Atria Plc, Financial Statement Release, 16 February 2020, 8:00 am
Financial Statement Release of Atria Plc, 1 January–31 December 2020
Atria continued strong growth in the fourth quarter – result improved in all business areas
- Consolidated net sales totalled EUR 398.6 million (EUR 380.0 million).
- Consolidated EBIT was EUR 15.1 million (EUR 12.1 million), or 3.8 per cent (3.2%) of net sales.
- All business areas improved their operating result.
- Atria Finland’s net sales increased, and the EBIT improved slightly from the same period a year earlier. Sales to retail and export customers increased.
- Increased retail sales, the strong Swedish krona and good cost management boosted the net sales and EBIT of Atria Sweden.
- Atria Denmark & Estonia had a steady performance. The good results are based on growth in sales to the retail sector.
- Atria Russia's result and net sales in roubles increased due to the increased retail and fast-food sales. The EBIT includes a EUR 0.8 million recognised brand impairment.
- Atria decided to invest EUR 155 million to expand poultry production in Finland.
- Atria published a new Group strategy: “Atria is a Winning Northern European Food Company”.
- Consolidated net sales totalled EUR 1504.0 million (EUR 1451.3 million).
- Consolidated EBIT was EUR 40.5 million (EUR 31.1 million), or 2.7 per cent (2.1%) of net sales.
- Consolidated net sales increased by over 3,6 per cent owing to good sales to the retail sector and exports. Sales to Food Service customers were down about 20 per cent from the year before.
- Atria Finland's strong retail sales, increased pork exports to China and better profitability lead to improved EBIT.
- Atria Sweden's net sales due to increased sales to retail. The operating loss decreased by EUR 4 million year-on-year.
- Atria Denmark & Estonia's net sales grew by over 10 per cent due to strong sales to retail.
- Market disruption caused by the coronavirus pandemic still reduces business predictability.
- Consolidated earnings per share were EUR 0.81 (EUR 0.54). The Board of Directors proposes that a dividend of EUR 0.50 (EUR 0.42) be paid for each share for the 2020 financial period.
After the review period:
- Atria concluded the sale of its Russian subsidiary OOO Pit-Product to Limited Liability Company Agricultural Complex Mikhailovskiy. The deal is subject to the approval of the Russian competition authority.
- Atria announced the launch of a EUR 30-million investment plan to reorganise Atria Sweden's production lines and to increase productivity. The project involves a viability assessment into the transfer of production from the Malmö plant to the Sköllersta plant near Örebro.
|Q4||Q4||Q1 - Q4||Q1 - Q4|
|Atria Denmark & Estonia||26.6||26.6||106.8||96.6|
|Net sales, total||398.6||380.0||1,504.0||1,451.3|
|Atria Denmark & Estonia||1.7||1.0||5.3||4.4|
|EBIT, %||3.8 %||3.2 %||2.7 %||2.1 %|
|Profit before taxes||14.6||10.7||37.3||26.2|
|Earnings per share, EUR||0.22||0.19||0.81||0.54|
Juha Gröhn, CEO
”For Atria, 2020 was a successful year especially considering the changes brought on by the coronavirus pandemic on the market and on Atria's daily operations. Atria's net sales exceeded the EUR 1.5 billion mark for the first time. The EBIT improved to EUR 40.5 million, an increase of about 30 percent compared to the previous year. Free cash flow amounted to EUR 59.0 million.
The fourth quarter net sales amounted to EUR 398.6 million and EBIT to EUR 15.1 million. The year 2020 ended well in terms of business operations.
The best news in the fourth quarter of 2020 were the good holiday season sales. People stayed home for the holidays and bought groceries accordingly. Unfortunately, the quarter's sales to Food Service customers lagged about 20 per cent behind year-on-year due to coronavirus restrictions. Once travel restrictions are lifted, rebound towards previous levels will be swift. Proof of this was seen in the summer of 2020, during the weeks when COVID-19-related restrictions were moderate, and confidence increased. During that time the Food Service sales saw a quick recovery. The Far East has an increasingly significant role in exports. In 2020, we exported more than 20 million kilograms of pork to China. The significance of South Korea as an export destination is also increasing.
Atria updated its corporate strategy last year. The new strategy header is “Winning Northern European Food Company”. Northern Europe is the focus of our operations. Winning here signifies, above all, operational capability and fusing the strategy and its daily execution into an organism that stays relevant through constant renewal.
