Atria Plc, Financial Statement Release, 13 February 2020, 8:00 am
Atria Plc, Financial Statement Release, 1 January – 31 December 2019
Atria's financial performance continued strong during the fourth quarter
- Consolidated net sales totalled EUR 380.0 million (EUR 376.9 million).
- Consolidated EBIT was EUR 12.1 million (EUR 6.7 million), which is 3.2 per cent (1.8%) of net sales.
- Atria Finland’s profitability improved significantly. Exports of pork to China continued to increase.
- The positive development of Atria Sweden’s EBIT continued in the fourth quarter. The sales of poultry products remained strong.
- Atria Russia’s operating loss decreased. The result is burdened by a credit loss of approximately EUR 0.8 million.
- The development of the international market price of pork caused by African swine fever increased raw material prices, particularly in Sweden and Denmark.
- Atria started the planning of a EUR 130 million production plant investment project for increasing poultry production in Finland. The investment decision will be made during 2020.
- Atria lowered its net sales guidance for 2019. This is due to weaker than expected sales in Finland and Russia at the end of the year.
- Consolidated net sales totalled EUR 1,451.3 million (EUR 1,438.5 million).
- At comparable exchange rates, consolidated net sales increased by 1.4% year-on-year.
- Consolidated EBIT was EUR 31.1 million (EUR 28.2 million), which is 2.1 per cent (2.0%) of net sales.
- The development of Atria Finland's net sales was stable, and EBIT improved from the previous year.
- Atria Sweden's net sales growth was influenced especially by the increased sales of poultry products.
- The significant rise in the market price of pork decreased profitability, particularly in Atria Sweden and Denmark.
- Atria Russia's financial performance improved in the second half of the year.
- Consolidated free cash flow amounted to EUR 51.4 million (EUR 2.0 million).
- Atria set as their goal a carbon-neutral food chain – the carbon footprint of meat production is significantly smaller in Finnish production than the international average.
- The Board of Directors proposes that a dividend of EUR 0.42 (EUR 0.40) be paid for each share for the 2019 financial period.
|Atria Denmark & Estonia||26.6||25.4||96.6||97.4|
|Net sales, total||380.0||376.9||1,451.3||1,438.5|
|Atria Denmark & Estonia||1.0||1.0||4.4||5.3|
|EBIT%||3.2 %||1.8 %||2.1 %||2.0 %|
|Profit before taxes||10.7||5.6||26.2||22.3|
|Earnings per share, EUR||0.19||0.12||0.54||0.58|
Juha Gröhn, CEO
“Net sales in 2019 totalled EUR 1,451 million. Growth on the previous year was almost EUR 13 million. EBIT amounted to EUR 31 million. The increase on 2018 was approximately EUR 3 million. Free cash flow amounted to EUR 51.4 million (EUR 2.0 million).
The fourth quarter EBIT of EUR 12.1 million was clearly higher than in the previous year (EUR 6.7 million). All business areas improved their profit level, even though the results for Sweden and Russia were not as expected. The business areas of Finland and Denmark & Estonia performed well.
Demand for chicken and convenience food continues to grow. Demand for pork and beef declined in the first half of 2019, but towards the end of the year, the change in demand levelled off. Sales of processed meat, i.e. sausages and cold cuts, have been stable.
As demand for chicken will continue to grow in the coming years, Atria launched a study to modernise the poultry unit at the Nurmo plant. According to preliminary studies, the value of the investment totals approximately EUR 130 million. If the investment is given a go-ahead, it will be possible to complete it by 2024.
African swine fever, which is widespread in China, has a major and apparently long-term impact on global meat trade and Atria's operations. China currently imports large quantities of pork and other types of meat from around the world, and this increase in demand has turned the price of pork particularly on the rise. The strong demand supports Atria's business in areas where the company has slaughterhouse operations. On the other hand, in countries where we procure meat raw materials for our plants as boneless meat, raw material prices have risen and there have been occasional problems with availability.
In 2019, Atria exported almost 9 million kilos of pork from Finland to China (2018: approximately 4 million kilos). We expect exports to increase in 2020.
