Atria Plc Half-Year Financial Report 1 January - 30 June 2019: Atria's net sales are stable, result brought down by increased raw material costs

Atria Plc, Half-year financial report, 18 July 2019 at 8:00 am

ATRIA PLC HALF-YEAR FINANCIAL REPORT 1 JANUARY – 30 JUNE 2019

Atria's net sales are stable, result brought down by increased raw material costs

April–June 2019

- Consolidated net sales totalled EUR 368.9 million (EUR 359.1 million).
- Consolidated EBIT was EUR 5.1 million (EUR 5.4 million), which is 1.4 per cent (1.5%) of net sales.
- The Easter season in April and the implemented price increases improved net sales.
- Atria Sweden's net sales at comparable exchange rates grew by 6.5 per cent thanks to increased sales of poultry products.
- In Finland, EBIT for the second quarter was weighed down by an unfavourable sales structure.
- African swine fever in China has caused disruptions on the international meat market.
- The goals and development areas for Atria's responsible business operations were updated during the review period.

January–June 2019

- Consolidated net sales totalled EUR 705.3 million (EUR 704.6 million).
- Consolidated EBIT was EUR 2.3 million (EUR 8.8 million), which is 0.3 per cent (1.3%) of net sales.
- The development of the Group's EBIT was brought down by higher raw material prices.
- The growth of Atria Finland's net sales was stable.
- At the beginning of the year, Atria launched development measures to improve profitability in Finland and Sweden.
- Atria Sweden's profit was weakened by the costs of the efficiency improvement programme, EUR 1.4 million.
- Atria Russia seeks profit improvement and is exploring opportunities for divestments.

Juha Gröhn, CEO

"Atria's net sales remained stable during the first half of the year. Our EBIT of EUR 2.3 million remained weaker than last year. The second quarter EBIT of EUR 5.1 million was on the same level as a year ago. At the beginning of the year, we started efficiency improvement projects at Nurmo pig cutting plant and in Atria Sweden with annual cost savings of EUR 1.5 million in Nurmo and around EUR 3 million in Sweden to improve cost efficiency. The projects have been completed and are expected to improve the Group's profit to some extent towards the end of the year and fully from the beginning of next year.

In Finland, we have sold an exceptionally high amount of frozen meat for export, because at the beginning of the year there was a larger than usual amount of beef and chicken products remaining in the frozen stocks. Due to this, the sales structure was not optimal.

During the first half of the year, the consumption of red meat in Finland has decreased by 4 % and the consumption of chicken has increased by 6 %. It seems that this structural change in meat consumption will continue to shift from red meat to chicken.

For Atria Sweden, the sales of chicken have been very strong compared to the previous year, and we have been able to improve our market position in the growing market of fresh chicken. Russia's operational situation has improved significantly since the end of last year. We have been able to revitalise margin level after the increase in raw material prices. In the Denmark & Estonia business area, our development in Estonia has been good for a longer time. In Denmark, sales have been weaker than predicted, and in addition, the increases in raw material prices has been especially strong in Denmark. 

The international meat market is affected by the African swine fever occurring in pigs and the spreading of the disease to China and certain countries in South-East Asia. In this region, the production of pork will decline, and domestic production will at least for the time being remain below the demand. The shortage will be met by imports. During this spring and summer, the increased exports from the EU, especially to China, have increased the prices of the raw materials used for the production of meat products also in Atria."

April–June 2019

Atria Group’s net sales for April–June totalled EUR 368.9 million (EUR 359.1 million). EBIT amounted to EUR 5.1 million (EUR 5.4 million). Atria Finland's and Sweden's net sales grew, largely due to the Easter season in April.  Atria Sweden's net sales improved considerably, especially thanks to the strong sales of poultry products. Atria's net sales in Denmark & Estonia fell slightly due to the decreased sales to retail in Denmark. In Estonia, sales development was positive. In Russia, net sales were strengthened by increased sales to Food Service customers, but on the other hand, net sales were weakened by decreased sales to retail.

EBIT was weighed down by Atria Finland's unfavourable sales structure, the weakened Swedish krona, and the increased raw material costs in all business areas.

The raw material costs of pork increased significantly during the second quarter, a result of the market disruptions in China, caused by African swine fever, and its effects on the international meat market.

Atria Finland's net sales for April–June totalled EUR 263.7 million (EUR 254.9 million). The sales of the Easter season in April improved the net sales of the review period year-on-year. EBIT amounted to EUR 6.4 million (EUR 6.9 million). EBIT was brought down by the higher raw material costs, an unfavourable sales structure and the cost of introducing a new production line for the poultry unit.

Atria Sweden's net sales for April–June totalled EUR 74.4 million (EUR 71.7 million). In the local currency, net sales grew by 6,5 per cent. The sales of poultry products increased substantially year-on-year. EBIT was EUR -1.5 million (EUR -1.8 million). EBIT was brought down by the weakened Swedish krona and the increase in raw material prices. The raw material costs of pork increased significantly during the second quarter, a result of the market disruptions in China, caused by African swine fever, and its effects on the international meat market.

