Business risks

Atria as an investment

Business risks

Q3/2022

Atria’s business, net sales and results may be affected by a number of uncertainties. Risk management and business risks are comprehensively described in Atria’s Annual Report 2021, which can be found at www.atria.fi/en/group/investors/financial-information/annual-reports.

In the third quarter, signs of an economic downturn abounded in Europe. Strong cost inflation and higher market rates have eroded household purchasing power and weakened public finances, while increasing costs for businesses. For Atria, raw material and packaging material prices as well as energy costs have increased. Changing consumer behaviour and future energy availability and cost increases are major uncertainties.

After a dry summer in 2021, grain prices increased. Ukraine is a major producer of feed grains and the military action on its soil has pushed up grain prices even further. According to preliminary data, this summer’s grain harvest in Finland was slightly better than average. However, increases in fertiliser and energy prices have kept grain prices high. For these reasons, costs incurred by meat farms have also remained high.

The rise in energy prices, which started just over a year ago, has continued in 2022. Russia’s war of aggression in Ukraine and the sanctions imposed on Russia have accelerated the rise, as Russia has been a major energy producer for Europe. The significant volatility in energy prices is expected to continue in the near future. Atria has hedged the system price risk of electricity in such a way that approx. 80% of the usage in the next twelve months is hedged and approx. 60% of the usage in the following twelve-month period. The electricity price risk, which is caused by the regional price difference, has been hedged against about 35%. The change in the fair value of electricity derivatives subject to hedge accounting is recorded in equity.

The risks associated with cybersecurity and information warfare have increased. Atria is prepared for an increase in cybercrime and information system failures. The purpose of systematic monitoring is to ensure rapid responsiveness in the event of an incident. At Atria, improving cybersecurity is an ongoing process.

COVID-19 is impacting Atria’s operations for the third consecutive year. In early autumn, the incidence of the virus has increased again. Atria is striving to prevent the pandemic’s effects on the health of its personnel and to secure safe working conditions and a disruption-free supply chain.

Atria has a holding of 2 per cent in Majakka Voima, which has become subject to claims for damages due to the Fennovoima project. Atria believes it is unlikely that the claims will result in any significant costs for Atria. Atria has written down the value of its shares in Majakka Voima Oy in its accounts in 2021.

Atria Finland exports pork to China. The demand for meat and the price of meat can fluctuate very quickly in the Chinese market, which is a risk to both volumes and the price level.

African swine fever is present in several European countries as well as in China and Russia. The occurrences of the highly pathogenic avian influenza detected in Europe have resulted in uncertainties in the poultry market. Due to the risk of these diseases spreading to Finland, Atria implements measures to prevent the spread of the diseases at its own production facilities and contract production farms.