June 4, 2007

HKScan to rationalise meat operations in Sweden

Sweden's meat processor HKScan is to launch a programme called Scan AB which aims to reorganise meat processing activities and save production costs between 18 million euros and 22 million euros. This efficiency programme, which will run for two years, is designed to improve competition strengths and turn around an unsatisfactory financial performance of Scan AB.

The planned efficiency programme has also invested production modernisation techniques and work practices at plants. Scan's business will be reorganised into two profit centres, Meat Business and Processed Meat and Convenience Food Business, to overhaul its marketing and sales department.

Implementation of the efficiency measures included in the programme calls for investments of roughly 20 million euros between 2007 and 2009. The company will also make write-downs of approximately 10 to 15 million euros.

The two-year efficiency programme will however slash 400 job cuts in several plants or about 12 percent of current Scan personnel. The workforce will remain in meat production.

Savings from the programme are expected to be full effective from the third quarter of 2009.

HKScan's efficiency programme is the continuous centralisation of production currently underway at Scan and initiated by Swedish Meats in 2006. The centralisation measures have involved the closure of the Skurup processing plant in autumn 2006 and the shutdown of the Visby cutting plant as well as operations in Helsingborg and Malmo in early 2007. Operations in Kävlinge will be discontinued in the third quarter of 2008.

Scan is also starting work on a national distribution centre in Linkoping together with an outside partner. The centre is designed to enhance efficiency and flexibility in logistics while also allowing further progress to be made in customer service and delivery reliability. Construction will begin this month and the distribution centre should come on line in 2010.