | -6 885.5 | 3 707.0 | ||
| Extraordinary items | 7 | 12 445.0 | 2 032.0 | |
| Profi t/loss after extraordinary items | 5 559.5 | 5 739.0 | ||
| Appropriations | 8 | 6 701.1 | 2 561.3 | |
| Income taxes | 9 | -1 401.8 | 1 057.4 | |
| Profi t/loss for the period | 10 858.8 | 9 357.7 | ||
| Note | 2009 | 2008 | ||
|---|---|---|---|---|
| ASSETS | ||||
| Non-current assets | 10 | |||
| Intangible assets | 2 209.5 | 2 452.3 | ||
| Tangible assets | 228 572.6 | 241 475.2 | ||
| Financial assets | 311 642.2 | 305 623.6 | ||
| Non-current assets, total | 542 424.2 | 549 551.2 | ||
| Current assets | ||||
| Non-current receivables | 11 | 149 292.1 | 156 470.0 | |
| Deferred tax asset | 11 | 872.1 | 1 674.2 | |
| Current receivables | 12 | 19 450.9 | 12 727.9 | |
| Cash and cash equivalents | 12 486.5 | 50 558.0 | ||
| Current assets, total | 182 101.5 | 221 430.1 | ||
| TOTAL ASSETS | 724 525.7 | 770 981.3 | ||
| EQUITY AND LIABILITIES | ||||
| Shareholders' equity | 13 | |||
| Share capital | 66 820.5 | 66 820.5 | ||
| Share premium reserve | 73 420.4 | 73 420.4 | ||
| Revaluation reserve | 3 363.8 | 3 363.8 | ||
| Treasury shares | -38.6 | -38.6 | ||
| Fair value reserve | 5 507.1 | 9 279.7 | ||
| RIUE | 143 075.8 | 66 742.0 | ||
| Other reserves | 4 523.7 | 4 484.4 | ||
| Retained earnings | 2 533.4 | 2 598.4 | ||
| Profi t/loss for the period | 10 858.8 | 9 357.7 | ||
| Total equity | 310 065.0 | 236 028.2 | ||
| Accumulated appropriations | 14 | 27 089.6 | 33 790.7 | |
| Provisions | 15 | 3 164.3 | 3 248.8 | |
| Liabilities | ||||
| Deferred tax liability | 16 | 1 984.3 | 3 260.4 | |
| Non-current interest-bearing liabilities | 16 | 305 442.2 | 433 549.6 | |
| Non-current non-interest bearing liabilities | 16 | 5 904.6 | 5 527.9 | |
| Current interest-bearing liabilities | 17 | 63 702.4 | 51 439.1 | |
| Current non-interest bearing liabilities | 17 | 7 173.4 | 4 136.5 | |
| Total liabilities | 384 206.9 | 497 913.6 | ||
| TOTAL EQUITY AND LIABILITIES | 724 525.7 | 770 981.3 | ||
| 2009 | 2008 | |
|---|---|---|
| Cash fl ow from operating activities | ||
| EBIT | 4 129 | 9 835 |
| Adjustments to EBIT | 2 018 | 842 |
| Depreciation and impairment | 19 242 | 17 426 |
| Change in provisions | -85 | 66 |
| Change in net working capital | 7 744 | -2 292 |
| Interest income and expenses | -16 568 | -16 650 |
| Dividends received | 5 554 | 10 522 |
| Taxes | -1 402 | 1 057 |
| Cash fl ow from operating activities | 20 632 | 20 807 |
| Cash fl ow from investing activities | ||
| Purchases of shares in subsidiary | -6 019 | 0 |
| Purchase of other fi xed assets | -6 461 | -24 031 |
| 289 | 1 530 | |
| Disposals of other fi xed assets | -3 900 | -5 449 |
| Loans granted | 18 808 | 46 803 |
| Repayments of loan receivables | 2 717 | 18 852 |
| Cash fl ow from investing activities | ||
| 23 349 | 39 659 | |
| Cash fl ow before fi nancing activities | ||
| Cash fl ow from fi nancing activities | ||
| Proceeds from share offering | 76 334 | 0 |
| Payments received on hybrid bond | 0 | 20 000 |
| Repayment of hybrid bond | -20 000 | 0 |
| Non-current borrowings raised | 73 975 | 15 009 |
| Non-current borrowings repaid | -153 840 | 0 |
| Current borrowings raised | 51 020 | 175 513 |
| Current borrowings repaid | -79 442 | -217 101 |
| Interest on hybrid bond | -2 077 | 0 |
| Dividends paid | -9 422 | -10 610 |
| Purchase of treasury shares | 0 | -129 |
| Group contributions received | 2 032 | 11 342 |
| Cash fl ow from fi nancing activities | -61 421 | -5 976 |
| Change in cash and cash equivalents | -38 072 | 33 682 |
| Cash and cash equivalents at 1.1. | 50 558 | 16 876 |
| 12 486 | 50 558 | |
| Cash and cash equivalents at 31.12. | ||
| Change in working capital: | 3 340 | 1 468 |
| Increase (-)/decrease (+) in current operating receivables | ||
| Increase (-)/decrease (+) in current non-interest bearing liabilities | 4 404 | -3 760 |
| 7 744 | -2 292 |
HKScan Corporation is a Finnish public limited company established under the law of Finland. The Company is domiciled in Turku.
Until 31 March 2005, HKScan Corporation engaged in production and sales activities. The business transfer from HKScan Corporation to HK Ruokatalo Oy took place on 1 April 2005, after which date HKScan Corporation has acted as the Group's parent company. HKScan Corporation comprises Group management and Group administration. HKScan Corporation transitioned to a holding company structure in its Finnish business at the beginning of 2010. The reorganization will streamline fi nancial reporting and internal auditing in the Group, as in future the business in each market area can be kept separate from the parent company. The reorganization was accomplished by transferring HKScan Corporation's production-related property, plant and equipment in Finland as well as its holdings in subsidiaries and associates to HKScan Finland Oy, a holding company wholly owned by HKScan Corporation. The transfer took place in the form of a business transfer on 1 January 2010.
HKScan Corporation's A Share has been quoted on the NASDAQ OMX Helsinki exchange since 1997.
HKScan Corporation is a subsidiary of LSO Osuuskunta and part of the LSO Osuuskunta Group. LSO Osuuskunta's registered offi ce is in Turku.
Copies of HKScan Corporation's fi nancial statements are available at the company's registered offi ce at Kaivokatu 18, 20520 Turku.
The parent company's fi nancial statements have been prepared in compliance with valid Finnish accounting legislation (FAS). The HKScan Group's consolidated fi nancial statements have been prepared in compliance with the IFRS (International Financial Reporting Standards) and the IAS and IFRS standards and SIC and IFRIC interpretations valid at 31 December 2009.
The parent company complies with the accounting policies of the Group whenever possible, except for the differences listed below. In other respects, the accounting policies are the same as those of the Group. Goodwill in the parent company's balance sheet is depreciated on a straight-line basis over a period of fi ve years.
The amounts in the parent company income statement, balance sheet and notes are in thousands of euro unless otherwise stated.
The fi nancial statements for 2009 are comparable with the fi gures for 2008.
Transactions in foreign currency are recognized at the exchange rate on the day the transaction takes place. Trade receivables, trade payables and loan receivables denoted in foreign currencies and foreign currency bank accounts have been translated into the functional currency at the average exchange rate quoted by the European Central Bank at the balance sheet date. Gains and losses arising from business transactions in foreign currencies and from the translation of monetary items have been recognized in fi nancial income and expenses in the income statement.
Outstanding derivatives in foreign currencies are measured at the forward exchange rate quoted at the balance sheet date. Changes in the value of currency futures are recognized in fi nancial income and expenses in the income statement. Gains or losses on interest rate swaps hedging variable-interest loans are presented under fi nancial expenses in the income statement.
HKScan Corporation employees' statutory pension provision has been organized through insurance in a pension insurance company. Statutory pension expenses have been charged in the year to which the contributions relate.
CEO Kai Seikku was to retire at the age of 60. His pension was fi xed at 60% of retirement salary, which is calculated as the average of the two highest annual salaries in the four years preceding the end of the employment. The pension arrangement of the CEO's deputy was in harmony with that of the CEO. Kai Seikku's employment was terminated on 5 January 2009, on which date the CEO's supplementary pension agreement was also terminated. The deputy's supplementary pension was paid up by 31 December 2008.
The CEO's period of notice was six months by either party. If his employment was terminated by the company, the CEO was entitled to severance pay equivalent to 18 months' salary excluding incentive bonuses.
In 2008, CEO Kai Seikku was paid a total salary of EUR 0.750 million, of which share bonuses tied to performance or other targets accounted for EUR 0.121 million. The CEO was granted 9 996 A Shares in the company on the basis of the actual results in the 2007 earning period of the share incentive scheme. Earnings in early 2009 will be eroded by the non-recurring expense of some EUR 1.3 million relating to the termination of the CEO's employment. The 27 000 A Shares assigned to the CEO based on the share incentive scheme reverted to the company in January 2009.
Matti Perkonoja, deputy to the former CEO, was appointed CEO effective 6 January 2009. His employment has been agreed for a fi xed term ending on 28 February 2012. CEO Matti Perkonoja was paid a total salary of EUR 0.6 million in 2009.
Consolidated accounting principles are applied to income taxes and deferred tax assets and liabilities when allowed under Finnish accounting principles. The deferred tax liability on depreciation difference is disclosed as a Note.
All leasing payments have been treated as rent. Leasing payments based on unpaid leasing agreements are shown in contingent liabilities in the fi nancial statements.
Extraordinary income and expenses consists of group contributions received, which are eliminated in the consolidated fi nancial statements.