In October 2020, Atria made the decision to invest in a poultry plant at the Nurmo unit. The new plant will be completed in 2024. The value of the investment is EUR 155 million. We will ensure our success in the growing poultry market by increasing industrial capacity as the current plant nears the end of its useful life.
After the review period Atria came to an agreement on selling Pit-Product, its subsidiary in the St. Petersburg region in Russia. We have weighed our options for Atria Russia's operations. The assessment culminated in the decision to sell Pit-Product. Pit-Product product sales to retail customers have fallen behind expectations in the past few years. On the contrary, the Sibylla concept has remained on a path of profitable growth, and Atria continues to operate in the Russian fast-food market.
The past year has shown that the key risks in Atria's operations revolve around biosafety. Typically, we experience incidents as repercussions from market-disrupting events, such as the spread of the African swine fever in Central Europe and the resulting meat market disruption. A similar risk is the bird flu currently circulating in Europe, harmless to humans but a grave danger to fowl. The COVID-19 pandemic is also a biosafety hazard that materialised in a very unfortunate way.
The sales and profitability in the current year will be greatly affected by how the coronavirus can be managed and at which point restrictive arrangements can be lifted. Atria has maintained its performance well during the pandemic and we have faith in our continued handling of the situation.”
Atria Group’s net sales for the fourth quarter totalled EUR 398.6 million (EUR 380.0 million). EBIT was EUR 15.1 million (EUR 12.1 million). Atria's net sales increased by 4.9 per cent due to increased sales to the retail sector and to Atria Finland's export customers. Sales to Food Service customers fell around 20 per cent year-on-year.
All business areas improved their operational profits due to increased sales and better cost management. The EBIT increase in Finland was held back by changes in the structure of sales due to the coronavirus pandemic. Steady meat raw material costs bolstered the EBIT in Sweden.
Return to tighter coronavirus restrictions at year-end made a dent at sales volumes to Food Service customers. On the other hand, sales to retailer customers were significantly above those in the last quarter of 2019. At the production plants, additional expenses were incurred from the special arrangements made to prevent the spreading of the coronavirus.
In October, the Board of Directors of Atria Plc approved the revised corporate strategy for the years 2021–2025, as well as updated financial targets which are effective as of 1 January 2021.
The key objective of the strategy update is to be a Winning Northern European Food Company with
- an strong profit-making ability,
- the most desired brands,
- deep partnerships with our customers,
- committed personnel,
- a position as a forerunner in accountability, and
- the best partnership with owner-producers.
The main changes in the business environment affecting the new strategy are related to consumer purchase behaviour. Purchase decisions increasingly reflect consumers' awareness of responsible food choices and the increase in the demand of convenience foods and poultry products in particular. Additionally, the popularity of the Food Service channel and private labels is on the increase.
For the company to achieve its objectives, it is essential to continue striving towards commercial excellence, continued improvement of operational efficiency and further enhancement of the Atria Way of Work. Additionally, it is especially important for us to succeed in the six focus areas that are the most essential for our profit-making in accordance with our strategy. These six focus areas are:
- Grow Sweden profitably
- Drive next level Supply Chain efficiency
- Optimize red meat
- Win big in poultry
- Expand in convenience food
- Strengthen in Food Service including fast food
Atria's new Group strategy sets out the following comprehensive financial targets:
- EBIT percentage: 5% (unchanged)
- Equity ratio: 40 % (unchanged)
- Capital distribution of profit from period: 50% (unchanged)
- Return on equity (ROE): 10 % (revised target)
- Above-market growth (new target)
Atria made a decision in October to invest in expanding its poultry production. The investment has a value of EUR 155 million and it involves the construction of new slaughtering, cutting and packaging lines at the company's production plant in Nurmo. Poultry consumption has been increasing rapidly in Finland for several years. The growth was around 4% per year between 2010 and 2019. The growth rate in 2020 was 3,6%. The new processing plant will help the company to meet growing consumer demand, and it will strengthen Atria's position as market leader in poultry products. Construction work at the site of the new plant will begin as soon as possible with completion estimated in 2024 at the earliest. The investment will increase Atria Finland's poultry production capacity by 40%.
