Atria Oyj : Interim report of Atria Plc, 1 January - 30 September 2021

Atria Plc, Interim report, 21 October 2021, 8.00 am

Interim report of Atria Plc, 1 January-30 September 2021

Atria Group's adjusted EBIT increased - all business areas posted a profit

July-September 2021

- Consolidated net sales totalled EUR 388.0 million (EUR 382.4 million).
- Consolidated EBIT was EUR 19.7 million (EUR 19.0 million), or 5.1 per cent (5.0%) of net sales.
- The Group's net sales, excluding the effect of the divested Russian subsidiary, increased by approximately 4 per cent.
- With the removal of coronavirus restrictions, the Food Service and fast-food market started to grow in all business areas.
- Sales to retail were level with the corresponding period of the previous year. Sales were good in the summer barbecue season.
- Exports of pork from Finland to China decreased and the profitability of exports deteriorated year-on-year.
- Increased costs brought down EBIT growth at the end of the review period.
- Atria is committed to the international Science Based Targets climate initiative (SBTi), which links Atria's responsibility work to the goal of the Paris Agreement on Climate Change to limit the increase in global average temperature to less than 1.5 degrees.

January-September 2021
- Consolidated net sales totalled EUR 1136.6 million (EUR 1105.4 million).
- Consolidated adjusted EBIT was EUR 38.9 million (EUR 25.4 million). The EBIT adjustment item consists of translation differences of the sold Russian subsidiary (OOO Pit-Product). The amount of cumulated translation differences was EUR -45.1 million, which was recognised in the income statement.
- Consolidated EBIT was EUR -6.2 million (EUR 25.4 million), or -0.5 per cent (2.3%) of net sales.
- Atria Finland's net sales and EBIT improved clearly. Sales grew in all sales channels, especially Food Service sales and feed sales increased. EBIT was EUR 8.8 million higher than in the previous year.
- The improvement in Atria Sweden's EBIT was due to good sales development to Food Service and fast-food customers.
- Atria Denmark & Estonia's EBIT increased year-on-year, which was mainly due to the lower price level of meat raw material.
- Atria Group's operational structure and segment reporting was changed. The reporting segments are Atria Finland, Atria Sweden and Atria Denmark & Estonia. As a result of the segment change, the Sibylla Rus company operating in the fast-food business in Russia is reported as part of the Atria Sweden segment as of 1 January 2021.
- The sale of Atria's Russian subsidiary OOO Pit-Product was completed in April.
- Atria is investing EUR 30 million in production restructuring in Sweden - production will be centralised at the Sköllersta plant and the Malmö plant will be closed.

Events after review period

- Atria raised its EBIT guideline for 2021 and estimates the adjusted EBIT to be EUR 47-54 million (EUR 40.5 million).
 

	Q3	Q3	Q1-Q3	Q1-Q3
EUR million	2021	2020	2021	2020	2020
Net sales
Atria Finland	274.6	266.1	812.5	781.8	1,066.3
Atria Sweden	94.3	90.8	259.0	247.1	332.2
Atria Denmark & Estonia	27.3	26.9	78.5	80.3	106.8
Unallocated*	0.2	14.0	14.8	37.8	51.8
Eliminations	-8.3	-15.4	-28.2	-41.5	-53.0
Net sales, total	388.0	382.4	1,136.6	1,105.4	1,504.0
EBIT before items affecting
comparability
Atria Finland	16.4	15.2	37.5	28.7	43.1
Atria Sweden	3.0	3.0	2.1	-0.4	0.8
Atria Denmark & Estonia	1.2	2.1	5.1	3.6	5.3
Unallocated*	-0.9	-1.3	-5.9	-6.5	-8.7
Adjusted EBIT	19.7	19.0	38.9	25.4	40.5
Adjusted EBIT, %	5.1 %	5.0 %	3.4 %	2.3 %	2.7 %
Items affecting comparability
of EBIT:
Unallocated
The effect of the sale
of the subsidiary	0.0	0.0	-45.1	0.0	0.0
EBIT	19.7	19.0	-6.2	25.4	40.5
EBIT, %	5.1 %	5.0 %	-0.5 %	2.3 %	2.7 %
Profit before taxes	19.4	17.9	-7.5	22.6	37.3
Earnings per share, EUR	0.53	0.51	-0.59	0.59	0.81
* Net sales and EBIT of the sold subsidiary OOO Pit-Product and Group costs are reported as "Unallocated".