Responsibility at Atria has four core themes: product, planet, people, and responsible business operations. Each theme has its own practical and feasible development projects. The goals are ambitious. Our most important goal is a carbon-neutral food chain by 2035.”
Atria Group’s net sales for the fourth quarter totalled EUR 380.0 million (EUR 376.9 million). EBIT amounted to EUR 12.1 million (EUR 6.7 million). Atria Finland's sales were stable in the fourth quarter. Especially exports to China increased. The increase in EBIT was due to stronger sales prices towards the end of the year, favourable sales structure, and improved operational efficiency. Atria Sweden's net sales were at the same level as in the previous year. The poultry business improved its sales and profitability during the review period. The rise in the price of pork used as raw material weighed down the development of EBIT in Sweden. Atria Denmark & Estonia's EBIT was slightly lower than in the previous year; higher raw material prices weighed on EBIT. Atria Russia's year-on-year EBIT improved. The result is burdened by a credit loss of approximately EUR 0.8 million. Sales of Sibylla products have continued to grow.
Atria lowered its net sales guidance for 2019, and net sales at comparable exchange rates are estimated to remain at the 2018 level. The reason for the lower than expected growth in net sales was slightly weaker sales in Finland and Russia at the end of the year. Despite a smaller increase in net sales, the company did not change its EBIT guidance.
The international raw material price for pork continued to rise towards the end of the year, as a result of the market disruption caused by African swine fever in China and its impact on the global meat market.
In October, Atria started planning a EUR 130 million production facility investment to increase poultry production in Finland. The investment project includes the renovation and modernisation of existing production facilities and the construction of new production facilities and lines at the Nurmo plant. Poultry consumption has been growing strongly in Finland for several years. In 2019, the consumption has grown by about 4% in kilos. Atria is responding to the growth in consumer demand and is now starting the planning of a major investment project. The investment would strengthen Atria's market leadership in poultry products. The first step is to initiate the application processes for official authorisations and to complete them as soon as possible. After the planning phase, the implementation of the investment will be decided on. If implemented, the project is expected to be fully completed at the end of 2024 at the earliest.
Atria Finland's net sales for October–December totalled EUR 271.6 million (EUR 268.5 million). Sales remained stable in the fourth quarter and strengthened net sales for the review period. Exports to China in particular increased, but sales to retail and Food Service customers also improved from the previous year. EBIT amounted to EUR 14.4 million (EUR 9.5 million). The increase in EBIT was due to stronger sales prices towards the end of the year, favourable sales structure, and improved operational efficiency. African swine fever in China has further increased demand for pork and raised export prices.
Atria Sweden's net sales for the fourth quarter amounted to EUR 74.5 million (EUR 74.1 million). In the local currency, net sales grew by 3.6 per cent. The poultry business improved its sales and profitability during the review period. EBIT was EUR -0.5 (EUR -1.1 million). The availability of Swedish pork continued to decline towards the end of the year. As a result, Swedish meat raw material prices rose sharply. In particular, the price of pork increased, which weakened the development of EBIT.
Atria Denmark & Estonia's net sales for October–December totalled EUR 26.6 million (EUR 25.4 million). EBIT amounted to EUR 1.0 million (EUR 1.0 million). In Denmark, net sales and EBIT continued to develop positively at the end of the year compared to the beginning of the year. Increases in sales prices and a more favourable sales structure strengthened net sales and EBIT. In Estonia, net sales also improved in the fourth quarter. Sales in Atria Estonia's Christmas season were particularly successful. Atria's sales to Estonian retail increased by approximately 12 per cent compared to the previous year. Market shares continued to strengthen, even though competition in a stable market was intense.
Atria Russia’s net sales for October-December amounted to EUR 18.9 million (EUR 19.9 million). EBIT was EUR -2.0 million (EUR -2.6 million). Sales of Sibylla products increased compared to the corresponding period of the previous year, but sales to retail declined. EBIT was weighed down by increased marketing investments in the Pit-Product brand reform and a single credit loss of EUR 0.8 million related to a retail customer.
