ATRIA GROUP PLC'S INTERIM REPORT 1 JANUARY - 31 MARCH 2006
* Group turnover for the period was 244.9 million euro (221.7 million euro),
representing growth of 10.5 per cent
* Operating profit was 4.5 million euro during the period (6.3 million euro)
and profit before tax was 3.8 million euro (5.8 million euro)
* Earnings per share amounted to 0.13 euro (0.20 euro)
Group earnings were in line with expectations
Atria Group's first quarter turnover and earnings were at the expected level.
The fact that the Easter season fell in the second quarter had a weakening
effect on group earnings in Finland and Sweden.
The closing of the Kuopio pig slaughterhouse and combining its operations with
the Nurmo slaughterhouse resulted in overlapping one-time costs during the
first quarter.
The company was not able to pass on the general increase in production
investment costs in Sweden and Finland to sales prices in full.
The Baltic development programme progressed as planned, which was visible as
improved earnings.
In Russia, sales grew in line with expectations and resulted in positive
earnings.
Finland
Atria Group's supplier share continued developing positively and amounted to 29
per cent (Source: AC Nielsen Scantrack YTD 2006). The most positive market
share development was seen in poultry products and retail-packed meat.
The fact that the Easter season, when highly profitable products are in demand,
fell in the second quarter had a weakening effect on first quarter earnings.
During the period the Kuopio pig slaughterhouse was closed and its operations
were transferred to the Nurmo production plant, where a new pig slaughtering
line worth 22 million euro was introduced. Pig slaughtering caused overlapping
costs when both lines were in use during the implementation stage of the new
line.
During the first quarter Atria's procurement volumes for pork and beef have
developed positively, the procurement volume for beef increased by nearly 7 per
cent and the procurement volume for pork increased by over 13 per cent compared
to last year.
Atria's convenience food and meat product operations were reorganised in
Finland from the beginning of 2006. Atria's meal solutions became a new
business unit that, in addition to Atria's operations, also comprise the
operations of Atria's subsidiary Liha ja Säilyke Oy, located in Forssa. The
management of Forssa's meat product operations also became the responsibility
of Atria's meat product industry. These changes aim to further improve Atria's
business renewal ability, profitability and business growth.
Atria has estimated that the effects of the news on avian influenza (bird flu)
on poultry consumption will be limited. In January-March, the consumption of
poultry decreased in Finland by 5 per cent compared to the corresponding period
last year (Source: Suomen Gallup Elintarviketieto Oy). Simultaneously, Atria's
supplier volume in retail-packed poultry increased by more than 7 per cent
(Source: AC Nielsen Scantrack YTD 2006). The decrease in consumption concerned
mainly imported meat. The share of the poultry industry in Atria Group's
turnover is below 10 per cent.
The construction and installation of the expansion of Nurmo's logistics centre
are progressing according to schedule. The construction of the logistics centre
began in July 2005 and the expansion should be completed and ready for use by
the spring of 2007. The expansion investment for the logistics centre comes to
approximately 37 million euro.
In Finland, the pressure to increase sales prices due to increased costs is
strong. Atria has not yet been able to transfer the price increases to sales
prices in full.
Sweden
Lithells Group's first quarter sales and earnings were at anticipated levels.
However, the fact that the Easter season fell in the second quarter weakened
earnings when compared to the previous year.
During the review period Lithells AB's subsidiary Atria Concept AB expanded its
operations to St. Petersburg, Russia, where eight Sibylla Is Inside sales
counters were opened.
The price of meat raw material was still at a high level during the period.
Prices are, however, expected to stabilise during the year.
Baltic States
In the Baltic States the turnover of Lithuanian operations decreased slightly
due to the closing of the unprofitable meat cutting operations; however,
earnings increased. The development programme has been forcefully pushed
forward, which is visible as better cost control and a sales increase in meat
products in particular.
In Estonia, development of primary production has continued through the
expansion of pig houses. This expansion and development investments will be
completed by the end of this year. Sales of retail-packed meat developed
positively during the period.
Traditionally, sales has been weak in the Baltic markets during the first
quarter. The demand peak in meat products is seen in the summer.
Russia
Pit-Product's turnover developed positively during the period and earnings were
also positive despite the traditionally slow demand in the first quarter and
the long local holidays in January.
The takeover process has progressed quickly and will be completed soon. A
temporary increase in production capacity and the design project for the new
production plant and logistics centre were the main projects in Russia during
the period.
Personnel
Matti Tikkakoski, MSc (Econ.), took over as the new President & CEO of the
group on 1 February 2006. Christer Åberg took over as the Managing Director of
Lithells AB on 1 April 2006. Atria's meat product industry director, Juha
Ruohola, was appointed as the Director of the Pit-Product takeover process.
During the period Atria Group's personnel numbered 5,293.