Juha Gröhn, CEO

"Atria's net sales for January-September amounted to EUR 1137 million. The year-on-year growth is approximately EUR 30 million. The development is good, as the net sales-reducing effect of the sale of Russian industrial operations has been offset and we have even been able to increase net sales.

EBIT has improved from the beginning of the year. EBIT is now EUR 39 million, having been EUR 25 million after nine months a year ago. Last year, the impact of the coronavirus pandemic on business was larger than it is now. The sale of the poorly profitable industrial business in Russia has improved profits.

The third quarter net sales amount to EUR 388 million and EBIT to EUR 19.7 million. Both net sales and EBIT have improved from the previous year. Sales growth to Food Service and fast-food customers has increased due to the easing of coronavirus restrictions, but we are not yet at the 2019 sales level. In retail, our position remains unchanged. We did well in the summer barbecue season. Export trade to China developed well in the first six months, but levelled off during the summer as pork prices fell sharply in China. A rapid strengthening of the Chinese market in the coming months is not likely.

Cost pressures have increased over the year and strengthened as summer turns into autumn. Cost pressures turned into actual price increases for a number of materials, supplies and external services. As a result of the coronavirus pandemic, demand and supply of several commodities are unbalanced and prices have risen. In addition, the modest harvest level as a result of the dry summer increases the costs of meat production and will increase the prices of meat raw materials.

The key task of autumn and the coming winter is to manage cost increases and the impact of inflation.

Atria is committed to the Science Based Targets climate initiative. By developing their activities, the actors committed to the initiative aim to contribute to limiting the increase in global average temperature to a maximum of 1.5 degrees. The strengths of the initiative are scientific basis and coverage of the entire operating chain.

The poultry investment at the Nurmo plant is proceeding according to plan. The contractors have been selected and foundation work is currently being done for the new factory building."

July-September 2021

Atria Group's net sales for July-September totalled EUR 388.0 million (EUR 382.4 million). Consolidated EBIT was EUR 19.7 million (EUR 19.0 million). The Group's net sales, excluding the effect of the divested Russian subsidiary, increased by approximately 4 per cent. The increase in net sales was mainly due to the recovery of the Food Service and fast-food market as coronavirus restrictions were lifted. Sales to retail were level with the corresponding period of the previous year. Sales were good in the summer barbecue season. Sales to feed customers also grew during the review period. Exports of pork from Finland to China decreased and the profitability of exports deteriorated year-on-year. In Sweden, sales of poultry products in retail continued to grow. Sales to fast food customers strengthened significantly in Russia.

Atria Finland's EBIT growth was due to stronger net sales and a more favorable sales structure. Increased costs brought down EBIT growth at the end of the review period.

Atria is committed to the international Science Based Targets climate initiative (SBTi), which links Atria's responsibility work to the goal of the Paris Agreement on Climate Change to limit the increase in global average temperature to less than 1.5 degrees.

Atria Finland's net sales for July-September totalled EUR 274.6 million (EUR 266.1 million). The growth in net sales is mainly due to increased sales to Food Service customers. Sales were good in the summer barbecue season. Sales to feed customers also grew during the review period. Sales to retail were level with the corresponding period of the previous year. Exports to China decreased and the profitability of exports deteriorated year-on-year. EBIT was EUR 16.4 million (EUR 15.2 million). EBIT growth was due to stronger net sales and a more favorable sales structure. General cost inflation has increased the prices of many materials, supplies and external services at the end of the review period.

Atria Sweden'snet sales for July-September totalled EUR 94.3 million (EUR 90.8 million). In the local currency, net sales grew by 2.9 per cent year-on-year. EBIT amounted to EUR 3.0 million (EUR 3.0 million). Atria's sales of Food Service and Sibylla products were higher than in the corresponding period of the previous year, thanks to the recovery of the Food Service and fast-food market with the lifting of coronavirus restrictions in Sweden. Sales of cold cuts and sausages in retail were lower than in the previous year. Sales of poultry products in retail continued to grow. Sales to fast food customers strengthened significantly in Russia. Due to coronavirus restrictions, domestic tourism has increased in Russia, which has grown the local fast-food market. Increased feed, transport and energy costs brought down EBIT growth during the review period.

Atria Denmark & Estonia's net sales for July-September totalled EUR 27.3 million (EUR 26.9 million). EBIT amounted to EUR 1.2 million (EUR 2.1 million). Atria's sales in Estonian retail increased and its total market share strengthened to approximately 17 per cent. In Denmark, sales to Food Service and export customers went well with the lifting of coronavirus restrictions. Sales to retail are returning to pre-coronavirus levels. EBIT was weighed down by higher prices of materials, supplies and external services and increased costs of own primary production in Estonia. The price of pork in Denmark has remained at a low level.