Accumulated appropriations consist of change in depreciation difference. The difference in depreciation according to plan and accounting depreciation is shown as an appropriation in the income statement and the accumulated difference in depreciation according to plan and accounting depreciation is shown in the balance sheet as accumulated appropriations.
| 2009 | 2008 | |
|---|---|---|
| 1. Breakdown of net sales | ||
| Sales in Finland | 30 774 | 31 679 |
| 30 774 | 31 679 | |
| 2. Other operating income, total | ||
| Rental income | 589 | 596 |
| Other operating income | 1 046 | 1 605 |
| Gain on disposal of non-current assets | 40 | 258 |
| Other operating income, total | 1 675 | 2 459 |
| Employees, average | 9 | 13 |
| 3. Staff costs | ||
| Salaries and fees | -3 548 | -925 |
| Pension expenses | -439 | -1 688 |
| Other social security costs | -106 | -176 |
| Staff costs | -4 092 | -2 789 |
| Management salaries, fees and benefi ts | ||
| Managing directors and vice presidents | 2 154 | 1 194 |
| Board members | 226 | 230 |
| Total | 2 117 | 1 424 |
| 4. Depreciation and impairment | ||
| Depreciation according to plan | -19 242 | -18 217 |
| Depreciation according to plan on non-current assets and goodwill | -19 242 | -18 217 |
| Impairment charge reversals for non-current assets | - | 791 |
| Impairment charges for non-current assets | - | - |
| Exceptional impairment and | ||
| reversal of impairment on non-current assets | 0 | 791 |
| Total depreciation and impairment | -19 242 | -17 426 |
| 5. Other operating expenses | |||
|---|---|---|---|
| Rents/leases | -1 117 | -1 217 | |
| Losses on disposal of fi xed assets, tangible assets total | -114 | -147 | |
| Losses on disposal of non-current assets | -114 | -147 | |
| Audit fees, statutory audit | -117 | -97 | |
| Audit fees, other expert services | -78 | -62 | |
| Audit fees | -195 | -159 | |
| Non-statutory staff costs | -115 | -165 | |
| Energy | -68 | -187 | |
| Maintenance | -166 | -125 | |
| Advertising, marketing and entertainment costs | -145 | -84 | |
| Service, information management and offi ce costs | -2 037 | -1 049 | |
| Other costs | -1 028 | -955 | |
| Total other operating expenses | -4 986 | -4 088 | |
| 6. Financial income and expenses | ||
|---|---|---|
| Financial income | ||
| Dividends from Group companies | 5 024 | 7 294 |
| Dividends from participating interests | 523 | 3 216 |
| Dividends from others | 7 | 12 |
| Income from units | 5 554 | 10 522 |
| Interest income on non-current fi nancial assets | ||
| from participating interests | 32 | 42 |
| Interest income from other non-current fi nancial assets | 32 | 42 |
| Other interest and fi nancial income from Group companies | 11 038 | 18 578 |
| Other interest and fi nancial income from others | 6 382 | 22 845 |
| Other fi nancial income | 17 420 | 41 423 |
| Total fi nancial income | 23 006 | 51 987 |
| Financial expenses | |||
|---|---|---|---|
| Other interest and fi nancial expenses | |||
| payable to Group companies | -6 631 | -9 423 | |
| Other interest and fi nancial expenses | |||
| payable to participating interests | - | -2 | |
| Other interest payable and fi nancial expenses to others | -27 389 | -48 690 | |
| Total other interest and fi nancial expenses | -34 020 | -58 115 | |
| Total fi nancial expenses | -34 020 | -58 115 | |
| Financial income and expenses, total | -11 014 | -6 128 | |
| Foreign exchange gains | 5 461 | 22 311 | |
| Foreign exchange losses | -7 070 | -22 786 | |
| Total foreign exchange gains and losses | -1 609 | -475 | |
| 7. Extraordinary items | |||
| Extraordinary income, Group contributions | 12 445 | 2 032 | |
| Total extraordinary items | 12 445 | 2 032 | |
| 8. Appropriations | |||
| Increase (-) or decrease (+) in depreciation difference | 6 701 | 2 561 | |
| Total appropriations | 6 701 | 2 561 | |
| 9. Direct taxes | |||
| Income tax on ordinary operations | 2 672 | 528 | |
| Income tax on extraordinary items | -3 236 | -528 | |
| Tax for previous fi nancial years | 14 | 211 | |
| Change in deferred tax liabilities and assets | -851 | 846 | |
| Income tax on ordinary operations | -1 402 | 1 057 | |
| Other | |||||
|---|---|---|---|---|---|
| Intangible | long-term | ||||
| rights | Goodwill | expenditure | Total | ||
| Acquisition cost at 1.1. | 3 423 | 1 223 | 136 | 4 782 | |
| Increase | 50 | - | - | 50 | |
| Decrease | - | - | - | - | |
| Transfers between items | 105 | - | - | 105 | |
| Acquisition cost at 31.12. | 3 578 | 1 223 | 136 | 4 937 | |
| Accumulated depreciation at 1.1. | -1 313 | -988 | -29 | -2 330 | |
| Accumulated depreciation | |||||
| on disposals and reclassifi cations | -6 | - | 6 | - | |
| Depreciation for the fi nancial year | -242 | -122 | -34 | -397 | |
| Impairment | - | - | - | - | |
| Accumulated depreciation at 31.12. | -1 561 | -1 110 | -56 | -2 727 | |
| Carrying amount at 31.12. | 2 017 | 112 | 80 | 2 209 | |
| Land and | Machinery and | Other | Pre- | ||||
|---|---|---|---|---|---|---|---|
| water areas | Buildings | equipment | tangible | payments | Total | ||
| Acquisition cost at 1.1. | 3 147 | 214 593 | 180 773 | 3 264 | 7 428 | 409 204 | |
| Increase | - | 968 | 3 427 | 16 | 2 000 | 66 411 | |
| Decrease | - | -199 | -2 227 | - | - | -2 426 | |
| Transfers between items | - | 198 | 6 697 | - | -7 001 | -105 | |
| Acquisition cost at 31.12. | 3 147 | 215 560 | 188 670 | 3 280 | 2 427 | 413 084 | |
| Accumulated depreciation at 1.1. | - | -65 297 | -99 887 | -2 545 | - | -167 729 | |
| Accumulated depreciation | |||||||
| on disposals and reclassifi cations | - | 147 | 1 914 | - | - | 2 061 | |
| Depreciation for the fi nancial year | - | -6 264 | -12 465 | -114 | - | -18 844 | |
| Impairment | - | - | - | - | - | - | |
| Accumulated depreciation at 31.12. | - | -65 297 | -110 438 | -2 659 | - | -184 512 | |
| Carrying amount at 31.12. | 3 147 | 144 146 | 78 232 | 621 | 2 427 | 228 572 | |
| Land and | Machinery and | Other | Pre- | |||
|---|---|---|---|---|---|---|
| water areas | Buildings | equipment | tangible | payments | Total | |
| Revaluations at 1.1. | - | 3 364 | - | - | - | 3 364 |
| Increase | - | - | - | - | - | 0 |
| Decrease | - | - | - | - | - | 0 |
| Revaluations at 31.12. | 0 | 3 364 | 0 | 0 | 0 | 3 364 |
| Holdings | Holdings | Amounts | Other | ||
|---|---|---|---|---|---|
| in Group | in | owed by | shares and | ||
| companies | associates | associates | holdings | Total | |
| Acquisition cost at 1.1. | 303 778 | 1 594 | 47 | 204 | 305 623 |
| Increase | 6 019 | - | - | - | 6 019 |
| Decrease | - | - | - | - | 0 |
| Transfers between items | - | - | - | - | 0 |
| Acquisition cost at 31.12. | 309 797 | 1 594 | 47 | 204 | 311 642 |
| Carrying amount at 31.12. | 309 797 | 1 594 | 47 | 204 | 311 642 |
| 31.12.2009 | 31.12.2008 | ||
|---|---|---|---|
| Non-current assets | |||
| Intangible assets | |||
| Intangible rights | 2 017 | 2 111 | |
| Goodwill | 112 | 234 | |
| Other long-term expenditure | 80 | 107 | |
| Intangible assets | 2 209 | 2 452 | |
| Tangible assets | |||
| Land and water | 3 147 | 3 147 | |
| Buildings and structures | 144 146 | 149 296 | |
| Machinery and equipment | 78 232 | 80 886 | |
| Other tangible assets | 621 | 719 | |
| Payments on account and | |||
| tangible assets in the course of construction | 2 427 | 7 428 | |
| Tangible assets | 228 573 | 241 475 | |
| Financial assets | |||
| Holdings in Group companies | 309 797 | 303 778 | |
| Holdings in associates | 1 594 | 1 594 | |
| Amounts owed by participating interests | 47 | 47 | |
| Other shares and holdings | 204 | 204 | |
| Financial assets | 311 642 | 305 623 | |
| Non-current assets, total | 542 424 | 549 551 | |
| 11. Non-current receivables | |||
| Non-current loan receivables | 2 880 | 3 286 | |
| Deferred tax assets | 872 | 1 674 | |
| Other receivables | 905 | 1 170 | |
| Total | 4 657 | 6 130 | |
| Amounts owed by Group companies: | |||
| Non-current Group loan receivables | 145 309 | 151 816 | |
| Other | - | - | |
| Non-current receivables from Group companies | 145 309 | 151 816 | |
| Amounts owed by participating interests: | |||
| Non-current loan receivables from participating interests | 198 | 198 | |
| Non-current receivables from participating interests | 198 | 198 | |
| Total non-current receivables | 150 164 | 158 144 | |
| 12. Current receivables | |||
|---|---|---|---|
| Trade receivables | 1 | 1 | |
| Short-term prepayments and accrued income (from others) | 711 | 2 560 | |
| Total | 712 | 2 561 | |
| Amounts owed by Group companies: | |||
| Trade receivables | 45 | 43 | |
| Loan receivables | 570 | - | |
| Prepayments and accrued income (within Group) | 4 887 | 7 084 | |
| Other receivables | 12 671 | 2 392 | |
| Total | 18 173 | 9 519 | |
| Amounts owed by participating interests: | |||
| Trade receivables | - | 81 | |
| Loan receivables | 559 | 559 | |
| Other receivables | 7 | 8 | |
| Current receivables from participating interests | 566 | 648 | |
| Total current receivables | 19 451 | 12 728 | |
| Main items included in prepayments and accrued income | |||
| Matched fi nancial items | 313 | 430 | |
| Matched staff costs | 53 | 157 | |
| Matched taxes | - | 933 | |
| VAT receivable | - | 2 | |
| Other prepayments and accrued income | 345 | 1 039 | |
| Total | 711 | 2 561 | |
| Share Share premium | Revaluation | Treasury | RIUE | Other | Retained | Total | ||
|---|---|---|---|---|---|---|---|---|
| capital | reserve | reserve | shares | reserves | earnings | |||
| Shareholders' equity at 1.1.2009 | 66 820 | 73 420 | 3 364 | -38 | 66 742 | 13 764 | 11 956 | 236 028 |
| Increase | - | - | - | - | - | 39 | - | 39 |
| Decrease | - | - | - | - | - | -3 773 | - | -3 773 |
| Dividend distribution | - | - | - | - | - | - | -9 423 | -9 423 |
