HKFoods Q1'25 flash comment: Earnings improved in a challenging market

Translation: Original published in Finnish on 05/07/2025 at 09:30 am EEST

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.

Weak domestic retail demand held back growth

HKFoods' revenue grew by 2% in Q1, which was clearly below our forecast (9%) and also below the strong growth rate of the previous three quarters (Q2-Q4’24: 7-9%). We believe organic growth was slightly negative. According to the company, the retail market was challenging in Q1 as consumers favored cheaper products, which led to a decrease in retail revenue. Q1 is a seasonally challenging quarter for meat industry players, with demand focused on, e.g., summer and Christmas This year, the situation was also affected by Easter falling clearly in Q2, which contributed to the weak development of retail sales in Q1. According to the release, HKFoods has continued to gain market share in the Foodservice segment (share of revenue at the comparison period level).

The share of exports in revenue doubled to 16% (Q1’24: 8%), which we believe is due to both organic and technical accounting factors. Organic export growth is related to poultry exports to China and weak comparison period export volumes due to port strikes. The accounting technical growth, on the other hand, is related to the recognition of the Polish bacon unit's revenue as external revenue from April 2024 (previously reported as part of Swedish operations).

Efficiency measures are paying off

Q1 comparable EBIT rose to 4.6 MEUR (Q1’24: 1.4 MEUR), beating our estimate of 3.4 MEUR. The company has invested in improving production efficiency, including two significant automation investments completed around mid-2024. In addition, the improved sales structure and other cost savings supported profitability. EPS was EUR 0.00 (we expected EUR -0.02). Net financial expenses decreased to 3.9 MEUR (Q1’24: 4.9 MEUR), which was slightly better than our forecast (we expected net financing costs of 4.4 MEUR).

The rising earnings guidance was reiterated

HKFoods reiterated its guidance that expects the Group's comparable EBIT to increase from 2024 (27.7 MEUR). In our view, visibility on the guidance materializing improved slightly with strong Q1 earnings, but the most important sales seasons are still ahead. HKFoods points out that the 3-day meat industry strike in April hampered the company's business, which may impact Q2 negatively. We estimate that the shortage of beef affecting the entire industry and the cool spring may also negatively impact sales in the coming quarters. HKFoods' investments in the Eura plant's ready-to-eat products line and Vantaa's ready-made meal production have progressed according to plan, which could support revenue growth in the near future.