Atria Plc, Interim report, 29 April 2021, 8.00 am
Interim report of Atria Plc, 1 January–31 March 2021
A clear improvement in Atria's earnings in the first quarter
- Consolidated net sales totalled EUR 361.3 million (EUR 356.7 million).
- Consolidated EBIT was EUR 6.6 million (EUR 2.2 million), or 1.8 per cent (0.6%) of net sales.
- Easter sales occurred in March, which had a positive effect on the increase in net sales.
- All business areas improved their operating result.
- Atria Finland's EBIT grew by EUR 3.6 million year-on-year. Sales to retail and especially export to China increased.
- The improvement in Atria Sweden's EBIT was due to stable raw-material prices and the strengthening of the Swedish krona. As a result of a segment change in Atria Group, the Sibylla Rus company operating in the fast food business in Russia will be reported as part of the Atria Sweden segment as of 1 January 2021.
- Atria Denmark & Estonia's EBIT increased significantly year-on-year, which was mainly due to the lower price level of meat raw material.
- In February, Atria entered into an agreement of the sale of its Russian subsidiary OOO Pit-Product to Limited Liability Company Agricultural Complex Mikhailovskiy.
- 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.
- Due to the probable sale of its Russian subsidiary OOO Pit-Product, Atria changed its segment reporting. Following the sale of OOO Pit-Product, Atria Russia does not form an independent business area and is therefore not a reporting segment. The reporting segments will be Atria Finland, Atria Sweden and Atria Denmark & Estonia.
- The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.50 (EUR 0.42) be paid per share.
|Atria Denmark & Estonia||24.5||26.5||106.8|
|Net sales, total||361.3||356.7||1,504.0|
|Atria Denmark & Estonia||1.9||0.3||5.3|
|EBIT, %||1.8 %||0.6 %||2.7 %|
|Profit before taxes||5.1||1.1||37.3|
|Earnings per share, EUR||0.13||0.01||0.81|
Juha Gröhn, CEO
"The first quarter of 2021 was better than the 2020 opening in terms of both net sales and earnings. Net sales now amounted to EUR 361.3 million, compared with EUR 356.7 million last year. EBIT amounted to EUR 6.6 million. The improvement on last year's EBIT was EUR 4.4 million.
The increase in net sales is based on strong sales to Finnish retail customers and export customers, especially to China.
EBIT improved in all business areas. The relatively most significant improvement is in the Denmark & Estonia business area, and measured in euros, the improvement was the largest in Finland.
Easter sales occurred in March, which had a positive effect on the increase in net sales. A year ago in March, sales were boosted by hoarding, triggered by the outbreak of the coronavirus. The effect of Easter sales on net sales is greater than the effect of hoarding. A year ago, hoarding increased net sales, but the effect on earnings was the opposite. The surprising increase in demand was met in production by special arrangements, and such arrangements invariably increase costs.
It seems that during the coronavirus, people prepare for the holidays by buying food, making sure it will not run out in the middle of the holidays. After the holidays, demand level offs. This was the case in January – after strong Christmas sales, January sales were modest. February and March were as expected. As long as the coronavirus is with us, we need to be prepared for larger-than-usual fluctuations in demand.
Atria's sales to retail increased by almost 10 per cent and, correspondingly, Food Service sales decreased by approximately 20 per cent. In Food Service sales, trade with the public sector has been better than with restaurants or hotels, some of which have been completely closed. During the coronavirus, those businesses and product groups whose customers focus on the Food Service sector have suffered the most from the coronavirus.
In February, negotiations were started with personnel in Sweden on production arrangements. The project explores the possibilities of closing the Malmö plant and investing EUR 30 million in the Sköllersta plant, so that the most important parts of production at the Malmö plant can be produced in Sköllersta in the future. Decisions on implementing the project will be made by the end of June.
The planning of the details of Nurmo's poultry plant investment is underway and earthworks are about to begin.
Atria has been successful in controlling the coronavirus. There have been no significant disruptions in operations.”
January - March 2021
Atria Group’s net sales for January–March amounted to EUR 361.3 million (EUR 356.7 million). EBIT was EUR 6.6 million (EUR 2.2 million). Atria's net sales grew by 1.3 per cent due to increased sales to the retail sector and to Atria Finland's export customers. Sales to Food Service customers remained slow.
Atria Group's EBIT was bolstered through increased sales, better cost management and lower raw material prices. In particular, Atria Finland's EBIT growth was significant, which was the result of increased net sales, a favourable sales structure and improved cost efficiency.
Coronavirus restrictions have reduced sales to Sibylla and Food Service customers. At the production plants, additional expenses were further incurred from the special arrangements made to prevent the spreading of the coronavirus.
In February, Atria entered into an agreement of the sale of its Russian subsidiary OOO 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 since 2006.
OOO Pit-Product is Atria's fully owned subsidiary. It has been Atria's subsidiary since 2005. At the end of 2020, the company had around 700 employees. The company produces products for retail and Food Service customers and owns plants in Gorelovo and Sinyavino. The divestment does not include Atria Russia's other subsidiary, Sibylla Rus LLC, which engages in fast food operations in Russia.
The deal is expected to be finalised during the first half of 2021. The divestment will have an impact of around EUR 35 million on Atria Group's annual net sales. The business has been showing a loss.