| Share offering | - | - | - | - | 76 334 | - | - | 76 334 |
| Direct recognition in retained earnings | - | - | - | - | - | - | - | - |
| Purchase of own shares | - | - | - | - | - | - | - | - |
| Payments made in treasury shares | - | - | - | - | - | - | - | - |
| Profi t for the period | - | - | - | - | - | - | 10 859 | 10 859 |
| Shareholders' equity at 31.12.2009 | 66 820 | 73 420 | 3 364 | -38 | 143 076 | 10 030 | 13 392 | 310 064 |
| Share Share premium | Revaluation | Treasury | RIUE | Other | Retained | Total | ||
|---|---|---|---|---|---|---|---|---|
| capital | reserve | reserve | shares | reserves | earnings | |||
| Shareholders' equity at 1.1.2008 | 66 820 | 73 420 | 3 364 | -730 | 66 742 | 6 651 | 13 593 | 229 860 |
| Increase | - | - | - | - | - | 7 113 | - | 7 113 |
| Dividend distribution | - | - | - | - | - | - | -10 610 | -10 610 |
| Share offering | - | - | - | - | - | - | - | - |
| Direct recognition in retained earnings | - | - | - | - | - | - | -385 | -385 |
| Purchase of own shares | - | - | - | -129 | - | - | - | -129 |
| Payments made in treasury shares | - | - | - | 821 | - | - | - | 821 |
| Profi t for the period | - | - | - | - | - | - | 9 358 | 9 358 |
| Shareholders' equity at 31.12.2008 | 66 820 | 73 420 | 3 364 | -38 | 66 742 | 13 764 | 11 956 | 236 028 |
| Distributable assets | 31.12.2009 | 31.12.2008 | |
|---|---|---|---|
| Contingency fund | 245 | 206 | |
| Treasury shares | -38 | -38 | |
| Reserve for invested unrestricted equity | 143 076 | 66 742 | |
| Retained earnings | 2 533 | 2 598 | |
| Profi t/loss for the period | 10 859 | 9 358 | |
| Distributable assets | 156 675 | 78 866 | |
| 14. Accumulated appropriations | |||
| Depreciation difference | 27 090 | 33 791 | |
| Total appropriations | 27 090 | 33 791 | |
| The unrecognized deferred tax liability on depreciation difference is EUR 7 043K. | |||
| 15. Statutory provisions | |||
| Provisions for pensions | 3 164 | 3 249 | |
| Statutory provisions, total | 3 164 | 3 249 | |
| 16. Non-current liabilities | |||
| Bonds | - | 5 000 | |
| Deferred tax liability | 1 984 | 3 260 | |
| Loans from fi nancial institutions | 305 442 | 413 550 | |
| Other liabilities | 5 905 | 5 528 | |
| Total | 313 331 | 427 338 | |
| Amounts owed to Group companies: | |||
| Bonds | - | 15 000 | |
| Total | - | 15 000 | |
| Total non-current liabilities | 313 331 | 442 338 | |
| Non-current liabilities | |||
| Interest-bearing: | |||
| Non-current amounts owed to Group companies | - | 15 000 | |
| Amounts owed to others | 305 442 | 418 550 | |
| Non-current interest-bearing liabilities | 305 442 | 433 550 | |
| Non-interest bearing: | |||
| Amounts owed to others | 7 889 | 8 788 | |
| Non-current non-interest bearing liabilities | 7 889 | 8 788 | |
| Total non-current liabilities | 313 331 | 442 338 | |
| 17. Current liabilities | |||
|---|---|---|---|
| Loans from fi nancial institutions | 48 369 | 37 368 | |
| Trade payables | 307 | 148 | |
| Accruals and deferred income | 5 612 | 2 500 | |
| Other liabilities | 1 177 | 1 076 | |
| Total | 55 464 | 41 092 | |
| Amounts owed to Group companies: | |||
| Trade payables | 70 | 67 | |
| Accruals and deferred income | 8 | - | |
| Other liabilities | 15 333 | 14 417 | |
| Total | 15 411 | 14 484 | |
| Total current liabilities | 70 876 | 55 576 | |
| Current liabilities | |||
| Interest-bearing: | |||
| Current amounts owed to Group companies | 15 333 | 14 071 | |
| Current amounts owed to participating interests | - | - | |
| Amounts owed to others | 48 369 | 37 368 | |
| Current interest-bearing liabilities | 63 702 | 51 439 | |
| Non-interest bearing: | |||
| Current amounts owed to Group companies | 78 | 413 | |
| Current amounts owed to participating interests | - | - | |
| Amounts owed to others | 7 095 | 3 724 | |
| Current non-interest bearing liabilities | 7 173 | 4 137 | |
| Total current liabilities | 70 876 | 55 576 | |
| Main items (non-current and current) included in accruals and deferred income | |||
| Matched staff costs | 638 | 383 | |
| Matched interest expenses | 994 | 1 910 | |
| Matched taxes | 325 | - | |
| Other accruals and deferred income | 3 663 | 207 | |
| Total | 5 620 | 2 500 | |
| Liabilities due in fi ve years or more | |||
| Loans from fi nancial institutions | 300 207 | ||
| Other long-term liabilities | - | ||
| Liabilities due in fi ve years or more | 300 207 | ||
| Commitments and contingent liabilities | |||
|---|---|---|---|
| 2009 | 2008 | ||
| Debts secured by mortgages and shares | |||
| Loans from fi nancial institutions | - | 814 | |
| Total | - | 814 | |
| Real estate mortgages | 2 856 | 2 856 | |
| Floating charges | 5 046 | 5 046 | |
| Securities pledged | - | - | |
| Total | 7 902 | 7 902 | |
| Security for debts of subsidiaries and other Group companies | |||
| Guarantees | 68 479 | 66 931 | |
| Total | 68 479 | 66 931 | |
| Security for debts of participating interests | |||
| Guarantees | 5 027 | 5 495 | |
| Total | 5 027 | 5 495 | |
| Security for debts of others | |||
| Guarantees | 5 088 | 5 339 | |
| Total | 5 088 | 5 339 | |
| Other contingencies | |||
| Leasing commitments | |||
| Leasing commitments maturing in less than a year | 0 | 0 | |
| Leasing commitments maturing in 1–5 years | 1 | 0 | |
| Rent liabilities | 988 | 1 481 | |
| Other commitments | 15 | 15 | |
| Total other contingencies | 1 004 | 1 496 | |
| Nominal values of derivative instruments | ||
|---|---|---|
| 2009 | 2008 | |
| Foreign exchange derivatives | ||
| - Currency futures | 86.0 | 68.8 |
| - Currency options | 15.3 | 0.6 |
| Interest-rate derivatives | ||
| - Interest rate swaps | 203.5 | 276.8 |
| Commodity derivatives | ||
| - Electricity futures | 10.8 | 8.6 |
| 315.6 | 354.8 |
| 2009 | 2009 | 2009 | 2008 | ||
|---|---|---|---|---|---|
| Fair value | Fair value | Fair value | Fair value | ||
| positive | negative | net | net | ||
| Foreign exchange derivatives | |||||
| - Currency futures | 0.0 | -1.0 | -1.0 | -1.0 | |
| - Currency options | 0.0 | 0.0 | 0.0 | 0.0 | |
| Interest-rate derivatives | |||||
| - Interest rate swaps | 0.0 | -11.3 | -11.3 | -11.5 | |
| Commodity derivatives | |||||
| - Electricity futures | 0.4 | -1.0 | -0.6 | -1.9 | |
| 0.4 | -13.3 | -12.9 | -14.4 | ||
| 2009 | 2009 | 2008 | 2008 | ||
|---|---|---|---|---|---|
| Nominal value | Fair value Nominal value | Fair value | |||
| effective portion | effective portion | ||||
| Foreign exchange derivatives | |||||
| - Currency futures | 21.6 | -0.2 | 0.0 | 0.0 | |
| Commodity derivatives | |||||
| - Electricity futures | 10.8 | -0.6 | 8.6 | -1.6 | |
| Interest-rate derivatives | |||||
| - Interest rate swaps | 203.5 | -11.3 | 276.8 | -11.5 | |
| 235.9 | -12.1 | 285.4 | -13.1 | ||
Vantaa, 18 February 2010
Chairman of the Board Deputy chairman of the Board Member of the Board
Markku Aalto Tiina Varho-Lankinen Matti Murto
Matti Karppinen Matti Perkonoja Member of the Board CEO
We have audited the accounting records, fi nancial statements, report of the Board of Directors and administration of HKScan Corporation for the period 1 January – 31 December 2009. The fi nancial statements comprise the consolidated balance sheet, income statement, statement of comprehensive income, statement of changes in shareholders' equity, cash fl ow statement, and notes to the consolidated fi nancial statements as well as the parent company's balance sheet, income statement, cash fl ow statement and notes to the fi nancial statements.
The Board of Directors and the CEO are responsible for the preparation of the fi nancial statements and the report of the Board of Directors and for the fair presentation of the consolidated fi nancial statements in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU, as well as for the fair presentation of the fi nancial statements and the report of the Board of Directors in accordance with laws and regulations governing the preparation of the fi nancial statements and the report of the Board of Directors in Finland. The Board of Directors is responsible for the appropriate arrangement of the control of the accounts and fi nances of the company. The CEO is responsible for ensuring that the accounts of the company are in compliance with law and that the company's fi nancial affairs have been arranged in a reliable manner.
The auditor shall conduct the audit in accordance with good auditing practice in Finland and, based on the audit, express an opinion on the fi nancial statements, consolidated fi nancial statements and report of the Board of Directors. Good auditing practice requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance that the fi nancial statements and report of the Board of Directors are free from material misstatement and that the members of the Board of Directors of the parent company and the CEO have complied with the Limited Liability Companies Act.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements and report of the Board of Directors. The procedures selected depend on the auditor's judgment and assessment of the risks of material misstatement of the fi nancial statements or the report of the Board of Directors, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the fi nancial statements and report of the Board of Directors in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the fi nancial statements and report of the Board of Directors.
We have conducted the audit in accordance with good auditing practice in Finland. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
In our opinion, the consolidated fi nancial statements give a true and fair view of the fi nancial position, the result of operations and the cash fl ows of the Group in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU.