January-September 2021

Atria Group's net sales for January-September totalled EUR 1136.6 million (EUR 1105.4 million). Adjusted EBIT was EUR 38.9 million (EUR 25.4 million). The EBIT includes a translation difference of EUR -45.1 million of the sold Russian subsidiary (OOO Pit-Product). Consolidated EBIT was EUR -6.2 million (EUR 25.4 million). Atria Group's net sales increased during January-June owing to good sales to the retail sector and exports. With the lifting of coronavirus restrictions, sales to Food Service and fast-food customers and feed customers strengthened during the third quarter. Consolidated adjusted EBIT was boosted by good export development and lower costs in January-June.

The increase in Atria Finland's net sales was due to increased sales in all sales channels, especially Food Service sales and exports to China improved from the corresponding period of the previous year. Sales to feed customers were higher than in the previous year. Atria Finland saw its EBIT improve as a result of increased net sales and a better sales structure. Chinese export prices started to decline at the end of the second quarter and remained at a low level during the third quarter.

Atria Sweden's net sales in local currency strengthened by 2.4 per cent compared to the corresponding period of the previous year, and EBIT improved by EUR 2.5 million. During the first half of the year, COVID-19 restrictions had a negative impact on the Food Service and fast-food business. In the third quarter, the market started to recover with the removal of coronavirus restrictions. Sales to retail were level with the previous year. The development of Atria Sweden's EBIT in the first quarter 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 is reported as part of the Atria Sweden segment as of 1 January 2021. The change had a positive effect on net sales and EBIT for the review period and the comparison period.

Atria Denmark & Estonia's EBIT increased by EUR 1.6 million. The EBIT improvement was due to low raw material prices and good cost management.

In June, Atria raised its EBIT guidance for 2021 and estimated the adjusted EBIT at EUR 41-48 million (EUR 40.5 million). The reason for the improvement in the EBIT forecast during January-June is the increase in pork exports from Finland to China, the favourable sales structure and cost management. In addition, the negative impact on consolidated EBIT of the operational activities of OOO Pit-Product, which was sold on 30 April 2021, was shorter than forecast.

In May, Atria decided to invest EUR 30 million in production restructuring in Sweden. The investment includes the expansion of production facilities and the purchase of new production equipment for the Sköllersta plant. As a result of the restructuring, Malmö's production will be transferred to the Sköllersta and Moheda plants in Sweden and to the Horsens plants in Denmark. The transfer of production is expected to be completed in 2023. By concentrating production, Atria wants to ensure its future competitiveness through more efficient production and logistics, which also have lower climate impacts. The restructuring is estimated to generate total annual savings of EUR 3.5 million for Atria.

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 the company's stock. Well-Beef Kaunismaa holds a strong position in the Finnish market as a manufacturer of high-quality hamburger patties and kebab products.

In February, Atria concluded the sale of its Russian subsidiary OOO Pit-Product to Limited Liability Company Agricultural Complex Mikhailovskiy, which belongs to the Cherkizovo Group. The divestment, which transfers ownership of OOO Pit-Product to the buyer, was completed at the end of April. The purchase price is approximately EUR 30 million. In addition to a translation difference, the divestment had no further impact on Atria's Group profit. The divestment has an impact of around EUR 35 million on Atria Group's net sales. The business has been showing a loss. The divestment did not include Atria Russia's other subsidiary, Sibylla Rus LLC, which engages in fast food operations in Russia.

Cumulated translation differences associated with Pit-Product stood at EUR -45.1 million on 30 April 2021. The translation differences have accumulated from exchange rate fluctuations during the Pit-Product holding. Atria purchased Pit-Product in 2005. At that time, one euro corresponded to around RUB 34. At the time of the transaction, one euro was worth RUB 90. 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 has no impact on the Group's equity ratio or cash flow.

Atria Finland's net sales for January-September totalled EUR 812.5 million (EUR 781.8 million). The increase in net sales was due to increased sales in all sales channels, especially Food Service sales and exports to China were higher than in the corresponding period of the previous year. Sales to feed customers were higher than in the previous year. Sales to retail were level with the previous year. EBIT increased to EUR 37.5 million (EUR 28.7 million). EBIT growth was due to the increase in net sales and a more favourable sales structure. The end of the reduction in statutory employment pension contributions has had a negative impact on profit. Chinese export prices started to decline at the end of the second quarter and remained at a low level during the third quarter.

