HKFoods

13:20

The operating environment has been challenging for Consumer Goods Companies.

After the most straightforward efficiency measures, earnings growth will be slower and more capital-intensive.

Our confidence in the sustainability of the earnings turnaround has strengthened.

We found HKFoods' Q1 report positively toned as the company improved its EBIT more than we expected. Weak demand in retail trade at the beginning of the year and the later timing of Easter depressed revenue, in light of which improving the earnings level was a particularly good achievement.

Last year's automation investment and growth in exports to China support earnings development despite a subdued domestic market.

We expect upward pressure on meat prices and consumer demand to be lower than last year, at least in H1.

HKFoods’ result has improved clearly due to efficiency investments and focusing on Finland. We expect earnings growth to moderate in the coming years. The timing of the redemption of the hybrid bond remained unclear, with the Board proposing a substantial return of capital to shareholders. We do not find the risk/reward ratio particularly attractive compared to other companies in the sector, although earnings growth continuing stronger than we estimate could change the situation.

HKFoods released its Q4 financial statements bulletin today. The strong comparable result was already known as the company released preliminary data in January. Net profit fell short of our expectations due to higher taxes and non-recurring items.