In our opinion, the fi nancial statements and report of the Board of Directors give a true and fair view of the fi nancial performance and fi nancial standing of the Group and the parent company in accordance with the laws and regulations governing the preparation of fi nancial statements and the report of the Board of Directors in Finland. The information in the report of the Board of Directors is consistent with the information in the fi nancial statements.
PricewaterhouseCoopers Oy Authorized Public Accountants
Johan Kronberg Petri Palmroth APA APA
HKScan has adopted dividend distribution of at least 30 percent of the year's net profi t as one of its key fi nancial targets. The pershare dividend of EUR 0.22 for 2009 proposed by the Board is equivalent to 34.5 percent of the undiluted result. The corresponding fi gure in the previous year was 199.3 percent.
The Annual General Meeting was held at Finlandia Hall in Helsinki on 23 April 2009. The Annual General Meeting adopted the parent company's and consolidated fi nancial statements and discharged the members of the Board of Directors and the CEO from liability for 2008. Dividend for 2008 was fi xed at EUR 0.24 per share, coming to a total of EUR 9.4 million. The dividend was paid to shareholders on 6 May 2009.
The Annual General Meeting confi rmed the number of members on the Board of Directors as fi ve. Board members Markku Aalto, Tiina Varho-Lankinen, Matti Murto and Matti Karppinen were re-elected and Lars Hultström elected to the Board as a new member. At the organization meeting held immediately following the AGM, the Board re-elected Markku Aalto as chairman and Tiina Varho-Lankinen as deputy chairman.
Board remuneration remained unchanged: members are paid EUR 20 000, the deputy chairman EUR 25 000 and the chairman EUR 40 000 per year. In addition, it was decided that an attendance fee of EUR 500 per meeting would be paid and that travel expenses would be reimbursed in accordance with the company's travel policy.
Authorized public accountants PricewaterhouseCoopers Oy, with APA Johan Kronberg as principal auditor, and Petri Palmroth APA were appointed as HKScan's auditors for the 2009 fi nancial year. Pasi Pietarinen APA and Mika Kaarisalo APA were appointed as the company's deputy auditors. The AGM also approved the authorizations proposed for the Board to acquire the company's own shares and to resolve on a share issue. These authorizations are explained in greater detail in the Report of the Board of Directors under the heading "Board of Directors' existing authorizations".
HKScan Corporation Board member Lars Hultström announced his resignation from the Board on 1 December 2009, effective immediately.
The Extraordinary General Meeting of Shareholders held on 24 November 2009 at Rantasipi Airport Congress Center auditorium in Vantaa resolved to grant the company's Board of Directors authorization to resolve on a directed share offering of approximately EUR 75–78 million and its terms.
At the end of the fi nancial year, a total of 11 387 shareholders were entered in the register of shareholders, compared to 8 356 the year before. At the end of 2009, 25.1 percent (29.6%) of the company's shares were nominee registered or held by non-domestic shareholders.
The company is not aware of any shareholder agreements or other commitments agreed on share ownership or the exercise of votes in the company.
The Company's registered and fully paid-up share capital at the beginning of the fi nancial year and at the balance sheet date was EUR 66 820 528.10. The share capital breaks down as follows:
| A Shares | 48 626 522 | 90.00% |
|---|---|---|
| K Shares | 5 400 000 | 10.00% |
| Total | 54 026 522 | 100.00% |
According to the Articles of Association, each A Share conveys one vote and each K Share 20 votes. The K Shares are held by LSO Osuuskunta (4 375 000 shares) and Swedish Meats ek.för. (665 000 shares). Each share gives equal entitlement to a dividend. The shares have no nominal value.
The company's shares joined the book-entry securities system on 31 October 1997.
The company's share capital reported to the Trade Register was not increased during the fi nancial year 2009. The proceeds of
roughly EUR 78 million from the share offering executed in November–December 2009 were recognized in full in the reserve for invested unrestricted equity (RIUE).
No share capital increases or share offerings took place in the 2008 fi nancial year.
The most recent share capital increase took place in January 2007 with the directed issue of 4 843 000 A Shares to Swedish Meats. The issue was part of the acquisition of the business of Swedish Meats (Scan AB). The subscription period was 29 January 2007 and the issue price was EUR 15.55 per share. The company's share capital was increased by EUR 8 233 100.00 to the current EUR 66 820 528.10. The increase was entered in the Trade Register on 5 February 2007. The new shares fi rst entitled to dividend for the 2007 fi nancial year.
HKScan's A Share has been quoted on NASDAQ OMX since 6 February 1997 in the sector of Consumer Staples. During the year under review, 22 285 126 of the company's shares were traded for a total of EUR 149 498 534.
The highest price quoted was EUR 10.38 and the lowest EUR 3.70. The middle price was EUR 7.18 and the year-end closing price was EUR 7.85. The share price rose by 77.6 percent on the year while the index for the Food Products sector (HX302020) rose by 47.8 percent or 47.4 points on the year.
The company's market capitalization (A and K Shares) at yearend was EUR 423.7 million, having stood at EUR 173.7 million a year earlier. The fi gure breaks down into A Shares valued at EUR 381.3 million and unlisted K shares having an imputed market value of EUR 42.4 million.
HKScan has in place a market making agreement with FIM Pankkiiriliike Oy which meets the requirements of NASDAQ OMX's Liquidity Providing (LP) operation.
At year-end 2009, members of the Board of Directors and the company's CEO and his deputies as well as their related parties owned a total of 76 078 A Shares, which corresponded to 0.14 percent of the total number of shares and 0.05 percent of the votes.
During 2009, the company received three notices regarding changes in holdings pursuant to Chapter 2:9 of the Securities Markets Act.
(1) Artio Global Management LLC announced that as a result of a share transaction executed on 20 April 2009, its shareholding in HKScan Corporation had fallen to zero.
(2) HKScan Corporation and Danske Bank A/S signed on 24 November 2009 an underwriting agreement relating to HKScan's upcoming share offering. In consequence of the agreement, Danske Bank A/S Helsinki Branch announced that its holding in HK-Scan would rise to 14.2 percent of the shares and 4.9 percent of the votes in the company if its underwriting commitment was realized in full.
Under the agreement, Danske Bank A/S Helsinki Branch committed, subject to certain conditions, to subscribe for offered shares that remain unsubscribed for in HKScan's rights offering.
(3) HKScan Corporation announced the fi nal result of the share offering on 23 December 2009. The underwriting commitment announced by Danske Bank A/S in the notifi cation released on 24 November 2009 did not materialize and neither was the potential shareholding announced in the said notifi cation realized. Danske Bank gave the company notifi cation to this effect on 23 December 2009.
NASDAQ OMX, Helsinki: HKSAV Reuters: HKSAV.HE Bloomberg: HKSAV:FH ISIN code: FI0009006308 Orderbook ID: 24273 (CCP, Central Counterparty clearing)
Share performance 2005–2009 (middle price in euros each month)
Shares traded 2005–2009 (number of shares traded per month)
| Number of | Shareholders | % | Shares | % | Votes | % |
|---|---|---|---|---|---|---|
| shares held | held | held | ||||
| 1–100 | 2 542 | 22.324 | 122 821 | 0.227 | 122 821 | 0.078 |
| 101–500 | 4 246 | 37.288 | 1 176 606 | 2.178 | 1 176 606 | 0.751 |
| 501–1 000 | 2 015 | 17.696 | 1 461 494 | 2.705 | 1 461 494 | 0.933 |
| 1 001–5 000 | 2 178 | 19.127 | 4 538 394 | 8.400 | 4 538 394 | 2.898 |
| 5 001–10 000 | 212 | 1.862 | 1 452 618 | 2.689 | 1 452 618 | 0.927 |
| 10 001–50 000 | 141 | 1.238 | 2 724 611 | 5.043 | 2 724 611 | 1.740 |
| 50 001–100 000 | 25 | 0.22 | 1 666 873 | 3.085 | 1 666 873 | 1.064 |
| 100 001–500 000 | 16 | 0.141 | 4 232 647 | 7.834 | 4 232 647 | 2.702 |
| 500 001– | 12 | 0.105 | 36 510 120 | 67.578 | 139 110 120 | 88.816 |
| Total | 11 387 | 100.000 | 53 886 184 | 99.740 | 156 486 184 | 99.910 |
| of which nominee registered | 10 | 5 441 793 | 10.072 | 5 441 793 | 3.474 | |
| General account | 139 780 | 0.259 | 139 780 | 0.089 | ||
| Special accounts, total | 558 | 0.001 | 558 | 0.000 | ||
| Number of shares issued | 54 026 522 | 100.000 | 156 626 522 | 100.000 | ||
| % | % | |
|---|---|---|
| Shareholder type | of shareholders | of shares |
| Corporates | 5.48 | 39.09 |
| Finance and insurance companies | 0.40 | 9.21 |
| Public sector entities | 0.13 | 4.44 |
| Households | 92.68 | 17.68 |
| Non-profi t organizations | 0.98 | 4.23 |
| Domestic holders, tot. | 99.68 | 74.65 |
| Abroad | 0.33 | 15.02 |
| Waiting list | - | 0.00 |
| General account | - | 0.26 |
| Nominee registered shares included, foreigners held 25.09% of the total number |
of shares. The corresponding fi gure a year earlier was 29.56%.
