ATRIA GROUP PLC'S INTERIM REPORT 1.1. - 30.6.2003 Atria Group's operating profit in the first quarter of 2003 was EUR 11.6 million (EUR 9.5 million). The profit before extraordinary items, was EUR 7.9 million (EUR 7.4 million). The turnover was EUR 374.8 million (EUR 330.0 million), earnings per share EUR 0.35 (EUR 0.32) and shareholders' equity per share was EUR 11.83 (EUR 11.35). PROFIT AND LOSS ACCOUNT GROUP (EUR Million) 1-6/2003 1-6/2002 1-12/2002 TURNOVER 374.8 330.0 707.0 NET OPERATING PROFIT 11.6 9.5 25.6 PROFIT BEFORE EXTRAORDINARY ITEMS 7.9 7.4 20.4 PROFIT BEFORE TAXES 7.9 7.4 20.4 PROFIT 5.6 5.1 14.1 The taxes in the profit and loss account are equivalent tax on income for the period under review. BALANCE SHEET, GROUP (EUR Million) ASSETS 30.6.2003 30.6.2002 31.12.2002 FIXED ASSETS Intangible assets 47.8 41.0 50.1 Tangible assets 250.7 217.5 243.8 Financial assets 5.6 7.5 5.0 CURRENT ASSETS Inventories 45.7 40.2 46.1 Receivables 88.1 79.4 77.5 Cash in hand and at bank 11.7 9.5 16.5 TOTAL 449.6 395.1 439.0 LIABILITIES SHAREHOLDERS' EQUITY Share capital and other shareholders´equity 187.1 179.6 188.6 MINORITY INTEREST 1.2 1.1 1.2 CREDITORS Long-term 113.8 80.6 123.4 Short-term 147.5 133.8 125.8 TOTAL 449.6 395.1 439.0 KEY FIGURES (EUR) 30.6.2003 30.6.2002 31.12.2002 Gross investments in fixed assets 19.0 19.9 66.0 Gross investments % of turnover 5.1 6.0 9.3 Personnel on average 3564 3298 3300 Earnings per share 0.35 0.32 0.89 Shareholders' equity per share 11.83 11.35 11.92 Equity ratio, % 41.9 45.8 43.3 Interest-bearing debt 168.8 133.8 157.9 CONSOLIDATED CASH FLOW STATEMENT (EUR million) 1-6/2003 1-6/2002 1-12/2002 Cash flow from operations 14.4 18.6 50.9 Financing items and taxes -5.7 -8.0 -14.9 Cash flow from operating 8.7 10.6 36.0 activities Investing activities -19.0 -19.8 -66.1 Cash flow from investing -19.0 -19.8 -66.1 activities Net change in loans 12.3 15.4 43.2 Dividends paid -6.7 -6.8 -6.8 Net cash from financing 5.6 8.6 36.4 activities Change in liquid funds -4.7 -0.6 6.3 CONSOLIDATED LIABILITIES (EUR million) 30.6.2003 30.6.2002 31.12.20 02 DEBTS INVOLVING MORTGAGES OR OTHER COLLATERAL AS SECURITY Loans from financial institutions 99.5 79.7 95.0 Pension loans 5.1 5.7 5.4 Total 104.6 85.4 100.4 MORTGAGES AND OTHER COLLATERAL GIVEN AS GENERAL SECURITY Mortgages on real property 75.4 62.2 64.4 Mortgages on company assets 48.0 22.3 25.6 Other collateral 47.1 67.9 40.6 Total 170.5 152.4 130.6 MORGAGES AND OTHER COLLATERAL GIVEN ON BEHALF OF GROUP COMPANIES Guarantees 34.3 - 21.8 CONTINGENT LIABILITIES NOT INCLUDED IN THE BALANCE SHEET Limits not used 77.7 55.8 82.3 Guarantees 0.9 0.8 1.0 Leasing liabilities Payable in the next financial year 0.9 0.6 1.0 Payable later 1.3 1.2 1.2 Total 2.2 1.8 2.2 The figures are not audited. ATRIAS RESULT IMPROVES SLIGHTLY ON THE PREVIOUS YEAR The Atria Groups turnover in the first half of the year was up 13.6% to EUR 374.8 million (EUR 330.0 million in 2002). The bulk of the growth came in Sweden, because the operations of Samfood AB, which was acquired last autumn, were now included in the Group figures for the whole first half of the year. Operations in Sweden accounted for 38% of consolidated turnover. Consolidated profit before extraordinary items in the report period was EUR 7.9 million (EUR 7.4 million) and it was EUR 5.9 million in the second quarter (EUR 5.2 million). Operating profit in the second quarter was EUR 7.8 million (EUR 6.4 million), up 21.9%, and half-year operating profit was EUR 11.6 million (EUR 9.5 million), up 22.1%. Earnings generated by the units showed structural differences. Operations in Sweden and processed meat production in Finland improved their earnings, whereas the result for slaughterhouse operations in Finland weakened further. The slaughterhouse industrys earnings have been hurt by the very low level of pork prices due to heavy overproduction worldwide. The business cycle is expected to improve during 2004. This will have a major bearing on the earnings generated by the entire Group. All in all, Atrias volume of meat procurements grew by 7.5 percentage points. From the beginning of 2003, the Atria Group went over to a new corporate