ATRIA GROUP PLCS INTERIM REPORT 1 JANUARY 30 JUNE 2006 * Group turnover was EUR 523.3 million (EUR 468.8 million), growth 11.6 per cent. * Operating profit was EUR 11.0 million (15.9 million) and profit before taxes EUR 8.9 million (EUR 15.2 million). * Earnings per share amounted to EUR 0.25 (EUR 0.51). Review Q2/2006: - GROUP TURNOVER CONTINUED ITS SUBSTANTIAL GROWTH - IN FINLAND AND SWEDEN EARNINGS SAW A POSITIVE DEVELOPMENT TREND - IN RUSSIA SALES CONTINUED TO GROW STEADILY, NON-RECURRING ITEMS TAXED EARNINGS Atria Groups second quarter turnover grew 12.7 per cent compared to the corresponding period in the previous year (JanuaryJune 11.6 per cent). Earnings for the review period were below the level of earnings during the corresponding period in 2005. Earnings in Finland saw a positive development trend compared to the first quarter thanks to efficiency measures. Finnish operations account for 62.2 per cent of all Group operations. In Sweden, review period earnings were at the same level as during the corresponding period in 2005 and took a turn for the better compared to the first quarter. In Russia, sales continued to grow steadily. The growth achieved during the period JanuaryJune was 41 per cent. Earnings for the review period remained in the red. Earnings were taxed by non-recurring costs related to the takeover process and the steep increase in meat raw material prices. Development of operations continued in the Baltic countries. Earnings were unsatisfactory. During the review period, Atria Group plc was reorganised. A management group was established for Atria Group. The management group is responsible for the management and monitoring of country-specific operations. Group economic objectives Atria Group plcs Board of Directors has confirmed the following economic objectives: - Equity ratio 40% - Operating profit 5% - Return on equity (ROE) 12% - International operations 50% of turnover - Distribution of dividends 50% of the profit of the period Administration The AGM confirmed the financial statements on 3 May 2006 and decided to distribute a dividend of EUR 0.595 per share. On 27 June 2006, the Supervisory Board elected Ms Leena Saarinen, M.Sc. (Food Sc.), President and CEO of Altia Corporation, as a new member of Atria Groups Board of Directors. Finland In Finland, turnover amounted to EUR 176.0 million (JanuaryJune EUR 332.8 million), including growth of 8.8 per cent (JanuaryJune 8.6 per cent). During the review period, measures were initiated to improve profitability. These measures were evidenced in the upturn in earnings at the end of the second quarter. In Finland, the increase in the price of energy and certain purchasing services has affected the earnings potential. It has not been possible to completely transfer the increase in production costs to sales prices. The start-up of operations at the Nurmo pig slaughtering and cutting plant caused still some non-recurring costs. The operations were stabilized by the end of the second quarter. The integration of Liha ja Säilyke Oys operations into Atrias meal solutions business unit has progressed according to plan. Integration of the operations will be completed by the end of the year. Liha ja Säilyke Oy will continue to operate as a production unit, while commercial operations will be integrated into Atrias corresponding operations. In January 2006, Atria and HK Ruokatalo announced that they had embarked on a feasibility study to work together to safeguard domestic turkey production. Based on the study, the companies have decided to establish a joint turkey meat production company, Länsi-Kalkkuna Oy, owned on a 50-50 basis. The aim of the cooperation is to safeguard turkey farming and turkey meat processing in Finland, as well as to provide consumers with competitive domestic turkey products. The turkey meat production company is intended to be operative from the beginning of 2007. The cooperation applies solely to primary production, slaughtering and cutting. Sales and market shares developed in a positive manner in all product groups represented by Atria. The market shares in retail-packed meat and poultry meat as well as in the product group of sausages and bacon grew noticeably faster than the market in total. Atrias growth in grilling sausage sales at the beginning of the summer was also faster than the market in general. Atrias market share of the early summer grilling sausage market (weeks 1827) was approximately 45 per cent (source: AC Nielsen). Summer season deliveries were completed without setbacks. Atria Finlands (Atria Oy) management was reorganised during the review period. Mr Juha Gröhn, M.Sc. (Food Sc.), was appointed General Manager of Atria Oy effective 1 June 2006. At the same time, a management group was established for operations in Finland. Sweden In Sweden, turnover