Atria Group's net sales for January–December totalled EUR 1,451.3 million (EUR 1,438.5 million). EBIT amounted to EUR 31.1 million (EUR 28.2 million). Strengthening of operational efficiency, price levels and sales structure had a positive impact on Atria Finland's EBIT development towards the end of the year. In Sweden, full-year EBIT includes the EUR 1.4 million costs of the efficiency improvement programme initiated at the beginning of the year. The sales and profitability of poultry products have increased in Sweden compared to the previous year. The international price level of meat raw materials has remained higher than previous year since spring.
Atria Russia updated its strategy at the beginning of 2019. A key goal is the quick revitalisation of business operations in Russia, which means increasing sales and sales margin as well as turning performance positive. As part of the strategy project, Atria is also looking into possibilities of selling Atria Russia's business operations. At the same time, the strategic development of Sibylla fast food operations has been investigated in all business areas.
In January, Atria Finland launched an efficiency improvement project at the Nurmo pig cutting plant, which aims to improve the profitability and competitiveness of the plant. The collective redundancy consultation related to the restructuring was completed in February. The restructuring will result in annual savings of approximately EUR 1.5 million, which will be fully realised from the beginning of 2020 onwards. The volume of work at the pig cutting plant was reduced by 51 person-years. The adjustments were implemented through internal arrangements and the reduction of fixed-term employment relationships.
In March, Atria Sweden launched a project in line with its revised strategy, which aims to enhance business operations and improve competitiveness in the changed business environment. The collective redundancy consultation related to the plan concerned all salaried employees of Atria Sweden and was finished in June. The efficiency improvement project aims to generate annual personnel cost savings of approximately EUR 3 million. The savings were partly realised towards the end of 2019 and fully from the beginning of 2020. As a result of the consultation, Atria laid off 40 salaried employees in Sweden and Norway.
Consolidated free cash flow amounted to EUR 51.4 million (EUR 2.0 million). The positive development of cash flow is attributable to improved EBITDA, good working capital management, and decreased investments.
Atria Finland’s net sales for the year amounted to EUR 1,033.8 million (EUR 1,019.2 million). EBIT was EUR 40.0 million (EUR 36.7 million). Net sales were boosted by increased exports, which were driven by higher sales volumes as well as higher price levels, especially towards the end of the year. Sales prices in other sales channels were also higher than in the previous year. The sales structure was better in the second half of the year than in the first half. Operational efficiency improved significantly towards the end of the year, which contributed to the positive development of EBIT. In 2019, Atria exported almost 9 million kilos of pork to China. This is more than double compared to the previous year.
Atria Sweden’s net sales for the year amounted to EUR 289.4 million (EUR 287.9 million). In the local currency, net sales grew by 3.6 per cent. EBIT was EUR -6.1 million (EUR -7.1 million). EBIT includes the EUR 1.4 million costs of the efficiency improvement programme initiated at the beginning of the year. The sales and profitability of poultry products have improved year-on-year. The price level of meat raw materials has remained higher than previous year since May. The sharp rise in raw material costs of pork is a result of the market disruptions in China, caused by African swine fever.
Atria Denmark & Estonia's net sales for the year amounted to EUR 96.6 million (EUR 97.4 million). EBIT amounted to EUR 4.4 million (EUR 5.3 million). In Denmark, the development of sales improved in the second half of the year. Atria Estonia's sales to retail have increased since the beginning of the year, and market shares have strengthened significantly. Meat raw material prices have risen sharply throughout the year.
Atria Russia’s net sales for the year amounted to EUR 73.8 million (EUR 75.1 million). EBIT was EUR -4.0 million (EUR -4.0 million). Net sales and EBIT remained at the level of the previous year. EBIT was burdened by weakening sales to retail, marketing investment in brand reform, and a credit loss of EUR 0.8 million. The sales of Food Service and Sibylla products grew compared to the previous year. The Sibylla business was incorporated as a part of the restructure of the administrative company structure.
|Shareholders´ equity per share EUR||14,85||14,69|
|Equity ratio, %||46,9 %||47,7 %|
|Net gearing, %||51,6 %||52,1 %|
|Gross investments in fixed assets *||40,1||44,5|
|% of net sales||2,8 %||3,1 %|
|Average FTE||4 454||4 460|
Atria's goal is a carbon-neutral food chain
Atria's food production is based on the taste, safety, healthiness, usability and responsibility of raw materials and finished products. Responsible Atria is part of Atria Group's strategy and includes four focus areas: product, planet, people, and responsible business operations. The goals and development areas for Atria's responsible business operations were updated during the first half of the year.