In October, Atria Finland Ltd acquired the entire stock of Domretor Oy, contract manufacturer in the food business. Ownership and holding of the company were transferred to Atria as from 1 October 2020. Domretor Oy has been an associated company of Atria since 2013, when Atria acquired a 24.9 per cent shareholding in it. The transaction price has no major impact on Atria's financial position or earnings. Domretor Oy's production plant is situated in Kauhava. The company has personnel of 70 around the year plus some 40 seasonal employees. Domretor Oy's 2019 net sales were EUR 8.8 million.
Atria Finland's net sales for October–December totalled EUR 284.5 million (EUR 271.6 million). The increase in net sales was due to increased sales to the retail sector and to export customers. The sales of pork to China have increased substantially year-on-year. Sales of Food Service products fell year-on-year. EBIT was EUR 14.4 million (EUR 14.4 million). The EBIT remained at a good level. The EBIT increase was held back by changes in the structure of sales due to the COVID-19 pandemic. Under normal circumstances, Christmas holiday sales are very significant to the Food Service's all-year sales, but their share was significantly smaller than usual this year.
Atria Sweden's net sales for the fourth quarter amounted to EUR 78.2 million (EUR 74.5 million). In the local currency, net sales improved by 1.6 per cent year-on-year. Coronavirus restrictions had a negative impact on the Atria Food Service sales in the fourth quarter as well. Overall net sales increased, since sales to the retail sector continued stronger than earlier. EBIT was EUR 0.7 million (EUR -0.5 million). The improvement in EBIT was due to increased net sales, better management of costs and the strengthening of the Swedish krona.
Atria Denmark & Estonia's net sales for October–December totalled EUR 26.6 million (EUR 26.6 million). EBIT amounted to EUR 1.7 million (EUR 1.0 million). Atria Denmark & Estonia had a steady performance. Sales to the retail sector remained at a good level. Atria's Food Service sales were at a lower level than in the corresponding period last year both in Denmark and Estonia. Net sales were bolstered by the price increases implemented early in the year. The growth of EBIT in Denmark was due to the stable raw material prices and good retail sales.
Atria Russia's net sales for the fourth quarter amounted to EUR 17.6 million (EUR 18.9 million). In the local currency, net sales grew by nearly 20 per cent. EBIT was EUR -1.0 million (EUR -2.0 million). Sales to the retail sector increased by almost 30 per cent, in particular due to good Casademont product sales. Sales of Sibylla products increased by more than 15 per cent year-on-year. The measures carried out at the production plants to prevent the spreading of the coronavirus continued to incur some additional expenses. Following the changes in Atria Russia's retail sales structure, a EUR 0.8 million impairment was recognised on the value of one brand.
Atria Group's net sales for January–December totalled EUR 1,504.0 million (EUR 1,451.3 million). EBIT amounted to EUR 40.5 million (EUR 31.1 million). Atria Group's net sales increased owing to good sales to the retail sector and exports. Sales to Food Service customers were down about 20 per cent from the year before. Consolidated EBIT was boosted by the growth in net sales, good export development and lower costs.
The increase in Atria Finland's net sales was due to increased sales to the retail sector and to export customers. Atria Finland saw its EBIT improve as a result of increased sales to the retail sector, increased pork exports to China and better productivity.
Atria Sweden's net sales, measured in the local currency, grew by 3.1 per cent from the previous year and earnings were up by EUR 4 million from the previous year. Profitability has increased due to improved efficiency and lower costs. The Swedish krona strengthened against the euro during the year and hit its highest level in the fourth quarter. Atria Sweden's EBIT for the comparable period includes EUR 1.4 million of costs related to employee arrangements.
Atria Denmark & Estonia's net sales grew by over 10 per cent due to strong sales to retail. All through 2020, Atria Russia's sales to the retail sector were at substantially higher than in the previous year. The improvement in earnings was due to the increase in net sales and a more favourable sales structure.
The exceptional circumstances caused by the coronavirus pandemic affected Atria's business environment starting from the end of the first quarter. National restrictions and recommendations related to restaurant operations and public food services had an impact on Atria's business. Restaurant opening hours and customer numbers were restricted. Furthermore, the reductions in travel and leaving the house have reduced food sales in both fast-food restaurants and service stations.
The popularity of daily foods sold to the retail sector rose sharply at the end of March due to preparations for exceptional circumstances. The volumes of sales to fast food and Food Service customers decreased significantly in April and May. Following the gradual lifting of coronavirus restrictions, Food Service sales increased, and the market began to recover towards the end of the second quarter, yet failing to return to its pre-coronavirus level by September's end. In the last quarter, with a renewed tightening of coronavirus restrictions, sales to Food Service customers fell again. Sales to the retail sector were at a substantially higher level than in the previous year.