Cumulated translation differences associated with Pit-Product stood at around EUR -44 million on 31 March 2021. When divesting a foreign subsidiary, the cumulative translation differences associated with said subsidiary, which have already been recognised in equity, are recognised through profit or loss. Since the cumulated translation differences already reduce the Group's equity, this recognition will have no impact on the Group's equity ratio or cash flow. The translation differences will only be recognised after the deal has been finalised. The final purchase price will be determined at the time of the transaction and the divestment is not expected to have any further significant impact on the Group result.
In February, Atria launched investment planning to reorganise production lines and increase productivity at Atria Sweden's production plants. 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.
Atria increased its stake in Well-Beef Kaunismaa Ltd by 20 per cent through share transactions made in March. Atria now owns 90 per cent of Well-Beef Kaunismaa's stock. In 2016, Atria acquired 70 per cent of Well-Beef Kaunismaa's stock. Well-Beef Kaunismaa holds a strong position in the Finnish market as a manufacturer of high-quality hamburger patties and kebab products.
Atria Finland’s net sales for January–March totalled EUR 260.2 million (EUR 252.6 million). The growth in net sales was due to increased sales to the retail sector and to export customers. The Easter season occurring in March boosted sales to retail in the first quarter. Exports of pork to China have continued to grow significantly. Sales of Food Service products continued to be slow, due to coronavirus restrictions and the exceptional market situation. EBIT was EUR 9.8 million (EUR 6.2 million). EBIT growth was due to stronger net sales, a favourable sales structure and improved cost efficiency.
Atria Sweden's net sales for January–March amounted to EUR 76.7 million (EUR 78.0 million). Net sales in local currency decreased by 4.7 per cent year-on-year. Sales of Sibylla and Food Service products continued to be below normal levels due to coronavirus restrictions. EBIT was EUR -1.2 million (EUR -1.8 million). The EBIT improvement was due to stable raw material prices and the strengthening of the Swedish krona. The development of EBIT was weighed down by the costs incurred in implementing the ERP system. As a result of a segment change in Atria Group, the Sibylla Rus company operating in the fast food business in Russia will be reported as part of the Atria Sweden segment as of 1 January 2021. The change had a small positive effect on net sales and EBIT for the review and comparison periods. Atria has a total of 12,600 Sibylla sales outlets in 12 countries. Sibylla Rus has a total of 4,300 sales outlets in Russia, Kazakhstan and Belarus. Atria Sweden's business has already previously included most of the Sibylla business.
Atria Denmark & Estonia’s net sales for January–March amounted to EUR 24.5 million (EUR 26.5 million). EBIT was EUR 1.9 million (EUR 0.3 million). Atria Denmark & Estonia’s EBIT increased significantly year-on-year. Sales to the retail sector fell slightly. As a result of coronavirus restrictions, sales to Food Service customers and for export continued to be slow. In Denmark, EBIT growth was impacted by low meat raw material prices during the first quarter. Also in Estonia, EBIT growth was due to the lower price level of meat raw material.
Aiming for a carbon-neutral food chain – Atria involved in a training project on regenerative farming and a project to increase the recycling of packaging plastics
Atria is involved in an online training project on regenerative farming aimed at Finnish farmers, which provides farmers with up-to-date and science-based information on practices that improve soil, crops and the environment. The course is administered by the Baltic Sea Action Group (BSAG) and is free for all participants. Regenerative farming is an important tool for mitigating and adapting to climate change. Studies show the benefits of the approach in terms of productivity, climate impact, water protection and biodiversity. Regenerative farming that improves the condition of the soil will help food production to adapt to weather extremes brought about by climate change and improve crop reliability.
Atria signed the Swedish consumer goods industry's voluntary plastic recycling commitment "The 2025 Plastic Initiative". Atria Sweden is committed to ensuring that the plastic consumer packaging on the market is recyclable by 2025. The initiative also aims to improve the recycling rate of plastic waste in line with producer responsibility for packaging. The launch of the new Lönneberga poultry packaging in the first quarter was also an initiative to reduce the use of plastic. The new packaging contains 57 per cent less plastic, which means 20,000 kilogrammes less plastic per year.
|Shareholders´ equity per share EUR||15.22||14.24||14.96|
|Equity ratio, %||47.5 %||43.0 %||46.8 %|
|Net gearing, %||49.4 %||60.9 %||43.6 %|
|% of net sales||2.4 %||3.3 %||3.0 %|
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 recognised in the income statement with material items affecting comparability. These may include events that are not part of the company's ordinary business activities, such as reorganisation of operations, capital gains and losses from the sale of operations, impairment, and the costs of discontinuing significant operations. Such an item affecting EBIT, if realised, is the translation difference recognition arising from the sale of OOO Pit-Product. Cumulated translation differences associated with Pit-Product stood at around EUR -45 million on 31 December 2020. Translation differences depend on the development of the Russian rouble exchange rate and will be recognised after the deal has been finalised.
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 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 for 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 interim report for 1 January to 31 March 2021 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 interim report
Atria Plc's CEO Juha Gröhn will present the company's interim report in a webcast today, April 29, 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 interim report is available on our website at www.atria.com.