In Finland the modernization and investment in the Outokumpu beef slaughterhouse was finalized, including renewal of the beef cutting area and part of the slaughter line, at the end of the second quarter. In April, HKScan purchased its previously rented production facility and land area in Mikkeli, Finland for EUR 4.2 million. In Sweden, investments increased from a low level the previous year, and focused on maintenance, improving productivity and efficiency at existing plants.
The Group’s interest-bearing debt at the year-end stood at EUR 153.8 (158.1) million. Net debt was EUR 144.0 (141.5) million and the net gearing ratio 33.8 (31.8) per cent.
The Group’s liquidity was good. Committed credit facilities at 31 December stood at EUR 100.0 (136.5) million, and were entirely undrawn. The EUR 200.0 million commercial paper programme had been drawn to the amount of EUR 27.0 (11.0) million.
Net financial expenses decreased significantly and were EUR -9.1 (-15.5) million in 2015.
Research and development
Research and development in HKScan Group is targeted at developing new products and concepts and making improvements to products that are already on the market. A total of EUR 5.1 (3.7) million was spent on R&D in 2015, equal to 0.3 (0.2) per cent of net sales.
The development of common innovation platforms and processes continued in 2015, and synergistic cross-border opportunities received increased attention. Creating new growth areas is the Group’s key priority going forward.
HKScan is continuously building its R&D network in order to support the implementation of the Group strategy. During 2015, several new partnerships were established with collaborators such as universities, research organizations, suppliers and other private organizations.
HKScan has defined its most important areas of corporate responsibility as economic responsibility, social responsibility, animal welfare and the environment.
The follow-through of actions based on the EES (Employee Engagement Survey) results continued during 2015. These actions focused on development of leadership, employee wellbeing and workplace safety, strengthening of unified HKScan Group culture and employee engagement.
To improve responsibility and transparency in the supply chain and to better manage corporate responsibility risks, HKScan further developed its supplier evaluation and audit procedures. Since 2015, all critical suppliers are evaluated and qualified in line with a more specific criteria related to food safety, quality, environment and social aspects. In order to further improve animal welfare in its slaughterhouses, the Group initiated collaboration with an external animal behaviour expert. For this purpose, the Group has also started installing video cameras in slaughterhouses.
The Group retained its good status regarding animal diseases both in its contract production and in its own primary production. In all HKScan countries the use of antibiotics in the treatment of animals has remained on a significantly lower level than the European average. The use of hormones as growth promoters, for instance, is not allowed. Good animal care and control of animal diseases has led to good results in preventing outbreaks. Prevention of the spread of African swine fever to pig farms is one of the main measures currently being undertaken at HKScan farms in the Baltics. In Finland and Sweden, HKScan has also worked diligently to prevent the spread of the disease into their territory.
The Group continuously measures its environmental impact and strives to decrease it, especially in the areas of energy efficiency and GHG emissions, wastewater, water use, chemical use, and waste management. In 2015, HKScan initiated an energy efficiency project aiming to decrease its energy usage by 10 per cent from the 2014 level by 2017 indexed to net sales.
Material efficiency, such as using all parts of animal raw material and minimization of production wastage, was also in focus during 2015. HKScan has reduced its volume of production wastage through improvements in production. The Group plans to grow means of circular economy of resources.
Additionally, the Group has identified soy and palm oil as raw material that have significant social and environmental impact. To manage these raw materials in a responsible way HKScan adheres to third-party audit standards provided by the Round Table on Responsible Soy (RTRS) and the Roundtable on Sustainable Palm Oil (RSPO). The Group has committed to using only 100 per cent responsible soy used in animal feed and as an ingredient by the end of 2018, and in Sweden by the end of 2015. The commitment in Sweden was reached as planned both on the part of local feed and also imported meat. Palm oil is only present in very small amounts in only some of the Group’s products. A mapping of palm content in all our products is under way to establish exact volumes and to certify the level of each palm ingredient. This work will be finalized during 2016.
In October 2015, the Group announced that its strategic investment in a new poultry production facility will be located in Rauma, Finland. From the very beginning of the planning of the plant, corporate responsibility aspects have been taken into account, including issues such as solutions to improved animal welfare, biosecurity related to animal disease risks, food safety and product quality, as well as employee health and safety. The investment will also in general improve environmental efficiency and enable a more efficient utilization of side-streams for biotech products. Additionally, the new facility will have a significant direct and indirect employment impact.
Annual General Meeting and Board of Directors’ authorizations
The Annual General Meeting of HKScan Corporation held on 14 April 2015 in Turku adopted the parent company’s and consolidated financial statements and discharged the members of the Board of Directors and the CEO from liability for 2014. The AGM resolved that a dividend of EUR 0.10 and an additional dividend of EUR 0.39 be paid for each share for the year 2014.
The Board members, Niels Borup, Tero Hemmilä, Teija Andersen and Henrik Treschow, were re-elected and Mikko Nikula and Pirjo Väliaho were elected as new members of the Board of Directors. Deputy member Per Nilsson was re-elected for a further term of office and Marko Onnela was elected as new deputy member of the Board of Directors. At the organizational meeting after the AGM, the Board elected Mikko Nikula as Chairman and re-elected Niels Borup as Vice Chairman.