amounted to EUR 82.1 million (JanuaryJune EUR 152.6 million), including growth of 1.4 per cent (JanuaryJune 1.5 per cent). Review period earnings were at the same level as during the corresponding period in 2005. In early 2006, investments to strengthen the Lithells brand and develop marketing were initiated in Sweden. The meat industry market in Sweden is in a state of ferment. The largest operator in the market has made a loss and is now officially for sale. This provides other operators, such as Atria Lithells AB, with an opportunity to improve their market shares. Svensk Snabbmat ABs operations and earnings performed as expected. The biggest operator in HoReCa wholesale outlets and Svensk Snabbmat ABs competitor ICA Meny has changed owners. Atria Concept ABs operations and earnings developed in a positive direction during the review period. Atria Swedens organisation was reorganised during the review period. Mr Christer Åberg was appointed General Manager of Atria Sweden and the sales and marketing organisation was confirmed. Russia and the Baltic Countries Turnover in Russia and the Baltic Countries during the review period amounted to EUR 26.5 million (JanuaryJune EUR 48.7 million). Earnings remained in the red. During the review period, operations in the Baltic Countries were reorganised. Mr Raimo Kirmanen was appointed head of Atria Baltic Countries. During the review period, several development measures have been initiated in the Baltic Countries. These measures are intended to improve the profitability of operations. Atria's sales have grown rapidly in Russia. Growth amounted to 41 per cent during the period JanuaryJune compared to the corresponding period in the previous year. Pit-Product's total market share in the St. Petersburg region was 22 per cent during the period January-May. In the same time Pit-Product was the market leader in the St. Petersburg area. (Source: AC Nielsen) In Russia the earnings potential was temporarily weakened by meat raw material price increase and non-recurring costs related to the takeover process. It has not yet been possible to completely transfer the raw material price increase to sales prices. The takeover process has been completed and related reorganisation of structures and organisation has been initiated. New production capacity is being built, and plans for a new plant and logistics centre are being drawn up. Mr Juha Ruohola, M.Sc. (Agr. & For.), was appointed head of the Russian and Baltic operations, effective 1 June 2006. Personnel During the review period, the following appointments have been made within the Group (effective 1 June 2006): - Mr Matti Tikkakoski, President & CEO - Mr Juha Gröhn, Primary Production, Executive Vice President & Deputy CEO - Mr Pasi Luostarinen, Group Vice President Marketing & Product Development - Ms Merja Leino, Group Vice President Quality & Product Safety - Mr Christer Åberg, Group Vice President International Accounts - Mr Jukka Mäntykivi, Group Vice President IT, Steering & Logistics - Mr Erkki Roivas, Chief Financial Officer - Mr Juha Ruohola, Group Vice President Purchasing & Investments In early 2006, Atria Groups personnel numbered approximately 5,816 (4,296). Investments At the end of the review period, an important uncompleted investment was the expansion of the logistics centre in Nurmo. The logistic centre investments share of the investments during the first half of 2006 amounted to approximately EUR 15.0 million. In Russia, an approximately EUR 5 million expansion to increase production capacity was initiated. Financing During the review period, a share issue directed at institutional investors was launched. Due to the share issue the number of shares increased by 1.1 million A Series shares. The share issue increased shareholders equity by a total of EUR 20.9 million. The Boards valid issue authorisations The AGM authorised the Board of Directors to decide on increasing the companys share capital by means of one or more subscription issues, so that the maximum number of the companys A Series shares, with a nominal value of EUR 1.70, should not exceed a total of 4,218,545 shares, thereby increasing the companys 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 2007. A total of 1,100,000 of the authorised A Series shares have been used during the review period. Outlook for the rest of the year Earnings in Finland saw a positive development trend thanks to efficiency measures and price increases, which will continue for the rest of the year. Due to the weak earnings early in the year, full year earnings will remain below last years level in Finland. Price increases will also be implemented in Sweden before the end of the year. Full year earnings are expected to be at no less than last years level. In Russia, sales continue to grow steadily. Full year earnings will remain somewhat in the red due to non-recurring items implemented during the second quarter. In the Baltic Countries, efficiency measures will continue and full year earnings are expected to remain at last years level. KEY INDICATORS 1-6/2006 1-6/2005 1-12/2005 EUR million Equity/share, 12.13 12.36 12.08 Interest-bearing liabilities 242.0 170.0 206.9 Interest-bearing assets 48.4 41.8 43.7 Equity ratio, % 42.9 46.3 43.0 Gross investments 37.8 42.3 107.3 Gross investments of turnover, % 7.2 9.0 11.0 Average personnel 5,816 4,296 4,433 Principles applied in preparing the interim report This interim report has been prepared in accordance with the IAS 34 Interim Financial Reporting standard. 