The transition to exceptional circumstances in Atria's operations was carried out quickly in order to maintain the company's operational capacity. Ensuring uninterrupted continuation of operations and maintaining reliability of product deliveries were Atria's primary tasks alongside safeguarding the health and working capacity of personnel. New practices were introduced at production plants to prevent the spread of any virus infections. The special arrangements continue, and they have incurred additional expenses. However, the switch to remote working and the cessation of business travel have produced cost savings. Atria has succeeded in reaching its objective of safeguarding the health and working capacity of its personnel and maintaining its delivery reliability.
Atria Finland’s net sales for the year amounted to EUR 1066.3 million (EUR 1033.8 million). The increase in net sales was due to increased sales to the retail sector and to export customers. Sales of Food Service products fell by approximately one fifth year-on-year due to the coronavirus restrictions. The company’s EBIT increased to EUR 43.1 million (EUR 40.0 million). The EBIT growth was due to increased net sales, favourable export development and better productivity. The coronavirus pandemic has incurred additional expenses, but their negative impact on profit has been mitigated by the reduction in statutory employment pension contributions.
Atria Sweden’s net sales for the year amounted to EUR 300.8 million (EUR 289.4 million). In the local currency, net sales grew by 3.1 per cent year-on-year. COVID-19 restrictions had a negative impact on the Food Service and fast-food business. On the other hand, sales to the retail sector increased substantially, which had a positive impact on all-year net sales. Net sales were boosted by strong sales of poultry products. EBIT was EUR -2.0 million (EUR -6.1 million). Earnings were burdened by a reduction in sales to fast food and Food Service customers. Furthermore, the coronavirus pandemic caused additional expenses, whose effect on profit was nevertheless mitigated by the compensation for sick leaves paid by the government. Profitability has increased due to improved efficiency, lower costs and the strengthening of the Swedish krona. EBIT for the comparable period includes EUR 1.4 million of costs related to employee arrangements.
Atria Denmark & Estonia’s net sales for the year amounted to EUR 106.8 million (EUR 96.6 million). EBIT amounted to EUR 5.3 million (EUR 4.4 million). The increase in net sales followed from substantial growth in sales to the retail sector in both Estonia and Denmark. Net sales were bolstered by the price increases implemented early in the year.
Atria Russia’s net sales for the year amounted to EUR 66.7 million (EUR 73.8 million). In the local currency, net sales grew by 3,0 per cent. EBIT was EUR -2.9 million (EUR -4.0 million). Sales to the retail sector grew significantly from the previous year. Sales of Casademont products increased substantially throughout the review period. Food Service product sales suffered from the coronavirus restrictions, but picked up again in the fourth quarter. The increase in earnings was due to the increase in net sales and a more favourable sales structure.
|Shareholders´ equity per share EUR||14.96||14.85|
|Equity ratio, %||46.8 %||46.9 %|
|Net gearing, %||43.6 %||51.6 %|
|% of net sales||3.0 %||2.8 %|
Atria is the first meat company to disclose the carbon footprint on chicken product packaging
Atria will be the first meat company to add a label of chicken products' carbon footprint on consumer product packages. The ability to trace the meat raw material to an individual farm also allows the carbon footprint to be marked on product packaging. The first carbon footprint marked products are chicken products from the Alatalo farm.
"Traceability of the meat raw material all the way to the farm has allowed us to calculate and mark the carbon footprint of individual products. Initially we add the carbon footprint label on chicken products from the Alatalo farm, and as the calculation capacity advances at individual farms, we will be extending the labels gradually to more products," says Merja Leino, Executive Vice President of Sustainability at Atria.
Atria continues to develop its product safety, quality, environmental and energy expertise
Certification of standardised systems are third-party proof of Atria's ongoing work on product safety, quality, environmental and energy expertise. Six of Atria's Swedish production plants acquired certification for their ISO 14001 environmental management systems. The ISO 14001 certification of the Sköllersta plant was renewed. All seven of Atria's Swedish production plants renewed their ISO 50001 energy management system certificates in the last quarter of 2020. Atria Finland's FSSC 22000 food safety system certification, ISO 14001 environmental management system certification and ISO 50001 energy management system certification also had their follow-up audits carried out in the fourth quarter. Atria Denmark & Estonia's production plants in Horsens and Valga as well as Atria Russia's production plants in Gorelovo and Sinyavino in the vicinity of St Petersburg have been audited and their quality system and product safety certificates are valid.