PricewaterhouseCoopers Oy, an audit firm chartered by the Central Chamber of Commerce, with APA Jouko Malinen as the main auditor, was elected as the actual auditor until the close of the next Annual General Meeting. The remuneration of the auditor will be paid in accordance with the auditor’s invoice approved by the company.
The AGM gave the following two authorizations to the Board: The Board of Directors was authorized to decide on share issue, as well as issue of option rights and other special rights entitling to shares, and to acquire the company’s own Series A shares and/or to accept as pledge. The authorizations are effective until 30 June 2016, revoking the authorisations given by the AGM 2014.
During 2015, the Board did not exercise the authorizations given by the AGM. The resolutions of the Annual General Meeting have been published in full in a stock exchange release on 14 April 2015, and they are also available on the web at www.hkscan.com.
Group Management Team
As of 20 January 2016, the HKScan Group Management Team is as follows: Aki Laiho, Deputy CEO and COO; Tuomo Valkonen, CFO; Samuli Eskola, EVP Consumer Business in Finland and the Baltics; Göran Holm, EVP Consumer Business in Scandinavia; Jukka Nikkinen, EVP Away from Home Business; Sari Suono, EVP HR; Anne Mere, CMO; and Markku Suvanto, EVP Legal and Administration, who also acts as the Group Management Team's secretary.
Changes in the Group structure
At the end of 2015, HKScan Sweden sold its 25 per cent stakes in Gotlands Slakteri AB and Svensk Butikskött AB to the main shareholder of Svensk Butikskött, and divested its 25 per cent stake in Svensk Lantbrukstjänst AB to Svenska Köttföretagen as well as one per cent stake to Konvex AB.
In March, the Group divested its non-core businesses, i.e. 80 per cent of its hatchery operations in Finland and the egg business in Estonia. In July, the Group acquired a 50 per cent stake in the Paimion Teurastamo Oy beef slaughterhouse in Finland.
Shares and shareholders
HKScan Group’s registered and fully paid-up share capital at the beginning and end of 2015 was EUR 66 820 528. The total number of shares issued was 55 026 522, and it was divided into two share series as follows: A Shares, 49 626 522 (90.19% of the total number of shares) and K Shares 5 400 000 (9.81%). The A Shares are quoted on the Nasdaq Helsinki Ltd. The K Shares are held by LSO Osuuskunta (4 735 000 shares) and Sveriges Djurbönder ek.för. (665 000 shares) and are not listed.
According to the Articles of Association, each A Share conveys one vote, and each K Share 20 votes. Each share gives equal entitlement to a dividend. The shares have no nominal value.
HKScan’s market capitalization at the end of the year stood at EUR 205.6 (176.5) million based on the closing price of the last trading day of the period. The Series A shares had a market value of EUR 185.1 (158.8) million, and the unlisted Series K shares EUR 20.6 (17.7) million correspondingly.
In 2015, a total of 17 320 850 of the company’s shares, with a total value of EUR 87 878 712, were traded. The highest price quoted was EUR 6.26 and the lowest EUR 3.24. The average price was EUR 5.07. At the end of 2015, the closing price was EUR 3.81.
At the end of 2015, the shareholder register maintained by Euroclear Finland Ltd included 12 558 (11 423) shareholders. Nominee-registered and foreign shareholders held 24.9 (20.1) per cent of the company's shares.
Notifications of changes in holdings
HKScan did not receive any notifications on changes in holdings in 2015.
At the beginning and end of the financial year 2015, HKScan held 1 053 734 treasury A Shares. At the end of 2015, they had a market value of EUR 4.01 million and accounted for 1.92 % of all shares and 0.67 % of all votes.
Share-based incentive schemes
1) Incentive plan for 2013–2015 and its conditions are described in detail in the stock exchange release dated 20 December 2012.
2) Incentive plan 2016 for the Group key personnel was published on 18 December 2015 in a stock exchange release. The plan covers one performance period, year 2016. The potential reward from the performance period will be based on the HKScan Group’s Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Earnings per Share (EPS).
Rewards from the performance period will be paid partly in the Company’s A series shares and partly in cash as follows: 50 per cent pay-out in 2017 and 50 per cent pay out in 2018. The cash proportion is intended to cover taxes and tax-related costs arising from the rewards to the key personnel. No reward will be paid, if the key employee’s employment or service ends before reward payment. The plan is directed to 37 people. The rewards to be paid on basis of the performance period are a maximum approximate total of 366 000 HKScan Corporation series A shares and cash payment corresponding to the value of such shares.
Shareholding of the Board of Directors and the President and CEO
At the end of 2015, members of the Board of Directors and the company’s President and CEO and his deputy, as well as their related parties owned a total of 79 770 A Shares, corresponding to 0.14 per cent of the total number of shares and 0.05 per cent of the votes.
In 2015, HKScan had an average of 7 437 (7 662) personnel.
The average number of employees in each market area was as follows: