UPDATE 1-HKScan warns of weaker 2008 profits, shares slide

HELSINKI, July 4 (Reuters) - Finnish food company HKScan Oyj (HKSAV.HE: Quote, Profile, Research) warned on Friday that full-year 2008 earnings would fall clearly below the 2007 level as its markets had not recovered as expected.

The announcement sent HKScan shares down 13.9 percent to 7.11 euros on the Helsinki bourse by 1149 GMT, their lowest level since December 2004.

HKScan had earlier forecast that 2008 profits would be on a par with 2007 if a difficult situation in the international pork market was overcome in the second half of the year.

"Management now estimates that a reversal in economic trends will be pushed back towards the end of 2008," the company said in a statement.

"This will weaken the company's earnings performance in all its markets and, in a departure from earlier estimates, depress full-year earnings clearly below those in 2007," HKScan said.

Earnings will fall short of forecasts both for the first half of the year and in the third quarter, it said.

Moreover, substantial additional costs from the use of frozen meat stocks in Finland and non-recurring writedowns of primary production in Poland will be booked in the second quarter, the company added.

"The costs of raw materials and energy have been rising at record rates and the company has in practice been unable to pass these on to sales prices," it said. "This is reflected in clearly depressed sales margins in all the Group's markets." Efficiency measures alone will not be enough. Instead, wholesale prices of meat and meat products must be raised in all markets to restore normal business as soon as possible, it said. (Reporting by Helsinki Newsroom; Editing by Quentin Bryar)