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. ATRIA GROUP PLC CONSOLIDATED BALANCE SHEET Assets EUR million 30.6.06 30.6.05 31.12.05 Non-current assets Property, plant and equipment 347.2 287.5 329.3 Goodwill 52.3 36.1 50.1 Other intangible assets 22.9 20.1 22.7 Loan assets and other receivables 6.1 4.8 5.1 Other financial assets 6.7 6.4 5.8 Total 435.2 354.9 413.0 Current assets Inventories 62.0 56.6 58.6 Trade and other receivables 168.0 145.5 151.0 Cash and cash equivalents 9.7 6.1 17.5 Total 239.7 208.2 227.1 Total assets 674.9 563.1 640.1 Equity and liabilities EUR million 30.6.06 30.6.05 31.12.05 Equity belonging to parent companys shareholders 269.3 241.0 254.8 Minority interests 20.2 19.7 20.2 Equity total 289.5 260.7 275.0 Long-term liabilities Interest-bearing liabilities 126.8 87.5 115.5 Deferred tax liabilities 23.0 20.6 22.5 Pension obligations 0.3 0.4 0.4 Total 150.1 108.5 138.4 Current liabilities Interest-bearing liabilities 115.2 82.5 91.4 Trade and other payables 120.1 111.4 135.3 Total 235.3 193.9 226.7 Total liabilities 385.4 302.4 365.1 Equity and liabilities total 674.9 563.1 640.1 CONSOLIDATED INCOME STATEMENT EUR million 4-6/06 4-6/05 1-6/06 1-6/05 1-12/05 Turnover 278.3 247.1 523.3 468.8 976.9 Expenses -263.1 -229.5 -495.0 -436.9 -905.2 Depreciations -8.7 -8.0 -17.3 -16.0 -31.5 Operating profit 6.5 9.6 11.0 15.9 40.2 * of turnover 2.3 3.9 2.1 3.4 4.1 Income from associates 0.3 0.5 0.7 0.8 0.8 Financial income and expenses -1.6 -0.7 -2.8 -1.5 -3.2 Profit before taxes 5.2 9.4 8.9 15.2 37.8 * of turnover 1.9 3.8 1.7 3.2 3.9 Income taxes -2.4 -2.5 -3.3 -4.1 -10.8 Profit for the period 2.8 6.9 5.6 11.1 27.0 * of turnover 1.0 2.8 1.1 2.4 2.8 Profit distribution for the period: To parent company shareholders 2.6 6.6 5.4 10.8 26.2 To minority shares 0.2 0.3 0.2 0.3 0.8 Total 2.8 6.9 5.6 11.1 27.0 Basic earnings/share, 0.12 0.31 0.25 0.51 1.24 Diluted earnings/share, 0.12 0.31 0.25 0.51 1.24 CALCULATION OF CHANGES IN SHAREHOLDERS' EQUITY EUR million Equity belonging to owners of Mino Equity the parent company 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 -1.7 -1.7 -0.1 -1.8 Profit for the period 10.8 10.8 0.3 11.1 Distribution of dividends -12.5 -12.5 -12.5 Shareholders' equity 30.6.2005 35.8 104.4 -1.2 102.0 241.0 19.7 260.7 Shareholders' equity 1.1.2006 35.8 104.4 -0.9 115.5 254.8 20.2 275.0 Translation differences 0.6 0.6 -0.1 0.5 Profit for the period 5.6 5.6 0.1 5.7 Distribution of dividends -12.6 -12.6 -12.6 Equity issue 1.9 19.0 20.9 20.9 Shareholders' equity 30.6.2006 37.7 123.4 -0.3 108.5 269.3 20.2 289.5 CASH FLOW STATEMENT FOR THE GROUP EUR million 1-6/06 1-6/05 1-12/05 Cash flow from operations -4.4 4.1 59.3 Financial items and taxes -5.7 -5.0 -12.4 Cash flow from operations -10.1 -0.9 46.9 Investments Investments in tangible and intangible assets -37.4 -42.3 -98.3 Investments -3.9 -2.6 -3.5 Cash flow from investments -41.3 -44.9 -101.8 Cash equity issue 20.9 Loans drawn down 48.4 61.4 91.4 Loans repaid -13.1 -9.6 -19.2 Dividends paid -12.5 -12.5 -12.7 Cash flow from financing 43.7 39.3 59.5 Change in liquid funds -7.7 -6.5 4.6 SEGMENT INFORMATION GEOGRAPHICAL EUR million 4-6/06 4-6/05 1-6/06 1-6/05 1-12/05 Turnover Finland 176.0 161.8 332.8 306.5 634.3 Sweden 82.1 81.0 152.6 155.0 314.0 Russia and Baltic 26.5 7.6 48.7 14.2 42.7 Eliminations -6.3 -3.3 -10.8 -6.9 -14.1 Total 278.3 247.1 523.3 468.8 976.9 Operating profit Finland 7.1 8.1 11.1 13.9 31.6 Sweden 2.0 2.1 2.3 2.8 7.1 Russia and Baltic -2.6 -0.6 -2.4 -0.8 1.5 Total 6.5 9.6 11.0 15.9 40.2 LIABILITIES EUR million 30.6.06 30.6.05 31.12.05 Debts for which collateral has been provided in the form of mortgages and other securities Loans from financial institutions 93.8 84.3 79.8 Pension fund loans 6.5 5.9 6.2 Total 100.3 90.2 86.0 Mortgages and other securities given as comprehensive security Real-estate mortgages 77.8 77.3 78.7 Corporate mortgages 43.9 43.4 44.2 Other security 54.9 50.2 47.3 Total 176.6 170.9 170.2 Guarantee engagements not included in the balance sheet Unused limits 90.8 80.8 107.8 Guarantees 15.4 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.