Events after the period under review
After the review period, Atria concluded the sale of its Russian subsidiary Pit-Product to Limited Liability Company Agricultural Complex Mikhailovskiy, which belongs to the Cherkizovo Group. Cherkizovo is Russia's leading meat products manufacturer and a listed company on the Moscow Stock Exchange
OOO Pit-Product is a wholly owned subsidiary. Atria has owned the company since 2005. At the end of 2020, the company had approximately 700 employees. The company produces food products for the retail and Food Service channels and owns the Gorelovo and Sinyavino plants. The sale transaction does not include Atria Russia's subsidiary Sibylla Rus LLC, which conducts fast food business in Russia.
The transaction is expected to close during the first half of 2021. The transaction is subject to the approval of the Russian Competition Authority. The impact of the divested business on Atria Group's net sales is approximately EUR 35 million. The business has been loss-making.
The amount of accumulated translation differences related to Pit-Product on December 31, 2020 was EUR
-45 million. The translation difference has arisen from exchange rate changes during Pit-Product's ownership. Atria acquired Pit-Product in 2005. At that time, the exchange rate of the Ruble against the euro was about 34 and at the end of 2020 about 92. Upon divestment of a foreign subsidiary, the accumulated translation differences related to that subsidiary, presented already earlier in equity, are recognized in profit or loss. As the accumulated translation differences already reduce the Group's equity, this entry will not have an effect on the Group's equity nor cash flow. Translation differences are not recognized until the final completion of the transaction.
The final purchase price will be determined at the closing of the transaction and the divestment is not expected to have any other significant effect on the consolidated result.
After the review period, Atria announced the launch of an investment plan to reorganise Atria Sweden's production lines and to increase productivity. The investment is estimated to total around EUR 30 million. The investment plan will thoroughly investigate the reorganisation of production lines, potential transfers and investment needs related to the construction of new production lines. The project will involve assessing the option of moving production from the Malmö plant to the Sköllersta plant. After the planning phase, the implementation of the investment will be decided on. If implemented, the project is expected to be fully completed during 2023.
Outlook for the future
In 2021, Atria Group's adjusted EBIT is estimated to be EUR 37 - 43 million (EUR 40.5 million).
The adjusted EBIT is determined by adjusting the EBIT recognized in the income statement for material items that affect comparability. These may include events that are not part of the ordinary business activities, such as the restructuring of operations, capital gains and losses attributable to the sale of operations, impairment, and the costs of discontinuing significant operations. Such an item affecting the EBIT, if completed, is the translation difference related to the divestment of OOO Pit-Product. The amount of accumulated translation differences related to Pit-Product on December 31, 2020 was EUR -45 million. Translation differences depend on the development of the Ruble exchange rate and are made at the final completion of the transaction.
Atria operates mainly in the 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. Atria has increased its meat exports, and pork exports to China, for example, are expected to increase further during 2021.
The coronavirus pandemic that began in early 2020 and continues in early 2021 has caused strong and rapid changes in the business environment in the food industry. This has hindered the predictability of the company’s development. Immediate effects related to Atria's business have included national restrictions on restaurant operations and public food services, resulting in reduced sales to Food Service customers. During the coronavirus pandemic, the importance of ordinary everyday food has strengthened. The possible weakening of consumer purchasing power will also affect food purchases and may shift the sales structure of Atria's products into an unfavourable direction.
Board of Directors' proposal for profit distribution 2020
The Board of Directors proposes that a dividend of EUR 0.50 (EUR 0.42) be paid for each share for the 2020 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 2020 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.
Publication of the financial statement release
Atria Plc's CEO Juha Gröhn will present the company's full year financial report 2020 in a webcast today, February 16, at 10:00 - 11:00 am. The webcast is available on Atria's website at www.atria.fi/konserni/sijoittajat/ in Finnish language. During the webcast, you can ask questions in writing via chat. The recording of the press conference and the presentation material of the event will be available during the same day at www.atria.fi/konserni/sijoittajat/taloustieto/osavuosikatsaukset/.
Board of Directors
Nasdaq Helsinki Ltd
The financial statement release is available on our website at www.atria.com.