Scandi Standard, the poultry group which bought Ireland’s Manor Farm, highlighted the threat posed by avian influenza, reporting falling profits in Sweden after an outbreak, while those in flu-free Denmark rose.
For its operations in Denmark - which was declared bird flu free early in 2017, prompting the lifting of trade bans - Scandi Standard reported a 13.8% rise to SEK34.6m in underlying operating profits for the July-to-September period, on revenues up 2.7% at SEK 653.7m.
“The improvement… referred mainly to better export prices, efficiency gains and higher net sales of further processed products,” said Leif Bergvall Hansen, the group’s chief executive.
However, in Sweden, operating profits dropped by 19.6% to SEK41.0m, despite growth of 5.2% to SEK657.8m in sales, amid continued trade bans, which fuelled a backing up of meat in the domestic market, boosting competition and compressing margins.
‘Oversupply of chicken’
The group estimated at SEK9m the dent to adjusted operating profits in Sweden from burd flu repercussions, which are expected to be felt for at least the rest of 2017, at a rate of SEK2m-4m per month.
“As a new case of bird flu was detected in a Swedish commercial flock during the second quarter, trade restrictions for Swedish poultry products are expected to remain for some time, with accompanying adverse effects on operating income,” Mr Hansen said.
Swedish takings were also being undermined by “weaker-than-normal” retail demand for chilled poultry products thanks to findings in Sweden’s poultry industry earlier in the year of higher-than-normal levels of campylobacter, which can cause food poisoning.
“The market situation involves an oversupply of chicken, which has led to increased price competition,” he said.
Scandi Standard said that with its Swedish takings “adversely impacted by bird flu and soft demand”, it was putting on hold plans for capacity expansion.
However, Mr Hansen added that the group was forecasting “demand for chilled products and the results in Sweden to gradually improve in the new year”.
In the July-to-September period, campylobacter levels “were below normal for the season”.
Irish margins drop
The comments came as the group revealed a dip of 6.3% to SEK46.5m in earnings for the July-to-September quarter, on revenues up 16.2% at SEK1.82bn.
The result, which fell a little short of market expectations, included first contributions from Manor Farm, Ireland’s top poultry group, which reported a pro-forma drop of 10.4% to SEK26.8m in adjusted operating profit, despite growth of 9.2% to SEK423.3m in sales.
Profitability at Manor Farm, which has a 50% share of the Irish retail market for fresh chicken, was “negatively impacted by higher than normal production costs in the quarter due to volume ramp-up”, Mr Hansen said.
Scandi Standard shares recouped early losses to stand 2.1% up at SEK61.25 in late morning deals in Stockholm.