| A | K | % | % | |||
|---|---|---|---|---|---|---|
| Shares | Shares | of shares | of votes | |||
| 1 | LSO Osuuskunta | 14 458 884 | 4 735 000 | 35.53 | 69.69 | |
| 2 | Swedish Meats ek.för. | 6 234 750 | 665 000 | 12.77 | 12.47 | |
| 3 | OP Sijoitusrahastot mutual funds, total | 1 117 424 | - | 2.07 | 0.71 | |
| - OP-Suomi Arvo | 544 375 | |||||
| - OP-Suomi Pienyhtiöt | 453 424 | |||||
| - OP-Pohjola Pienyhtiöt | 119 625 | |||||
| 4 | Tapiola Mutual Pension Insurance Company | 1 029 640 | - | 1.91 | 0.66 | |
| 5 | Central Union of Agricultural Producers and Forest Owners MTK | 836 414 | - | 1.55 | 0.53 | |
| 6 | Nordea Sijoitusrahastot mutual funds, total | 797 911 | - | 1.48 | 0.51 | |
| 7 | Alfred Berg Finland mutual fund | 751 843 | - | 1.39 | 0.48 | |
| 8 | FIM Fenno mutual fund | 571 172 | - | 1.06 | 0.36 | |
| 9 | Danish Crown a.m.b.a. | 540 458 | - | 1.00 | 0.35 | |
| 10 Fim Forte mutual fund | 467 500 | - | 0.87 | 0.30 | ||
| 11 Varma Mutual Pension Insurance Company | 464 989 | - | 0.86 | 0.30 | ||
| 12 Ilmarinen Mutual Pension Insurance Company | 400 798 | - | 0.74 | 0.26 | ||
| 13 Evli mutual funds, total | 375 006 | - | 0.69 | 0.24 | ||
| - Evli Select | 333 986 | |||||
| - Evli Finland Mix | 41 020 | |||||
| 14 ABN AMRO Small Cap Finland mutual fund | 333 642 | - | 0.62 | 0.21 | ||
| 15 Omaisuudenhoito Arvo Finland Value mutual fund | 282 500 | - | 0.52 | 0.18 | ||
| Nominee registered shareholders | 5 441 793 | - | 10.07 | 3.47 | ||
| Other shareholders, total | 14 521 798 | - | 26.88 | 9.27 | ||
| Total | 48 626 522 | 5 400 000 | 100.00 | 100.00 |
| Share series | Shares, | % | % |
|---|---|---|---|
| no. | of equity | of votes | |
| A Shares | 48 626 522 | 90.00 % | 31.05 % |
| K Shares | 5 400 000 | 10.00 % | 68.95 % |
| Total | 54 026 522 | 100.00 % | 100.00 % |
Each A Share conveys one (1) vote, each K Share conveys 20 votes.
HKScan Corporation's Annual General Meeting will be held at 11:00 on Tuesday, 23 April 2010 in Helsinki in Congress Hall A of Finlandia Hall, address Mannerheimintie 13 e, 00100 Helsinki, Finland. Registration of the shareholders who have notifi ed the company of their intention of attending the meeting will commence at 10:00.
Shareholders wishing to attend the Annual General Meeting should notify the company of their intention to do so by 16:00 Finnish time on 20 April 2010 either through the Company's website www.hkscan.com, by telephoning +358 (0)10 570 6218 (weekdays 9:00–16:00), by fax to +358 (0)2 250 1667 or in writing to HKScan Corporation, Annual General Meeting, PO Box 50, FI-20521 Turku, Finland.
To be eligible to attend the Annual General Meeting, shareholders should be registered by 13 April 2010 in HKScan Corporation's shareholder register maintained by Euroclear Finland Ltd (Finnish Central Securities Depository APK).
The Board of Directors recommends to the Annual General Meeting that a dividend of EUR 0.22 per share be declared for 2009. The dividend decided by the Annual General Meeting will be paid to those shareholders entitled to such dividend who are registered in the share register at 28 April 2010. The proposed payment date for the dividend is 5 May 2010. Shareholders whose shares are not registered in the book-entry securities system at the record date, 28 April 2010, will duly receive their dividend once they have transferred their shares to the book-entry securities system.
The share register of HKScan Corporation is maintained by the Euroclear Finland Ltd (Finnish Central Securities Depository), PO Box 1110, FI-00101 Helsinki, Finland. Its street address is Urho Kekkosen katu 5 C, 00100 Helsinki, telephone +358 (0)20 770 6000 and email info.fi [email protected].
Shareholders should notify any changes of name and address to the book-entry securities register where their book-entry account is registered.
HKScan publishes English and Swedish translations of the original Finnish annual report in April each year as well as three interim reports.
The annual report and interim reports are published in Finnish, English and Swedish. The publications are available for review on the company's website www.hkscan.com where the company also posts its stock exchange releases.
Printed versions of the annual report will be posted automatically to all shareholders with at least 750 HKScan shares and registered in the company's share register kept by Euroclear Finland Ltd. The interim reports are published in the form of stock exchange release and are also available for review on the website. Copies of interim reports will be sent on request by post or as an email attachment.
Annual reports and interim reports may be ordered via HKScan's website under HKScan > Feedback or by letter to HKScan Corporation, Corporate Communications, PO Box 50, FI-20521 Turku, Finland, by telephone +358 (0)10 570 100 / Corporate Communications, by fax to +358 (0)10 570 6102 or by email to [email protected]
HKScan observes a 'silent period' prior to the release of its interim reports and fi nancial statements bulletin. The silent period begins three weeks before the release date. During this time, the company will not comment on matters pertaining to its fi nancial standing.
HKScan published a total of 35 company releases in English via NASDAQ OMX in 2009. These are available for review in full on the company's website www.hkscan.com under HKScan -> Stock Exchange Releases and also on the website of the Central Storage Facility at www.oam.fi
| 5 Jan 2009 | HKScan CEO Kai Seikku steps down |
|---|---|
| 12 Jan 2009 | Matti Perkonoja appointed HKScan CEO |
| 14 Jan 2009 | Changes at HKScan Management Team |
| 22 Jan 2009 | Change to publication date of fi nancial statement bulletin |
| 27 Feb 2009 | HKScan Group's fi nancial statement bulletin for 2008 |
| 4 Mar 2009 | HKScan shifts emphasis in development to Sweden |
| 17 Mar 2009 | Proposals of the Board of Directors of HKScan Corporation to the Annual General Meeting |
| 17 Mar 2009 | Persons who have acted on behalf of LSO Osuuskunta and belong to the management of HKScan Corporation |
| have been heard in an insider case regarding share purchases by LSO Osuuskunta | |
| 20 Mar 2009 | Change in proposals of the Board of Directors of HKScan to the Annual General Meeting |
| 7 Apr 2009 | Insider investigation relating to share purchases by LSO Osuuskunta |
| 8 Apr 2009 | Annual report 2008 published |
| 21 Apr 2009 | Notifi cation on change in ownership (Artio Global Management) |
| 23 Apr 2009 | Resolutions passed by the Annual General Meeting of HKScan |
| 5 May 2009 | HKScan Group's interim report 1 January - 31 March 2009 |
| 6 May 2009 | HKScan to reform its operating model and organisation in Sweden |
| 23 Jun 2009 | Change in Scan's management |
| 26 Jun 2009 | Change in holding of own shares |
| 6 Aug 2009 | HKScan Group interim report 1 January - 30 June 2009 |
| 4 Sep 2009 | Scan AB's streamlining programme proceeds in Sweden |
| 15 Sep 2009 | HKScan announces road map seeking development benefi ts of EUR 30 million in Sweden |
| 16 Oct 2009 | Notice to Extraordinary General Meeting of Shareholders of HKScan Corporation |
| 2 Nov 2009 | Cancellation of extraordinary general meeting of shareholders planned to be held on 9 November 2009 |
| and notice to a new extraordinary general meeting of shareholders of HKScan Corporation | |
| 3 Nov 2009 | Interim report of the HKScan Group 1 January – 30 September 2009 |
| 24 Nov 2009 | Decisions by HKScan Corporation's extraordinary general meeting |
| 24 Nov 2009 | Board Of Directors of HKScan Corporation has decided on a Share Offering |
| 24 Nov 2009 | Notifi cation of a change of ownership interest under chapter 2, section 10 of the Finnish securities markets act (Danske Bank) |
| 24 Nov 2009 | Publishing of the offering circular related to HKScan Corporation share offering |
| 1 Dec 2009 | Lars Hultström to resign from HKScan's Board of Directors |
| 1 Dec 2009 | HKScan Corporation supplements the offering circular relating to its share offering |
| 11 Dec 2009 | Effects of the bank strike on HKScan's share offering |
| 18 Dec 2009 | HKScan Corporation's share offering oversubscribed |
| 23 Dec 2009 | Final result of HKScan Corporation's share offering |
| 23 Dec 2009 | Notifi cation under chapter 2, section 10 of the Finnish securities market act (Danske Bank) |
| 29 Dec 2009 | HKScan's fi nancial calendar year 2010 |
| 30 Dec 2009 | HKScan to reorganize legal structure of Finnish business at start of 2010 |
Corporate governance in HKScan Corporation is based on Finnish legislation, HKScan's Articles of Association and the Finnish Corporate Governance Code as well as the charter and rules of procedure adopted by the company's Board of Directors. HKScan furthermore complies with the rules and regulations of the Stock Exchange and the Financial Supervisory Authority.
This corporate governance statement has been drafted in accordance with recommendation 51 of the Code that entered into force on 1 January 2009 and with Chapter 2:6 of the Securities Markets Act. The corporate governance statement is issued separate of the Company's annual report.
HKScan Corporation observes the Finnish Corporate Governance Code drafted by the Securities Market Association with the exception that members to the Nomination Committee may be appointed also from outside the Board in order to bring additional knowledge and expertise to bear on key appointments within the Company.
HKScan's corporate governance statement may be viewed on the Company's website www.hkscan.com under "Investor information". The website also gives access to the register of the company's public insiders, a list of the Company's largest shareholders, the notifi cations of changes in holdings submitted to the Company and the Company's Articles of Association.
The Finnish Corporate Governance Code is available for review on the Securities Market Association website at www.cgfi nland.fi .
The management and operations of the HKScan Group are the responsibility of the General Meeting of Shareholders, the Board of Directors and its four Committees, and the CEO. Their duties are determined in accordance with the Finnish Limited Liability Companies Act. The Group's operational activities are the responsibility of the Group's CEO assisted by the Group Management Team.
Ultimate decision-making power in HKScan Corporation is vested in shareholders in General Meetings of Shareholders, which are convened at least once annually. The Annual General Meeting of Shareholders (AGM) is held by the end of June each year. The Board of Directors sends a notice to shareholders and draws up the agenda.
Notice of general meetings of shareholders shall be given by announcement published in at least two (2) newspapers designated by the Board of Directors no earlier than three months and no later than three weeks prior to the meeting. The notice is also given in the form of a stock exchange release and published on the Company's website.
The following matters, among others, are considered by the Annual General Meeting:
Likewise changes in the share capital and Articles of Association are also items of business to be considered by the Annual General Meeting or, if necessary, by an Extraordinary General Meeting. An Extraordinary General Meeting shall be convened when the Board deems it to be warranted or when required under law.