structure. The parent company is Atria Group plc, which owns the shares in subsidiaries and the fixed assets. The businesses in Finland are run by the subsidiaries Atria Oy and Liha ja Säilyke Oy. The subsidiary Lithells AB is responsible for operations in Sweden. Following the Samfood acquisition, Atria Group plc is the largest manufacturer of meat products in the Nordic countries and the Baltic area. Positive trend in retail sales Atria Oys retail sales showed positive development in the major product groups. The company strengthened further its position as the market leader in cold cuts, and sales of poultry and retail- packed meat developed favourably. Cold weather conditions weakened grill-season sales in the early summer but, all things considered, the Groups summer sales, delivery reliability and the summer season as a whole held up well. Sales of cheap grill sausages declined in step with the sharp fall in market prices, but within A-class grill sausages, Wilhelm retained its strong position and Atria was the market leader within the entire grill sausage category. Liha ja Säilyke Oy The salads and cold cuts which Liha ja Säilyke Oy manufactures and sells under the Forssan brand have sold well. Delivery reliability in the summer season remained good and market share grew. The company has trimmed its product assortment and concentrated on its strong product groups. Turnover was EUR 20.1 million, growing by 2.8%. The Lithells Group shows strong growth and a positive trend in profitability At present, the Lithells Group comprises Atria Lithells AB and Samfood AB, which manufacture meat products and convenience foods, the Atria Concept AB fast food business and Svensk Snabbmat AB, which operates in the local wholesale trade. Atria Lithells AB and Samfood AB, meat products and convenience foods Operations of the previously loss-making Samfood AB, which was acquired in September 2002, have been restored to profitability during the second quarter nearly in line with the planned timetable. At the same time, the market share in Sweden of the meat products manufactured by the Lithells Group rose to about a quarter of Swedens total market. Integrating the Samfood business into our operations in Sweden has largely been completed. The most important changes, such as moving production from the Hamnen plant in Malmö to the Fosie plant and the expiry of the Hamnen plants lease agreement have for the most part taken place during the second quarter and will be seen to completion during the third quarter. Similarly, the consolidation of sausage production within the Sköllersta plant has nearly been completed. The handling of retail-packed meat has been centralised at Årsta near Stockholm. Concurrently, an important long-term co-operation agreement on retail-packed meat was signed with Coop Sverige AB. Atria Concept AB, fast food business Atria Concept, whose operations encompass fast food stands and the Sibylla Inside business, increased its share of sales by fast food stands through an acquisition. The Sibylla chain was rounded out by the addition of the Fyrkanten and Sammys chains, doubling the number of units in Sweden. At present, Atria Concept has a market share of about 65% of the market in fast food stands in Sweden. The Sibylla Inside business registered fast organic growth, increasing the number of new units in the chain by more than 40%. Sibylla Inside has about 930 outlets in Sweden, 250 in Finland and over 100 in Denmark as well as a total of more than 300 in Poland and the three Baltic countries. According to a consumer survey carried out by the ISI Wissing consumer research institute, the Sibylla brand ranks highest among customers as a fast food brand. This survey covered all the fast food chains in the Swedish market. Svensk Snabbmat AB, local wholesale business The Svensk Snabbmat AB local wholesale trade, which is a non-core business of Lithells AB, retained its position despite the weakening in consumer demand in the catering products market. Svensk Snabbmat AB has maintained its profitability at the previous years level. Atria stakes out a position in Lithuania On 8 July 2003, Atria Group plc signed an agreement on acquiring