HK RUOKATALO GROUP OYJ ANNUAL REPORT 2006 ANNUAL REPORT GROUP OYJ HK RUOKATALO HK RUOKATALO GROUP OYJ ANNUAL REPORT 2006 HK RUOKATALO GROUP OYJ / HKSCAN OYJ SWEDEN POLAND (Head offi ce, group management and administration) PO Box 50 (Kaivokatu 18) SCAN AB SOKOLÓW S.A. FI-20521 Turku, Finland Production, sales and marketing in Sweden Production, sales and marketing in Poland (Headoffi ce) Aleja 550-lecia 1 (Group management and administration) Slakthusplan 4 08-300 Sokolów Podlaski, Poland PO Box 49 (Väinö Tannerin tie 1) SE-121 86 Johanneshov, Sweden tel:+48 25 640 82 00 FI-01511 Vantaa, Finland tel:+ 46 771 510 510 fax:+ 48 25 787 61 32 tel: +358 10 570 100 [email protected] www.sokolow.pl fax: +358 10 570 6146 www.scan.se fi rstname.surname@hkruokatalo.fi SOKOLÓW S.A. - Head Offi ce in Warsaw www.hkruokatalo.fi Bukowinska 22B Str. 02-703 Warsaw, Poland THE BALTICS tel:+48 22 525 82 50 fax:+ 48 22 840 39 39 FINLAND AS RAKVERE LIHAKOMBINAAT [email protected] Production, sales and marketing in the Baltics HK RUOKATALO OY Roodevälja küla Production facilities, sales and marketing in Finland Sõmeru vald (Head offi ce, management and administration) EE-44305 Lääne-Virumaa, Estonia PO Box 50 (Kaivokatu 18) tel:+372 32 29211 FI-20521 Turku, Finland fax:+372 32 29300 fi [email protected] (Management and administration) www.rlk.ee PO Box 49 FI-01511 Vantaa, Finland AS TALLEGG Production, sales and marketing in the Baltics tel: +358 10 570 100 Saha tee 18, Loo fax:+358 10 570 6146 Jõelähtme vald fi rstname.surname@hkruokatalo.fi EE-74201 Harju maakond, Estonia www.hkruokatalo.fi tel:+ 372 6 107 012 fax:+ 372 6 107 060 [email protected] www.tallegg.ee HK Ruokatalo Group Oyj, Communications Designtoimisto TANGO\ Photos: Marjo Tokkari Recipes: Jyrki Sukula Printing: Painoprisma Oy Contents 04 HKScan 43 Notes to the consolidated balance sheet 06 Headlines in 2006 55 Parent company income statement 08 Review by the CEO 56 Parent company balance sheet 10 Market area: Finland 57 Parent company cash fl ow statement 16 Corporate responsibility 58 Notes to the parent company fi nancial statements 19 Market area: Sweden 59 Notes to the parent company income statement 20 Market area: Baltics 60 Notes to the parent company balance sheet 22 Market area: Poland 66 Signatures of the Board of Directors and CEO 24 Report of the Board of Directors 66 Auditors’ report 29 Financial indicators 67 Shares and shareholders 30 Formulae for fi nancial indicators 70 Annual General Meeting 31 Consolidated income statement 67 Summary of stock exchange releases in 2006 32 Consolidated balance sheet 72 Corporate governance 33 Consolidated cash fl ow statement 74 Board of Directors 34 Statement of changes in shareholders’ equity 76 Group Management Team 35 Notes to the consolidated fi nancial statements 78 Market analysts 40 Notes to the consolidated income statement 83 Addresses 3 HKScan – a leading Northern European food company HK Ruokatalo Group to become HKScan The strategic intents of HKScan are In the 2006 annual report, the company is referred to as HK • to meet the diverse food requirements and preferences Ruokatalo Group Oyj, which is its legal name at the time of publi- of consumers at different points of life cation. The decision on changing the company name to HKScan • to have the most satisfi ed customers in its sector, won Oyj will be taken by the Annual General Meeting convening in through competitive products, dependability and innovation April 2007. All future prospects and projections presented in this • to be among the most profi table companies in its sector annual report thus also apply to HKScan. • to be among the most attractive employers in its sector HKSCAN IN BRIEF KEY FINANCIAL TARGETS HKScan is one of the leading food companies in Northern Europe. The company’s home market consists of Finland, Sweden, the Bal- Operating profi t: over 5 percent of net sales tics and Poland. Return on equity: over 15 percent HKScan HKScan produces, sells and markets pork, beef and poultry Equity ratio: over 40 percent Breakdown of net sales and operating profi t meat, processed meats and convenience foods to retail, the HoRe- Dividend distribution: at least 30 percent of pro forma 2006 Ca sector, industry and export customers. net earnings The company has 36 production facilities in six countries and Net sales EUR 2 057.1 million some 10,000 employees. Increasing the share of international operations to more than 50% A core business principle of HKScan is consumer and customer of net sales has been a long-term goal of HK Ruokatalo Group. satisfaction, which calls for high quality products and service at The acquisition of Scan AB has allowed us