The Board of Directors is responsible for the administration and the proper organization of the operations of the Company. The duties and accountability of the Board are determined primarily under the Articles of Association and the Finnish Limited Liability Companies Act. The Board's meetings procedure and duties are described in the charter adopted by the Board for each year.
Board members are elected annually by the AGM based on a proposal put forward by the Board's Nomination Committee. The Articles of Association contain no mention of any special order of Board member appointments. The Board comprises 5–7 members, all of whom possess the particular competence and independence consistent with the position. The term of Board members begins at the end of the General Meeting at which they were elected and ends at the end of the General Meeting fi rst following their election. The Board of Directors elects a chairman and deputy chairman from among its number. No person who has reached the age of 62 may be appointed to the Board of Directors.
The following were elected to the Board by the AGM held in 2009:
Markku Aalto, chairman of the Board, b. 1950 Pork producer in Jämijärvi, Satakunta
Tiina Varho-Lankinen, deputy chairman, b. 1962 MSc (Econ & Bus Admin) Beef and broiler meat producer in Oripää, Varsinais-Suomi
Matti Murto, b. 1964 MSc (Agriculture) Beef producer in Salo, Varsinais-Suomi
Matti Karppinen, b. 1958 MSc (Econ & Bus Admin) CEO of Lännen Tehtaat plc
Lars Hultström (until 1 December 2009), b. 1954 BA (Econ) and degree from the Swedish University of Agricultural Sciences Director of Fors Säteri farm in Katrineholm, Central Sweden
Until the AGM held on 23 April 2009, the Board also comprised:
MSc (Econ & Bus Adm)
Farm entrepreneur and pork producer in the southern Swedish province of Skåne.
During 2009, the Board held 22 meetings. The average attendance rate of Board members was 98.1 percent. The Board constitutes a quorum when more than half of its members are present. Besides the members, the Group's CEO and the CFO as secretary to the Board also regularly attend Board meetings.
The Board conducts an annual evaluation of the independence of its members and has found all Board members to be independent of the Company and its signifi cant shareholders.
The work of the Board of Directors is based on the provisions of the Finnish Limited Liability Companies Act and the Company's Articles of Association as well as the charter and supplementary rules of procedure adopted by the Board.
According to the charter, the following key matters are among those to be resolved by the Board of Directors at HKScan:
The Board of Directors holds monthly meetings except in the summer holiday season. More meetings may be held if required. The chairman of the Board prepares the agenda for the meeting based on a proposal made by the CEO and convenes the meetings, under normal circumstances with at least one week's notice.
The Board conducts an annual evaluation of its performance and working methods in the interests of enhancing its operations. The most recent evaluation addressed the composition and processes of the Board, the quality of the Board's performance, cooperation between the Board and operative management, and the expertise and participation of Board members.
Four committees have been set up in HKScan Corporation to streamline the preparation and management of matters for the consideration of the Board. The Board selects the members and chairmen of the committees from among their number, except for the Nomination Committee, to which members may be selected from outside the Board in order to bring additional knowledge and expertise to bear on key appointments within the Company.
The Board elects the three members of the Audit Committee from among its number. At least one of the members must possess particular expertise in the fi elds of accounting, bookkeeping or auditing. The Audit Committee assists the Board by preparing matters within its remit for the consideration of the Board and by submitting proposals or recommendations for Board resolution.
The duties of the Audit Committee have been determined in its charter adopted by the Board, in keeping with Recommendation 27 of the Corporate Governance Code. The tasks of the Audit Committee of HKScan Corporation's Board of Directors include but are not limited to the following: to monitor the reporting process of fi nancial statements; to supervise the fi nancial reporting process; to monitor the effi ciency of the Company's internal control, internal auditing and risk management system; to review the description of the main features of the internal control and risk management systems pertaining to the fi nancial reporting process, which is included in the company's corporate governance statement; to monitor the statutory audit; to evaluate the independence of auditors; and to prepare the proposal for resolution on the election of the auditors. The Audit Committee reports on its work to the Board at the Board meeting fi rst following the meeting of the Committee.
The Audit Committee is chaired by Markku Aalto and its members are Matti Karppinen and Tiina Varho-Lankinen. The Audit Committee held fi ve meetings during 2009. The average attendance rate of Committee members was 100 percent. Committee meetings are also regularly attended by the Group's CEO and CFO and by its external auditors.
The Board elects the three members of the Nomination Committee. The members of the Committee need not be Board members. The CEO of the Company or other senior executives may not be elected to the Nomination Committee.
The duties of the Nomination Committee are defi ned in its charter adopted by the Board. The Committee is tasked with preparing the proposals to be presented to the General Meeting of Shareholders concerning the number, appointment and remuneration of Board members. The Nomination Committee convenes at least once before the General Meeting of Shareholders and reports on its work to the Board of Directors immediately following the meeting of the Committee.
The members of the Nomination Committee are Markku Aalto (chairman), Tiina Teperi-Saari and Lars Gustafsson. The Nomination Committee held three meetings during 2009. The average attendance rate of Committee members was 100 percent.
The Board elects the three members of the Remuneration Committee from among its number. The CEO of the Company or other senior executives may not be elected to the Remuneration Committee.
The duties of the Remuneration Committee are defi ned in its charter adopted by the Board of Directors. The Remuneration Committee is tasked with preparing matters pertaining to the Company's remuneration schemes. The Remuneration Committee convenes as necessary and reports on its work to the Board immediately following the meeting of the Committee.
The Committee is chaired by Tiina Varho-Lankinen and its members are Markku Aalto and Matti Karppinen. The Remuneration Committee held four meetings during 2009. The average attendance rate of Committee members was 100 percent.
All Board members are members of the Working Committee, which is chaired by the chairman of the Board. The Working Committee held four meetings during 2009. The average attendance rate of Committee members was 90.0 percent.
The duties of the Working Committee are defi ned in its charter adopted by the Board of Directors. The Working Committee is tasked with promoting the effi cient accomplishment of the duties of the Company's Board of Directors. The aim of the Committee is to advance compliance with the Finnish Corporate Governance Code in HKScan Corporation.
The CEO and possible deputy CEO of the Company are appointed by the Company's Board of Directors. The CEO is tasked with managing the Group's business activities and administration in accordance with the Articles of Association, the Finnish Limited Liability Companies Act and instructions provided by the Board of Directors. The CEO is accountable to the Board of Directors for the implementation of the aims, plans, procedures and goals laid down by the Board.
The Company's CEO does not serve on the Board but attends its meetings and provides monthly reports to the Board on the Group's fi nancial performance, fi nancial position, solvency and market position. He or she also presents the materials of the fi nancial statements and interim reports to the Board. The CEO shall furthermore report to the Board on the implementation of the Board's resolutions and on the measures and outcomes to which these have given rise.
The CEO of the Company is Mr Matti Perkonoja (b. 1949, commercial college graduate). CFO Irma Kiilunen serves as deputy to the CEO. In managing the Group, the CEO is supported by the Group Management Team.
HKScan Corporation's CEO is assisted by the Group Management Team consisting of CEO Matti Perkonoja as Chairman along with CFO Irma Kiilunen, senior vice president for strategy and development Olli Antniemi, HKScan Finland Oy and HK Ruokatalo Oy managing director Jari Leija and Scan AB managing director Denis Mattsson. Management Team meetings are also attended by AS Rakvere Lihakombinaat managing director Anne Mere and AS Tallegg managing director Teet Soorm. The Management Team convenes approximately once a month and a charter has been prepared for it.
The Company complies with the Guidelines for Insiders of NAS-DAQ OMX forming part of the Exchange's rules and regulations. The revised version of the Guidelines was adopted effective 2 June 2008 and it is available for review on the Exchange's website www. nasdaqomx.com under "Listing center > Nordic market".
HKScan's insiders are split into a public register and a companyspecifi c (non-public) register. By law, insiders included on the public register of insider holdings include members of the Board of Directors, the company's auditors and CEO. By corporate decision, the public register of insiders also includes the Group Management Team and designated representatives of the principal owners' administrative bodies. These come to approximately 20 persons.
By corporate decision, certain managing directors of subsidiaries, members of fi nancial and accounting clerical staff, communications offi cers, management secretaries, etc. – a total of approximately 20 persons – have been included in the company-specifi c (non-public) register of permanent insiders.
HKScan's insiders may trade during 30 days following the disclosure of an interim report and fi nancial statements bulletin. Insiders are barred from trading in the Company's share at other times.
The Company ensures compliance with insider holding guidelines by regularly reminding insiders of permitted trading windows and by checking the register maintained by Euroclear Finland (the Finnish Central Securities Depository) once a year to see the trades carried out by insiders. In the same context, the company sends an extract from the register to each insider to allow him or her to check and complete their own personal information in the register.
The decision to establish project-specifi c registers of insiders is taken by Company management on a case by case basis. Persons entered in a project-specifi c register are prohibited from trading in the Company's shares until the relevant project is announced or lapses.
HKScan's Group administration maintains and manages the insider register. The actual register resides in the SIRE system of Euroclear Finland Oy (the Finnish Central Securities Depository). Public access to the registers has been provided since 17 October 2005 on the Company's website at under "Investor information".
Under its Articles of Association, HKScan shall have two auditors and two deputy auditors; one of the auditors and one of the deputy auditors shall be an auditor or a fi rm of accountants authorized by the Central Chamber of Commerce. The auditors and deputy auditors are elected by the AGM. The auditors' term of offi ce is the Company's fi nancial year and their duties end at the Annual General Meeting of Shareholders fi rst following their election.
The task of statutory auditing is to verify that the fi nancial statements give a true and fair view of the result and fi nancial position of the HKScan Group in the fi nancial period audited. The auditor submits to the shareholders an auditor's report as a part of the annual fi nancial statements and also provides the Audit Committee with regular reports on his/her observations.
Authorized public accountants PricewaterhouseCoopers Oy, with APA Johan Kronberg as principal auditor, and Petri Palmroth APA have served as the Company's independent statutory auditors.
The Company's internal control framework is within the remit of HKScan Corporation's Board of Directors. Group management is responsible for maintaining and further developing effective internal control. Internal control aims to ensure compliance with laws and regulations as well as the Group's values and internal policies and guidelines. The internal control system has the further objective of supporting activities in line with the Group's strategy. The reliability of fi nancial reporting and measures in service of this goal are an integral component in the Company's internal control framework.
The Group's values and policies form the basis for the internal control environment at HKScan. Particular attention was paid in 2009 to updating the Group's internal guidelines and policies.