The key goal of Responsible Atria is combating climate change and achieving carbon-neutral food production. By 2021, Atria will identify the carbon footprint of its products, understand the cause of emissions, how the emissions can be decreased, and how a carbon-neutral food chain is realised. Especially the reduction of the environmental impact of Atria's industrial operations is a key target of the programme. Besides carbon emissions, Atria will pay attention to water and energy consumption and to developing environmentally friendly packaging solutions.
In December, Atria made a Baltic Sea commitment to the Baltic Sea Action Group with the objective to improve environmentally sustainable food chains and livestock production together with Atria's contract producers and A-Rehu's contract farmers. The commitment is part of Atria's responsibility strategy, which aims at carbon-neutral food production.
Atria's five-year commitment consists of three parts:
1. Atria is committed to reducing the environmental impact of livestock production by, for example, optimising feeding, utilising food industry side streams, improving nutrient cycling and utilising research data to develop farm production.
2. Atria will advance cooperation between livestock farms and arable farms to enhance nutrient cycling through improved manure application, make more efficient use of the current agricultural area, reduce greenhouse gas emissions from peatlands, increase the production of domestic protein crops, and improve crop rotation.
3. Atria promotes the introduction of conservation agriculture and other cultivation practices that improve the soil and enhance carbon sequestration on livestock farms and arable farms by training its own experts and producers and sharing best practices and communicating research results.
Atria has calculated the carbon footprint of pork, beef and chicken production from the farm to the slaughterhouse gate. The carbon footprint calculation was carried out with Envitecpolis Oy and Atria Family Farms. The carbon footprint of an Atria example pig is 3.8 CO2e/kg of carcass weight. It is about 40% lower than the international average. The carbon footprint of an Atria example bovine is 13.4 CO2e/kg of carcass weight. This is about 70% lower than the international average. The carbon footprint of beef on the farm included in the calculation was about 25% smaller than in research projects completed in Finland in 2016 and 2017. The carbon footprint of an Atria chicken is 3.2 CO2e/kg of carcass weight. It is about 40% lower than the international average.
In order to increase the recyclability of packaging, Atria Finland gave up black plastic during 2019 in all plastic packaging suitable for material recycling.
In 2019, Atria Finland continued work on the Group-wide Safely Home from Atria occupational safety programme. The implementation of the programme through extensive communication, training and day-to-day management has led to a positive development in Atria's safety culture. Atria Group's accident frequency trend has been declining throughout the programme period, and the number of serious occupational accidents has decreased significantly.
Outlook for the future
In 2020, Atria Group’s EBIT is estimated to be higher than in 2019 (EUR 31.1 million).
Atria operates mainly in the stabile retail and Food Service markets in Finland and Sweden. The strong and rapid changes in the global meat market will have a greater impact on the company's development and reduce predictability.
Consumption of poultry meat is expected to continue to increase, while consumption of red meat is expected to decline slightly. The importance of convenience food and the Food Service channel is expected to increase, and the importance of exports will also increase.
Atria has increased its meat exports, and pork exports to China, for example, are expected to increase during 2020.
Board of Directors' proposal for profit distribution
The Board of Directors proposes that a dividend of EUR 0.42 (EUR 0.40) be paid for each share for the 2019 financial period.
Atria Plc complies with the disclosure procedure in accordance with standard 5.2b of the Financial Supervisory Authority and publishes its financial statement release for 1 January to 31 December 2019 as an attachment to this stock exchange release. The full release is available on the company's website at www.atria.com.
For more information, please contact: Juha Gröhn, CEO, Atria Plc, tel. +358 400 684224.
Invitation to press conference
A press conference will be held in Finnish today, 13 February 2020, at 9:45 am at Scandic Hotel Simonkenttä, Simonkatu 9, conference room Mansku, 1st floor, Helsinki. The presentation material will be available on the company's website (www.atria.com) after the distribution of the interim report and as an attachment to this company announcement.
Board of Directors
Nasdaq Helsinki Ltd