the Lithuanian company UAB Saltuva. Via the deal, the company will become a wholly-owned subsidiary of Atria. UAB Saltuva will pass into Atrias ownership on 28 August 2003. UAB Saltuva has just started building a meat processing plant in Vilnius. The company has obtained a significant investment grant for this purpose. The intention is for the company to have its products custom-produced until the new companys plant has been completed. Thereafter, the custom manufacturer will wind up meat processing operations at the old plant because its technology does not meet the EUs requirements now that Lithuania will become a member of the EU in spring 2004. The companys present management will stay on, and its well-known brands and marketing channels will similarly be retained in line with operations up to now. The company also exports products to Latvia. UAB Saltuva presently has turnover of EUR 10 million and its market share of meat products in Lithuania is estimated at about 10%. Atrias objective is to move ahead step by step on its way to becoming a strong player in the largest markets in the Baltic area. At present, no other western-owned companies in the meat processing industry are operating in Lithuania, and following Lithuanias accession to membership of the EU, structural changes are expected to take place in the industry. Atria is also currently exploring the conditions and potential for starting operations in western Russia. If the preconditions for starting operations are felt to be adequate, the objective will be to launch a step-by-step entry into the market either alone or together with an appropriate partner in co-operation, depending on the extent and objective of the operations. Group investments During spring, Atria Oy placed in use the extension - built at a cost of about 20 million euros - to its poultry processing plant. The start-up has gone according to plans. The extension and the operational changes it brings will be fully integrated into operations during the third quarter. In other respects, Atrias investments in operations in Finland have consisted mainly of replacement investments. In the autumn Liha ja Säilyke Oy will begin building facilities intended for the product dispatching functions. Plans have been laid in good co-operation with the town of Forssa and, when completed, the facilities will also make it possible to expand production operations because the previous premises will be available for these usage purposes. The investments made by the Lithells Group went primarily for reorganising operations and partly for modernising production lines. The objective is to keep investments at a level where they can be financed from the cash flow generated in Sweden. Outlook for the future The Atria Groups operations showed positive development within the processed meat industry. By contrast, the profitability of slaughterhouse operations was weak. A significant factor underlying earnings is that Atria has been able to make strong cost adjustments in all areas of operations. Despite this, it is still very difficult to forecast profits going forward owing to the situation in the meat markets and particularly in the pork market. The sharp downswing that has persisted for a year and a half may come to a halt, but a cyclical rebound in this sector is not likely to take place until some time next year. Furthermore, the strengthening in the euro against the US dollar has weakened the profitability of pork meat sales both in Finland and across Europe. After the downsizing costs in the first months of the year, operations in Sweden have had good profitability and it is believed that the current momentum will continue ahead. Because within operations in Finland there has also been a positive trend in the profitability of the meat products and poultry business, the entire Groups earnings trend will depend crucially on the major changes unfolding within the slaughtering industry. ATRIA GROUP PLC Seppo Paatelainen President DISTRIBUTION Helsinki Exchanges Principal media The interim report will be mailed at request or it can be read on our internet pages: www.atria.fi
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