The Board of Directors and the Audit Committee in particular monitor the Company's fi nancial position and the quality of the Group's fi nancial reporting. The Board carries out its duty by means including adoption of the Group's risk management policy and determination of the objectives and principles of internal control. The Group's CEO and CFO are responsible for maintaining and further developing an effective control environment relating to fi nancial reporting.
At HKScan, the internal audit is a management tool for the accomplishment of supervision organized around an internal controller function in the business areas. The Company's auditors, who constantly perform audits of various operational aspects, also participate in internal auditing.
The aims of internal auditing are integrally linked with the Company's management system built on a principle of ongoing improvement. The implementation of corrective and preventative measures is a key part of the function of the entire process.
The aim of risk management within the HKScan Group is to safeguard the conditions to achieve business objectives and enable uninterrupted business operations.
The risks faced by the Group are by nature strategic (e.g. acquisitions), operative (e.g. animal diseases), fi nancial (e.g. currency exchange rates and interest rates) and risks of damage (e.g. accidents and interruptions in production).
The Board of Directors and CEO have responsibility for the strategy and principles of risk management within the Group and for managing risks that threaten achievement of the Group's strategic intents. Operative risks are the responsibility of segment management and the managers of the relevant business processes. The Group CFO is responsible for the management of fi nancial risks and risks to persons and property.
The Company is engaged in an enterprise risk management (ERM) project, the purpose of which is to update the risk management policy and which comprises consistent principles and systematic processes for risk management. The aim of the project is to promote risk awareness in HKScan and effective risk management throughout the Group, and to ensure that management and the Board of Directors are in possession of suffi cient information on risks to support their decision-making. The new risk management policy will be applied in all of the companies in the HKScan Group which carry out business operations.
Risk management is a key element in the Group's fi nancial reporting process. At the Group level, the Company strives to identify and assess, at least once a year, all signifi cant risks inherent in material balance sheet and income statement items and to determine the key controls for risk prevention.
Control measures are designed to ensure that
Control measures can take the form of manual or automated system controls. Examples of controls to ensure the reliability of fi nancial reporting include reconciliations, approvals, reviews, analyses and the elimination of high-risk combinations of duties.
The Group's fi nancial administration has determined, via risk assessment, the controls central to fi nancial reporting. These cover the fi nancial reporting process. The implementation and effectiveness of the controls is the responsibility of fi nancial administration in the segments. The Group has in place a self-evaluation process which seeks to ensure the function and effectiveness of controls relating to fi nancial reporting. The Group's major subsidiaries provide an annual report to the Group's fi nancial administration on the effectiveness of key controls. In addition to ensuring control effectiveness, self-evaluation also seeks to locate possible gaps and areas for further development in the controls.
97 CORPORATE GOVERNANCE
The guidelines and principles relating to fi nancial reporting are reported in the Group's regular internal meetings and by email. The Group's fi nancial administration organizes a Financial Forum at least once every year to address new accounting procedures, changes in internal guidelines and processes, and other topical issues in fi nancial administration.
The Group observes a silent period of approximately one month before the publication of interim reports and fi nancial statements. In respect of external distribution of information, Group Communications maintains guidelines concerning the disclosure of fi nancial information.
The Group's earnings performance is monitored in meetings of the Board and the Group Management Team with the help of monthly reporting. The Audit Committee evaluates and the Board approves all interim reports and fi nancial statements prior to their release to the markets. In addition, the statutory auditors provide the Audit Committee with an annual report on their audit plans and a quarterly report on their audit observations and the functioning of internal control. The Audit Committee in turn conducts an annual evaluation of the performance and independence of the auditors.
In 2009, particular attention was paid within the Group to the internal control framework and its further improvement. Ongoing processes include the updating of internal guidelines, the determination of Group processes and the preparation of charters for the various bodies. The outcomes of this work will be reported to the Audit Committee and the Group Management Team.
The aim of risk management within the HKScan Group is to safeguard the prerequisites for achieving business objectives and ensuring uninterrupted business operations.
Risk management has been organized as a part of the management system at HKScan and it is based on the consistent identifi cation, assessment and reporting of risks throughout the Group.
As far as possible and appropriate, risk management is implemented as a part of day-to-day business activities together with the support processes. This shows in the consideration of investment and other draft resolutions, process and job descriptions, the charters of the various bodies, performance reviews with employees, etc. Risk management measures and risk reporting summaries at the Group level are managed in a centralized manner.
At HKScan, risks have been divided into four main categories: strategic risks, operative risks, economic risks and risks of damage. Strategic risks are assessed as a part of the annual strategy process and in connection with major business decisions. Economic risks and risks of damage are minimized to the extent possible by using policies and guidelines drafted for this purpose. Operative risks are assessed not only in connection with the annual action plans but also as a part of day-to-day business operations. The companies and functions in the HKScan Group are in charge of introducing the requisite risk management procedures in day-to-day business operations.
The prices and availability of the raw materials, such as pork, poultry, and beef, which are needed for the production of HKScan products, vary. The global overproduction of raw materials decreases the prices of raw materials and increases their availability, while underproduction leads to poorer availability and rising prices of raw materials. Owing to oversupply and the high prices in Finland, and to a certain extent in Sweden as well, the export of excess production to countries where raw material is less expensive presents a challenge. The cycle of economy and the EU's Common Agricultural Policy affect the balance of supply and demand in the long term. Factors rapidly affecting supply, like animal disease epidemics, may occasionally distort the balance of supply and demand. The prices of processed meats sold by the company to retail are agreed for several months ahead in Finland, Sweden and the Baltics, and under these circumstances, the rise in the prices of raw materials cannot be passed on to product prices. Passing higher raw material prices to product prices may also be diffi cult in a situation where no fi xed prices have been agreed in advance.
Competition in HKScan's business sectors has grown tougher recently with retail chains to an increasing degree entering the food market to compete with their own products and brands. Besides domestic competitors, competition is also made fi ercer by international companies and companies operating in lower-cost countries. The company is responding to increased competition through, for example, the effi ciency of its core processes, highquality products, delivery reliability, and internationalization.
HKScan's operations are regulated by the legislation of the company's respective countries of operation. Regional and supranational regulation, such as EU legislation, also affects the company's operations. The company's management considers that at present, the company is in compliance with legislation and other regulation. Legislation and other regulation and the interpretations thereof may change, however, and the company cannot guarantee that it would be compliant with such changed requirements without taking material action. In the event that the company expands its operations to new markets, the company will also have to observe local regulation in these new regions, which may differ considerably from regulation in effect in its current markets. In its operations, the company is also dependent on the authorities in its countries of operation. Authorities procedures may also vary considerably in the company's various sectors of operation.
As a part of the development of its business, HKScan may acquire either in its current markets or in other geographical areas companies which enhance its competitive position. Risks relating to acquisitions include the unknown liabilities of the companies possibly acquired by the company, the possible inability to integrate and manage the business operations and personnel acquired, and the risk of the benefi ts or synergies of mass production not being realized. In addition, exclusion from industry consolidation might have an adverse effect on HKScan's strategic competitive position. Expansion to new geographical areas might also cause problems relating to exchange rate fl uctuations, overlaps of different taxation systems, unexpected changes in statutory requirements, changes in and compliance with foreign legislation and regulations, and political risks and longer distances.
An outbreak of animal diseases, such as avian infl uenza, Newcastle disease, foot and mouth disease, or BSE may affect the company's business and demand for the company's products. Animal diseases may affect consumer behaviour for a long time, although company management believes that consumption is usually normalized within a reasonable period of time from the respective animal disease discovery. The animal disease risk is levelled off by consumption transferring to the company's other meat product groups. In an integrated production line, such as some of the company's Baltic operations, discovery of an animal disease may temporarily sever, in a worst case scenario, the supply of raw materials, if substitute raw material sources such as importation from abroad do not exist.
HKScan is dependent on the uninterrupted operation of its production plants and distribution centres. If a key production plant of the company is destroyed or closed regardless of reason, its equipment is damaged in a signifi cant manner or other disruptions occur in production, this is likely to cause delays in HKScan's ability to produce and distribute its products as scheduled. Depending on product, it may be possible for HKScan to transfer production to other locations, thus avoiding any signifi cant interruptions to its operations, but changes in production of this kind may be more diffi cult to implement in respect of some product groups and may lead to signifi cant delays in the deliveries of products and to lost sales, and give rise to additional expenditure.
The delivery of orders on very short lead times is characteristic of the company's industry. Short lead times increase the signifi cance of an effective and dependable order/delivery chain and underscore the need to be able to anticipate consumer behaviour. Likewise, the signifi cance of the reliability of logistics systems and other technological systems has increased. If distribution centres are damaged, destroyed or brought out of commission for whatever reason, or if the products held in the distribution centres suffer signifi cant damage, HKScan will have to come up with an alternative method of delivering products to customers until such time that the damaged distribution centre can again be made available for operations.
Food safety risks have to do with the purity of raw materials (residues, foreign substances), the healthfulness of products, packaging materials intended to come into contact with food, and microbiological purity. Particular attention is paid to the prevention and control of bacteria which cause food poisoning. In addition to rigorous in-house controls, the facilities of all industry operators are subject to strict scrutiny by the authorities. HKScan's high standard of requirements and rigorous internal control notwithstanding, HKScan cannot have absolute assurance of the risk-free management of the entire foodstuff chain. The realization of a risk relating to product safety or product liability may have a material adverse effect on the demand for the company's products among customers and consumers.
Natural disasters, fi res, bioterrorism, pandemics, exceptional weather conditions or other factors beyond the company's control may have an adverse effect on the health and growth of production animals or hamper the company's operations due to power outages, damage to production and property, disruptions in the distribution chains, or other reasons.
Financial risks mean unfavourable movements taking place in the fi nancial markets that may erode accrual of the company's result or reduce cash fl ows. The company's fi nancial risk management aims to use fi nancial means to hedge the company's intended earnings performance and equity and to safeguard the Group's liquidity in all circumstances. As a rule, HKScan's funding is obtained through the parent company while funding to subsidiaries is arranged by the Treasury through intra-Group loans in the local currency of each subsidiary. Funding of the Group is centralized to a fi nance unit operating under the Chief Financial Offi cer.