Atria Sweden's net sales for January-September totalled EUR 259.0 million (EUR 247.1 million). In the local currency, net sales grew by 2.4 per cent year-on-year. During the first quarter, coronavirus restrictions had a negative impact on the Food Service and fast-food business. After that, the market started to recover with the removal of coronavirus restrictions. Sales to retail were level with the previous year. EBIT was EUR 2.1 million (EUR -0.4 million). EBIT grew due to improved sales structures.  As a result of a segment change in Atria Group, the Sibylla Rus company operating in the fast-food business in Russia is reported as part of the Atria Sweden segment as of 1 January 2021. The change had a positive effect on net sales and EBIT for the review period and the comparison period.

Atria Denmark & Estonia's net sales for January-September totalled EUR 78.5 million (EUR 80.3 million). EBIT amounted to EUR 5.1 million (EUR 3.6 million). Net sales and EBIT were bolstered by the price increases implemented early in the year. EBIT growth was impacted by low meat raw material prices and good cost management. At the end of the review period, feed and production costs started to rise.

Atria aims for carbon-neutral food production - Atria commits to the Science Based Targets climate initiative

The key goal of Atria's responsibility work is to mitigate climate change and to promote the goal of carbon-neutral food production. Atria is committed to the international Science Based Targets climate initiative (SBTi), which links Atria's responsibility work to the goal of the Paris Agreement on Climate Change to limit the increase in global average temperature to less than 1.5 degrees. Atria is a forerunner in responsibility in northern European food production, and committing to the SBT initiative gives Atria's goals a scientific international framework. With this commitment, the entire Atria production chain will be better involved in climate work. SBTi is a global initiative that directly links companies' CO2 emissions targets to the Paris Agreement to keep global warming below 1.5 degrees Celsius. It helps companies set greenhouse gas reduction targets based on the latest climate science and the goals of the Paris Agreement.

Atria Finland, Valio and the Natural Resources Institute Finland (LUKE) are working together to build a national model for calculating the carbon footprint of cattle farms. The model is based on the Lypsikki LCA modelling previously developed by Valio, which can be used to verify the differences between production farms and the impact of the measures taken on the farm on the carbon footprint of milk. The outcome of the cooperation will be a national carbon footprint calculation model for milk and beef production, which takes into account the specific characteristics of Finnish production. Atria's objective is to bring a product-specific carbon footprint label to the consumer packaging of beef.
 

Key indicators
EUR million	30.9.2021	30.9.2020	31.12.2020
Shareholders´ equity per share EUR	15.72	14.58	14.96
Interest-bearing liabilities	191.0	245.1	218.1
Equity ratio, %	49.6 %	46.0 %	46.8 %
Net gearing, %	38.6 %	55.7 %	43.6 %
Gross investments	33.4	31.2	45.6
% of net sales	2.9 %	2.8 %	3.0 %
Average FTE	3,690	4,453	4,444

Events after review period

Atria raised its EBIT guideline for 2021 and estimates the adjusted EBIT to be EUR 47-54 million (EUR 40.5 million).

The reason for the improvement in the EBIT forecast is the faster-than-expected recovery of the Food Service and fast-food markets after the removal of Covid-19 restrictions, and better-than-expected sales in these sales channels. Sales of summer barbecue products were also better than expected. The earnings trend towards the end of the year is affected by the development in the demand of various sales channels, the profitability of exports and the effects of cost inflation.

The statement describing the development of EBIT as well as the statements describing exports and Food Service market situation are updated in the new guidelines. In other respects, the guidelines have remained unchanged.

Updated guidelines can be found under "Outlook for the future".

Outlook for the future

18th of October 2021 updated guidelines:
In 2021, Atria Group's adjusted EBIT is estimated to be EUR 47-54 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, is the translation difference recognition of EUR -45 million arising from the sale of OOO Pit-Product. The translation difference was recognised after the deal was 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 for example, the pork exports to China is a significant part of Atria Finland's business.

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.

Previously published guidelines were:
In 2021, Atria Group's adjusted EBIT is estimated to be EUR 41-48 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, is the translation difference recognition of EUR -45 million arising from the sale of OOO Pit-Product. The translation difference was recognised after the deal was 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.

Disclosure

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 30 September 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. [phone].

Publication of the interim report

Atria Plc's CEO Juha Gröhn will present the company's interim report in a webcast today, October 21, 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/.


ATRIA PLC
Board of Directors


DISTRIBUTION
Nasdaq Helsinki Ltd
Major media
www.atria.com

The interim report is available on our website at www.atria.com.
 

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