Investments
The pig slaughterhouse expansions, which cost 22 million euro during the
period, was completed at the beginning of April. The implementation of the new
expansion continues during the second quarter. Another major construction
project concerns the expansion of the logistics centre, which has progressed
according to plan and will be opened in the spring of 2007.
The approximately 70 million euro investment programme in Nurmo will be
completed during 2007. Of this investment, 20 million euro is directed at 2006
and the remaining 10 million euro at 2007.
In Russia, the possibility to build a new production plant and logistics centre
in St. Petersburg has been investigated. The results will be reported later
this year.
Financing
During the period interest-bearing liabilities increased by 16.8 million euro
(+8.1%). Financing has been carried out by utilising the parent company's
financing limits.
The Board's valid issue authorisations
The AGM has authorised the Board of Directors to decide on increasing the
company's share capital by means of one or more subscription issues, so that
the maximum number of the company's A Series shares, with a nominal value of
EUR 1.70, should not exceed a total of 4,218,545 shares, thereby increasing the
company's share capital by a maximum of EUR 7,171,526.50.
The authorisation is valid for one year from the empowerment decision taken by
the AGM, until the AGM arranged for 3 May 2006. The Board of Directors has
decided to present to the AGM a similar authorisation request, valid for one
year from the empowerment decision.
Changes in the operating environment
During the period avian influenza (bird flu) has been found around Europe. In
Finland, the issue was visible in the news in early 2006. This lead, on the one
hand, to a slight, approximately 5 per cent, decrease in the consumption in
poultry compared to the year before, and, on the other hand, to a heavy
decrease in poultry imports. The industry and authorities have emphasised that
the Finnish poultry production chain is safe. In Finland, productive animals
are kept indoors, completely isolated from wild birds.
According to a poll carried out in week 9 by Suomen Gallup Elintarviketieto, 99
per cent of respondents believed that Finnish poultry is safe for food. 61 per
cent found it very safe, while 52 per cent felt this way in early March.
Consumers are also increasingly satisfied with the steps taken by the meat
industry and authorities to ensure safety. According to research, 95 per cent
of Finns eat chicken and 74 per cent eat turkey. More than four out of five
consumers continue to eat poultry products as before. There are more people
that have increased than decreased their consumption. (Source: Suomen Gallup
Elintarviketieto, press release 13 April 2006).
Outlook for the rest of the year
Completion of the pig slaughterhouse expansion so that the operations can be
introduced fully is expected to take place by the beginning of the third
quarter.
The integration project of Liha ja Säilyke Oy's and Atria's convenience food
production with all its changes will depress earnings slightly in the second
quarter.
The effects of the news on avian influenza (bird flu) on domestic poultry
consumption are limited. We expect demand to decrease by only a couple of
percentage points during the rest of the year. Research into improving the
profitability of the loss-making turkey operations will continue.
Domestic sales in the main product groups will continue developing positively,
but at the same time the pressure to raise sales prices will increase strongly
due to increased raw-material costs. The earnings of Atria's domestic
operations are expected to be slightly weaker during the second quarter than in
the corresponding period last year.
In Sweden, Lithells AB's operations will continue stably and the full year
earnings are expected to be at last year's level. The increase in
prices of meat raw materials is expected to stabilise during the year.
Pit-Product sales will continue developing positively and turnover is expected
to amount to approximately 75 million euro in 2006. Operating result in Russia
will be slightly in the black.
Baltic operations are expected to continue developing positively and full year
earnings are expected to improve slightly from last year.
KEY INDICATORS
mill. EUR 1-3/2006 1-3/2005 1-12/2005
Equity/share, 12.21 12.71 12.08
Interest-bearing liabilities 223.6 146.9 206.9
Equity ratio, % 43.4 50.1 43.0
Gross investments 13.9 23.0 107.3
Gross investments of turnover, % 5.7 10.4 11.0
Average personnel 5,293 4,090 4,433
Principles applied in preparing the interim report
This interim report has been prepared in accordance with IAS 34 Interim
Financial Reporting. The firm has applied the same principles in preparing this
interim report as in preparing the 2005 annual financial statements. This
interim report is unaudited.