Owing to income and expenses denominated in foreign currencies and equity investments and earnings denominated in foreign currencies, the company is exposed to foreign exchange risk arising from movements in exchange rates. The most signifi cant exchange risks in the company's business arise from the US dollar, Japanese yen and Swedish crown. The largest equities of the companies in the HKScan Group are in Swedish crowns, Polish zloty and Estonian crowns. The Group's fi nancial risks are presented in more detail in Note 26 of the fi nancial statements.
MARKKU AALTO (BORN 1950) Chairman of the Board
Finnish national Member of HKScan's Board since 1994, chairman since 2008
Key employment history: Pork producer in Jämijärvi, Satakunta
Main Board memberships and public duties currently undertaken: Member of the Board of LSO Osuuskunta Member of the Board of Trustees of Parkanon Säästöpankki bank
Independent of the Company HKScan shareholding: 2 750
TIINA VARHO-LANKINEN (BORN 1962) Deputy chairman of the Board, MSc (Econ & Bus Admin)
Finnish national Member of HKScan's Board since 2003, deputy chairman since 2008
Key employment history: Beef and broiler meat producer in Oripää, Varsinais-Suomi
Main Board memberships and public duties currently undertaken: Chairman of the Board of LSO Osuuskunta Chairman of Suomen Broileriyhdistys association Chairman of the Delegation of Pellervo Confederation of Finnish Cooperatives Member of the Supervisory Board of Varsinais-Suomen Lähivakuutusyhdistys insurance association
Independent of the Company HKScan shareholding: 5 500
MATTI MURTO (BORN 1964) Member of the Board, MSc (Agriculture)
Finnish national Member of HKScan's Board since 2008
Key employment history: Beef producer in Salo, Varsinais-Suomi
Main Board memberships and public duties currently undertaken: Vice chairman of the Board of LSO Osuuskunta Member of the Supervisory Board of Suur-Seudun Osuuskauppa cooperative Member of the General Assembly of the Finnish Association of Academic Agronomists
Independent of the Company HKScan shareholding: 2 750
MATTI KARPPINEN (BORN 1958) Member of the Board, MSc (Econ & Bus Admin)
Finnish national Member of HKScan's Board since 2008
Key employment history: CEO of Lännen Tehtaat plc since 2005 CEO of Atria Corporation / Lithells AB, 2002–2005 Profi t centre director, Nokian Renkaat plc, 1998–2001 Marketing director, Saarioinen Oy, 1994–1998 Marketing manager, Tamrock Oy, 1989–1994 Market manager, Unilever Finland Oy, 1985–1989
Main Board memberships and public duties currently undertaken: Chairman of the Board of the Finnish Food and Drink Industries' Federation ETL Member of the Board of the Confederation of Finnish Industries EK Member of the Supervisory Board of Tapiola Mutual Insurance Company Member of the Board of Sucros Oy
Independent of the Company HKScan shareholding: -
Authorized public accountants PricewaterhouseCoopers Oy with Johan Kronberg MSc (Econ & Bus Admin), APA of Länsi-Turunmaa as principal auditor Petri Palmroth, MSc (Econ & Bus Admin), Authorized Public Accountant, Turku
Mika Kaarisalo, MSc (Econ & Bus Admin), Authorized Public Accountant, Turku Pasi Pietarinen, MSc (Econ & Bus Admin), Authorized Public Accountant, Turku
CFO Irma Kiilunen, BSc (Econ & Bus Admin), serves as secretary to the Board of Directors.
The shareholdings of Board members are reported as at 17 March 2010.
Member of the Board from 23 April 2009 to 1 December 2009, BA (Econ) and degree from the Swedish University of Agricultural Sciences
Swedish national
JOHTORYHMÄ From left: Management Team members Denis Mattsson, Olli Antniemi, Irma Kiilunen, Matti Perkonoja and Jari Leija
MATTI PERKONOJA (BORN 1949) CEO of HKScan Corporation, commercial college graduate
Finnish national
Key employment history: CEO of HKScan since January 2009 Earlier: HKScan CFO, 2000–2009 Unit director and commercial director in the Group and managing director of Broilertalo Oy, 1993–2000 Active in the meat industry since the 1970s
Main Board memberships and public duties currently undertaken: Chairman of the Supervisory Board of Rakvere Lihakombinaat Chairman of the Supervisory Board of AS Tallegg Chairman of the Board of Scan AB Vice chairman of the Board of Sokolów S.A. Member of the Supervisory Board of Tapiola Corporate Life Member of the employers' consultative committee of Mutual Employment Pension Insurance Company Varma Managing Director of LSO Osuuskunta Member of the Board of the Finnish Food and Drink Industries' Federation ETL
HKScan shareholding: 52 936, of which 13 500 as share bonus
CFO, deputy to the CEO, BSc (Econ & Bus Admin)
Finnish national
Key employment history: CFO of HKScan since January 2009 Earlier: HKScan's fi nance director since 2001 Duties in fi nance and fi nancial administration in various HKScan Group companies 1977–2001
Main Board memberships and public duties currently undertaken: Member of the Board of Scan AB Member of the Supervisory Board of Rakvere Lihakombinaat Member of the Supervisory Board of AS Tallegg
Member of the Board of HKScan Finland Oy Member of the Board of LSO Foods Oy Member of the Board of Best-In Oy
HKScan shareholding: 6 642, of which 1 752 as share bonus
Managing Director of HKScan Finland and executive vice president, Finland, vocational qualifi cation in engineering
Key employment history: Managing director of HKScan Finland as of 2009 and managing director of HK Ruokatalo Oy since December 2007 Earlier: Senior vice president in charge of HK Ruokatalo's poultry business In charge of HK Ruokatalo Oy's production and delivery logistics and the terminals in Vantaa and Tampere in the capacity of executive vice president, production Logistics manager Vantaa plant manager Joined the Group in 1993
Main Board memberships and public duties currently undertaken: Member of the Board of Pakastamo Oy Deputy member of the Board of Pyhäjärvi-instituuttisäätiö foundation Deputy member of the Board of Transbox Oy Member of the Board of Länsi-Kalkkuna Oy Member of the Board of LSO Foods Oy Chairman of the Board of Lounaisfarmi Oy Member of the Board of Kivikylän Kotipalvaamo Oy Member of the Board of Harri Tamminen Oy
HKScan shareholding: 43 788, of which 13 500 as share bonus
Managing Director of Scan AB and executive vice president, Sweden, eMBA
Finnish national
Key employment history: Managing director of Scan AB since June 2009 Earlier: Vice president, food industry, Scan, 2007–2009 Managing director, RavintoRaisio Oy, 2006–2007 Commercial director, Atria Oy, 1999–2006 Commercial director, Nestlé Oy, 1994–1999
Main Board memberships and public duties currently undertaken: Member of the Board of Kavli Oy Member of the Board of Nyhlens & Hugosons AB Member of the Board of Kreatina A/S Member of the Board of Scan Foods UK Ltd.
HKScan shareholding: 5 500, of which 0 as share bonus
Senior vice president, strategy & development, BSc (Econ)
Finnish national
Key employment history: HKScan senior vice president, strategy and development since January 2010 Earlier: HK Ruokatalo, director of development Managing director of Scan AB, March–June 2009 Executive vice president, HKScan's Baltic Group, 2003–2009 Marketing director and exports director at HK Ruokatalo Also served the Huhtamäki Group in positions including a spell with Leaf in the United Kingdom
HKScan shareholding: 4 818, of which 3 504 as share bonus
The shareholdings of Management Team members are reported as at 17 March 2010.
Banks and stockbrokers in Finland analysing HKScan as an investment.
HKScan Corporation is not liable for any evaluations presented in the analyses.
Carnegie Investment Bank AB, Finland Branch Timo Heinonen tel: +358 9 6187 1234 fi [email protected]
Danske Markets, Equities Kalle Karppinen tel: +358 10 236 4794 fi [email protected]
E. Öhman J:or Fondkommission AB Elina Pennala tel: +358 9 8866 6043 fi [email protected]
Evli Pankki Oyj tel: +358 9 476 690 fi [email protected]
FIM Bank Ltd Mark Mattila tel: +358 9 6134 6398 fi rstname.surname@fi m.com
Handelsbanken Capital Markets Maria Wikström tel: +358 10 444 2425 fi [email protected] ICECAPITAL Securities Ltd Robin Santavirta tel: +358 9 6220 5092 fi [email protected]
Nordea Markets Rauli Juva tel: +358 9 1655 9944 fi [email protected]
Pohjola Bank Plc Matias Rautionmaa tel: +358 10 252 4408 fi [email protected]
Jutta Rahikainen tel: +358 9 6162 8713 fi [email protected]
Swedbank Markets Jarkko Soikkeli tel: +358 20 746 9152 fi [email protected]
Ålandsbanken Oyj Martin Sundman tel: +358 204 293 777 fi [email protected]
(Head offi ce, Group management and administration) PO Box 50 (Kaivokatu 18) FI-20521 Turku, Finland
PO Box 49 (Väinö Tannerin tie 1) FI-01511 Vantaa, Finland
tel: +358 10 570 100 fax: +358 10 570 6146 fi [email protected] www.hkscan.com
Production facilities, sales and marketing in Finland (Head offi ce and administration) PO Box 50 (Kaivokatu 18) FI-20521 Turku, Finland
(Management and administration) PO Box 49 FI-01511 Vantaa, Finland
tel: +358 10 570 100 fax: +358 10 570 6146 fi [email protected] www.hkruokatalo.fi
Production, sales and marketing in Sweden (Head offi ce) Box 30223 (Lindhagensgatan 126) SE-104 25 Stockholm, Sweden tel: +46 771 510 510 [email protected] www.scan.se
Production, sales and marketing in the Baltics Roodevälja küla Sõmeru vald EE-44207 Lääne-Viru maakond, Estonia tel: +372 32 29221 fax: +372 32 29300 fi [email protected] www.rlk.ee
Production, sales and marketing in the Baltics Saha tee 18, Loo Jõelähtme vald EE-74201 Harju maakond, Estonia tel: +372 6 107 012 fax: +372 6 107 060 fi [email protected] www.tallegg.ee
Production, sales and marketing in Poland Aleja 550-lecia 1 08-300 Sokolów Podlaski, Poland tel: +48 25 640 82 00 fax: +48 25 787 61 32 www.sokolow.pl
22B Bukowinska Str. 02-703 Warsaw, Poland tel: +48 22 525 82 50 fax: +48 22 525 82 91 [email protected] ´
HKScan Corporation, Communications Printing: Jaakkoo-Taara Oy Painoprisma
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