to meet this goal, and Sweden 55% every stage of the value chain. Finnish operations now account for 29 percent of net sales. Finland 29% In future, the company’s home market will be the Northern Eu- Poland 10% ropean region. Mission statement and aims The Baltics 6% HKScan delivers added shareholder value through a successful combination of consumer and customer focused operations, HKScan Oyj Key indicators pro forma 2006 strong brands, effi cient production, the excellence of its people Operating profi t EUR 51.2 million and profi table growth in all its market areas. - net sales: EUR 2 057.1m HKScan seeks to enhance the everyday life of consumers by pro- - operating profi t: EUR 51.2m Sweden 21% viding alongside traditional classic products also increasing num- - EBIT %: 2.5 bers of innovations that make cooking easier and more enjoya- - employees, ca. 10 000 Finland 43% ble. - locations 36 Poland 12% The group’s vision is to be a leading multidomestic food com- The Baltics 24% pany which holds a strong position in its Northern European do- mestic markets. 4 HK Ruokatalo Group Oyj -> HKScan Oyj Pro forma net sales 2006: EUR 2 057.1 million*, CEO Kai Seikku Finland Sweden The Baltics Poland Luleå Net sales in 2006: Net sales in 2006**: Net sales in 2006: Net sales in 2006: EUR Skellefteå EUR 608 million EUR 1 124.8 million EUR 130.8 million 203.6 million*** Ullånger Outokumpu Managing director Managing director Executive vice • Saturn Nordic Esa Mäki Magnus Lagergren president, the Baltics Holding AB Tampere Eura Mellilä • HK Ruokatalo Oy • Scan AB Olli Antniemi -> Sokolów S.A. Säkylä Forssa St Petersburg Turku Vantaa • AS Rakvere Managing director Uppsala Örebro Stockholm Lihakombinaat Boguslaw Miszczuk Tallinn Rakvere Linköping • AS Tallegg Skara Viiratsi Visby Halmstad Riga Strövelstorp Kristianstad * Between segments EUR -10.1 million Helsingborg Kävlinge Bjæverskov ** Pro forma Scan Group Malmö Vilna *** Saturn Nordic Holding, a joint venture owned 50-50 by Swinoujscie HK Ruokatalo and Danish Crown, is the sole shareholder in Sokolów. Czyzew In 2006, half of Sokolów’s net sales, i.e. EUR 203.6 million, were Surrey Warsaw accounted for in HK Ruokatalo Group fi gures. Poznan Sokolow Kolo Debica Tarnow Jaroslaw LOCATIONS HKScan has production facilities in Finland, the Baltics, Poland, Sweden and Denmark, with sales companies in Russia and the UK. In Poland, business is operated by Sokolów S.A, which is owned by holding company Saturn Nordic Holding AB. This company in turn is owned by HK Ruokatalo Group and Danish Crown on a 50–50 basis. Locations in Luleå, Skellefteå and Ullånger are owned by Scan AB and Nyhléns & Hugoson on a 50–50 basis. 5 Headlines in 2006 Dualistic development in the economy standing in the long run in the Baltic Sea Region and in the food Key fi gures in 2006 and 2005 The HK Ruokatalo Group concern enjoyed a second good year market. The Board of HK Ruokatalo Group will propose to the An- 2006 2005 running in its international operations. Growth targets were nual General Meeting that the name of the group be changed to Net sales, EUR million 934.3 883.3 achieved in the Baltics. Positive development in Poland was slowed HKScan. Operating profi t, EUR million 40.4 24.1 down by tighter market competition in the last quarter. In Finland, - % of net sales 4.3 2.7 performance was clearly short of longer-term targets despite im- Rationalisation of Finnish operations Profi t before tax, EUR million 33.6 20.4 provements in net sales and profi tability towards the end of the - % of net sales 3.6 2.3 year. HK Ruokatalo Oy launched in January 2006 a two-year industrial Group net sales came to EUR 934.4 million, an increase of 5.8 restructuring programme in Finland. Processed meat production Return on equity, % 11.9 7.7 percent from a year earlier. The consolidated book operating prof- will be centralised in Vantaa, the value added processing of fresh Return on investment, % 10.1 7.4 it was EUR 40.4 million (EUR 24.1m in 2005), up by 67.6 percent meat in Forssa and logistics in Vantaa. When implemented, the on the corresponding fi gure a year earlier. Comparable operating plans will cut the number of industrial plants from eight to six with Equity ratio, % 43.7 44.7 Gross investments, EUR million 82.6 59.2 profi t came to EUR 41.8 million (EUR 28.2m). The Board of Direc- the closure of production at the Turku processed meat factory and Earnings per share (EPS), EUR 0.79 0.46 tors recommends a dividend of EUR 0.27 per share. the Tampere meat processing plant. Dividend per share, EUR 0.27 0.27 The modernisation of the slaughterhouse and cutting room in Forssa was completed for deployment in November 2006.