CONSOLIDATED BALANCE SHEET
Assets
EUR million 31-3-06 31-3-05 31-12-05
Non-current assets
Property, plant and equipment 332.7 276.4 329.3
Goodwill 52.0 34.5 50.1
Other intangible assets 22.7 21.0 22.7
Loan assets and
other receivables 5.6 4.6 5.1
Other financial assets 6.3 7.3 5.8
Total 419.3 343.8 413.0
Current assets
Inventories 64.5 54.4 58.6
Trade and other receivables 143.8 127.2 151.0
Cash and cash equivalents 13.2 10.7 17.5
Total 221.5 192.3 227.1
Total assets 640.8 536.1 640.1
Equity and liabilities
EUR million 31-3-06 31-3-05 31-12-05
Equity belonging to parent companys
shareholders 257.5 248.7 254.8
Minority interests 20.3 19.5 20.2
Equity, total 277.8 268.2 275.0
Long-term liabilities
Interest-bearing liabilities 125.2 84.5 115.5
Deferred tax liabilities 22.9 18.5 22.5
Pension obligations 0.4 0.4 0.4
Total 148.5 103.4 138.4
Current liabilities
Interest-bearing liabilities 98.4 62.3 91.4
Trade and other payables 116.1 102.2 135.3
Total 214.5 164.5 226.7
Total, liabilities 363.0 267.9 365.1
Equity and liabilities, total 640.8 536.1 640.1
CONSOLIDATED INCOME STATEMENT
EUR million 1-3/06 1-3/05 1-12/05
Turnover 244.9 221.7 976.9
Expenses -231.8 -207.4 -905.2
Depreciations -8.6 -8.0 -31.5
Operating profit 4.5 6.3 40.2
* of turnover 1.8 2.8 4.1
Income from associates 0.5 0.3 0.8
Financial income and
expenses -1.2 -0.8 -3.2
Profit before taxes 3.8 5.8 37.8
* of turnover 1.6 2.6 3.9
Income taxes -1.0 -1.6 -10.8
Profit for the period 2.8 4.2 27.0
* of turnover 1.1 1.9 2.8
Profit distribution for the period:
To parent company shareholders 2.8 4.2 26.2
To minority shares 0.8
Total 2.8 4.2 27.0
Basic earnings/share, 0.13 0.20 1.24
Diluted earnings/share, 0.13 0.20 1.24
CALCULATION OF CHANGES IN SHAREHOLDERS' EQUITY
EUR million
Equity belonging to the owners of the parent company
Mino Equity,
rity's total
interest
Share Share Trans Retained Total
equity premium lation earnings
diff.
Shareholders'
equity 1-1-2005 35.8 104.4 0.5 103.7 244.4 19.5 263.9
Translation differences 0.1 0.1 0.1
Profit for the period 4.2 4.2 4.2
Shareholders'
equity 31-3-2005 35.8 104.4 0.6 107.9 248.7 19.5 268.2
Shareholders'
equity 1-1-2006 35.8 104.4 -0.9 115.5 254.8 20.2 275.0
Translation differences -0.1 -0.1 0.1 0.0
Profit for the period 2.8 2.8 2.8
Shareholders'
equity 31-3-2006 35.8 104.4 -1.0 118.3 257.5 20.3 277.8
CASH FLOW STATEMENT FOR THE GROUP
EUR million 1-3/06 1-3/05 1-12/05
Cash flow
from operations -5.6 -2.1 59.3
Financial items
and taxes -1.0 -1.3 -12.4
Cash flow
from operations -6.6 -3.4 46.9
Investments
Investments in tangible
and intangible assets -14.0 -23.0 -98.3
Investments -0.6 -2.5 -3.5
Cash flow
from investments -14.6 -25.5 -101.8
Loans drawn down 28.8 32.9 91.4
Loans repaid -11.9 -6.0 -19.2
Dividends paid -12.7
Cash flow
from financing 16.9 26.9 59.5
Change in liquid funds -4.3 -2.0 4.6
SEGMENT INFORMATION
GEOGRAPHICAL
EUR million 1-3/06 % 1-3/05 % 1-12/05 %
Turnover
Finland 156.8 64.0 144.7 65.3 634.3 64.9
Sweden 70.5 28.8 74.0 33.4 314.0 32.1
Russia 15.4 6.3
Others and eliminations 2.2 0.9 3.0 1.4 28.6 2.9
Total 244.9 100.0 221.7 100.0 976.9 100.0
Operating profit
Finland 4.0 88.9 5.8 92.1 31.6 78.6
Sweden 0.3 6.7 0.7 11.1 7.1 17.7
Russia 0.3 6.7
Others and eliminations -0.1 -2.2 -0.2 -3.2 1.5 3.7
Total 4.5 100.0 6.3 100.0 40.2 100.0
LIABILITIES
EUR million 31-3-06 31-3-05 31-12-05
Debts for which collateral has been provided
in the form of mortgages and other securities
Loans from financial
institutions 86.4 76.5 79.8
Pension fund loans 6.3 6.1 6.2
Total 92.7 86.0 86.0
Mortgages and other securities given
as comprehensive security
Real-estate mortgages 77.6 77.5 78.7
Corporate mortgages 44.5 43.7 44.2
Other security 42.7 40.6 47.3
Total 164.8 161.8 170.2
Guarantee engagements
not included in the balance sheet
Unused limits 97.6 85.5 107.8
Guarantees 13.7 3.1 13.5
For additional information, please contact Mr Matti Tikkakoski, President &
CEO, tel. +358 50 2582.
ATRIA GROUP PLC
Matti Tikkakoski
President & CEO
DISTRIBUTION
Helsinki Stock Exchange
Principal media
www.atria.fi
The interim report will be mailed to you upon request and is also available on
our website at www.atria.fi.
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