Atria Denmark & Estonia's net sales for April–June totalled EUR 23.5 million (EUR 24.3 million). EBIT amounted to EUR 1.0 million (EUR 1.4 million). In Denmark, sales have been weakened by the intense competition and the decline in meat consumption. In Estonia, Atria's sales to retail during the review period increased by approximately 11 per cent in terms of value. EBIT was brought down by increased meat raw material costs. The price of meat raw materials increased significantly due to the rapid increase in pork exports from Europe to China.

Atria Russia's net sales for April–June totalled EUR 18.5 million (EUR 18.5 million). EBIT was EUR -0.3 million (EUR -0.1 million).  Sales to retail were lower than the previous year’s figures. Sales to Food Service customers has increased markedly. The sales of Sibylla products have remained stable.

January–June 2019

Atria Group’s net sales for January–June totalled EUR 705.3 million (EUR 704.6 million). EBIT amounted to EUR 2.3 million (EUR 8.8 million). Atria's net sales in Finland increased slightly due to price increases, and Sweden's net sales grew in local currency by 3.3 per cent especially thanks to increased sales of poultry products. Atria Russia's and Atria Denmark & Estonia's EBITs were weighed down by reduced sales to retail. The development of the Group's EBIT was brought down by higher raw material prices. Atria Sweden's profit was weakened by the costs of the efficiency improvement programme, EUR 1.4 million, which were recognized for the first quarter.

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, Atria has investigated the reorganisation of the administrative company structure and the strategic development of the Sibylla fast food operations 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 negotiations 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 will be 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 negotiations 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 will be partly realised towards the end of 2019 and fully from the beginning of 2020. As a result of the negotiations, Atria laid off 40 salaried employees in Sweden and Norway.

Atria Finland’s net sales for January–June totalled EUR 504.7 million (EUR 500.5 million). EBIT amounted to EUR 10.3 million (EUR 13.6 million). Price increases and Atria's stable market share improved the net sales of the beginning of the year. Because of last year's dry summer and the resulting poor harvest, raw material costs increased strongly last autumn. Because of this, Atria increased its sales prices at the beginning of the year. The sales structure was weaker than in the corresponding period last year, partly due to the increased export sales volumes of frozen beef. During the review period, the export of pork to China has grown compared to the previous year.

Atria Sweden’s net sales for January–June totalled EUR 141.0 million (EUR 141.3 million). EBIT was EUR -5.6 million (EUR -5.0 million). The result was weakened by the costs of the efficiency improvement programme, EUR 1.4 million. The sale of poultry products has increased markedly. The sales structure of poultry products continues to be challenging, but it has improved compared to the previous year.

Atria Denmark & Estonia's net sales for January–June totalled EUR 45.3 million (EUR 47.4 million). EBIT amounted to EUR 1.6 million (EUR 2.7 million). Atria Estonia's sales to retail has remained strong throughout the first half of the year. In Denmark, sales have decreased slightly. EBIT development continued to be disrupted by the increased raw material costs.

Atria Russia’s net sales for January–June totalled EUR 34.2 million (EUR 35.8 million). EBIT was EUR -2.5 million (EUR -0.7 million). Net sales remained at the same level year-on-year and EBIT was slightly weaker year-on-year. EBIT was brought down by continued high meat raw material prices and weakened sales to retail.

Responsibility: Atria's goal is a carbon-neutral food chain

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 review period.

The key goal of Responsible Atria is combating climate change and carbon-neutral food production. By 2021, Atria will identify the carbon foot-print of its products, understand the cause of emissions, how the emissions can be decreased and how a carbon-neutral food chain is realized. 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.

To increase the recyclability of packaging, in 2019, Atria Finland will give up black plastic in all its plastic packaging aimed for material recycling. Black colour may still occur to some extent in package colouring, but this will not prevent recycling.

Animal welfare and excellent rearing conditions are at the heart of Responsible Atria. One step for improving the health of piglets and sows is the transition to free farrowing. The transition from traditional to free farrowing will be strongly increased in Atria's pork chain during the upcoming years. The change is made possible by technological development, the development of entrepreneurs' skills, and first and foremost the will to meet the message from the consumers. Atria supports this change through investment premiums. Atria Finland's goal is to launch pork products reared through free farrowing in 2019.

In Sweden, Atria joined a project led by the Environmental Protection Authority, the goal of which is to decrease food waste. The project will create a voluntary collaboration model between actors in the food industry, which can be used for intervening in the creation of food waste.

Outlook for the future

Consolidated EBIT was EUR 28.2 million in 2018. In 2019, EBIT is expected to be better than in 2018. At comparative exchange rates, net sales for 2019 are expected to grow compared to 2018.

Disclosure

Atria Plc complies with the disclosure procedure in accordance with standard 5.2b of the Financial Supervisory Authority and publishes its half-year financial report for 1 January to 30 June 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, 18 July 2019, at 9:45 am at Scandic Hotel Simonkenttä, Simonkatu 9, conference room Mansku, 1^st 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.

ATRIA PLC
Board of Directors

DISTRIBUTION
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www.atria.com