Half-year financial report of Atria Plc, 1 January–30 June 2020: Atria's EBIT and net sales remained stable in the second quarter

Atria Plc, half-year financial report, 17 July 2020, 8.00 am


Half-year financial report of Atria Plc, 1 January–30 June 2020

Atria's EBIT and net sales remained stable in the second quarter

April–June 2020
- Consolidated net sales totalled EUR 366.3 million (EUR 368.9 million).
- Consolidated EBIT was EUR 4.1 million (EUR 5.1 million), or 1.1 per cent (1.4%) of net sales.
- The coronavirus pandemic (COVID-19) affected Atria's business: sales to Food Service customers decreased in all business areas, but on the other hand, sales to retail grew.
- Atria Finland's improved operative efficiency strengthened EBIT, but net sales remained at the previous year's level.
- Atria Sweden's and Atria Russia's net sales and EBIT declined due to the reduced Food Service and fast food sales. Sales and EBIT improved at the end of the period under review.
- Atria Denmark & Estonia's net sales grew almost 15% due to increased sales to retail.
- Market conditions took a turn for the better in all of Atria's business areas in June.

January–June 2020
- Consolidated net sales totalled EUR 723.0 million (EUR 705.3 million).
- Consolidated EBIT was EUR 6.4 million (EUR 2.3 million), which is 0.9 per cent (0.3%) of net sales.
- Atria Finland's improved net sales and good operative efficiency strengthened EBIT.
- Atria Sweden's net sales grew by 3 per cent in the local currency, and operating loss decreased from the previous year. EBIT was weighed down by an unfavourable sales structure.
- Atria Denmark & Estonia's net sales improved due to increased sales volumes and higher prices.
- Atria Russia's EBIT was weighed down by exceptionally weak sales in April-May.
- Market disruption caused by the coronavirus pandemic reduces business predictability.
 

Juha Gröhn, CEO

”The Atria Group’s net sales during the second quarter of this year totalled EUR 366.3 million and EBIT totalled EUR 4.1 million. Taking account of the exceptional situation caused by the coronavirus, we can be moderately satisfied with sales and profitability in the second quarter. Operationally, the period went smoothly – very few employees have been ill with the coronavirus, and plants have continued operations. Our measures to prevent the spread of the virus have been shown to be effective.

Sales in the second quarter were unusual. Households stocked up supplies at the end of March, and sales of basic products for preparing food at home were particularly brisk. Demand levelled off quickly in April with sales over Easter, for example, being lower than normal. Sales in May were also sluggish. In June, the easing of restrictions put in place due to the coronavirus increased demand in all of Atria's business areas and sales were also good. The warm weather also drove sales in June.

The coronavirus restrictions have had the biggest effect on Food Service sales. Business areas where the Food Service share in net sales is large have suffered the worst impact both in net sales and in earnings. Russia and Sweden experienced the biggest decrease in sales, but the effects in Finland were also significant. Sibylla's sales decreased everywhere - particularly in Russia where Sibylla's drop in April was severe, as 70 per cent of the net sales disappeared. Sibylla's sales returned to a normal level at the end of the period under review and even partly rose above that of the same period of the previous year.

Sales to retail have grown in all of Atria's business areas, but the growth was not sufficient to make up for losses in Food Service sales. The Finnish retail market for the product groups represented by Atria has grown by 9 per cent in terms of value. The waning in Food Service sales has made the sales of fillets and roasts, among other things, difficult. Certain product groups of convenience food have also suffered from corona. For example, the consumption of snacks decreased. Demand for meat products have been rising and the development of poultry is still growing.

Pork exports to China have gone smoothly with the volume being even better than expected, but the price level in the Chinese markets decreased. Swings in price levels in China are large and rapid.

News about corona in Atria's home markets has been encouraging in recent weeks as the spread of the disease has been brought under control. People now can and dare to move about and also consume – as shown by the good sales numbers for June. However, there is reason to prepare for swings in sales volume. Everyday life at Atria has gone well, so the ability to operate as the market dictates is good.”

April–June 2020

Atria Group's net sales for April–June totalled EUR 366.3 million (EUR 368.9 million). EBIT amounted to EUR 4.1 million (EUR 5.1 million). Atria Finland's net sales remained roughly at the same level year-on-year: sales to retail and for export grew, but on the other hand, sales to Food Service customers decreased. Atria Sweden's and Atria Russia's net sales decreased due to reduced restaurant and fast food sales. Atria Denmark & Estonia's net sales grew almost 15 per cent due to increased sales volumes and higher prices.

Atria Finland's net sales grew, which was due to good operative efficiency and managing the seasons. Atria Sweden's and Atria Russia's the sharp weakening of sales to Food Service and fast food customers weighed down earnings in April-May. Atria Denmark & Estonia's EBIT improved with the growth in net sales. Increased meat raw material costs and an unfavourable sales structure at the beginning of the year weakened the earnings improvement.

The effects of the coronavirus pandemic on Atria's business were at their worst in April-May. The pandemic restrictions began to ease in June and sales volumes took a turn for the better. The export volumes of pork from Finland to China were at a good level, but the fall in sales prices in May weighed down on profitability.

Atria Finland's net sales for April–June totalled EUR 263.0 million (EUR 263.7 million). Sales to retail and for export grew year-on-year, but on the other hand, sales to Food Service customers declined. With the gradual easing of corona restrictions, Food Service sales began to revive towards the end of June. Pork exports to China increased, but the price level decreased in accordance with global price changes. EBIT amounted to EUR 7.3 million (EUR 6.4 million). Good operative efficiency in industrial operations and good management of seasons strengthened EBIT. The corona pandemic weakened the sales structure and caused additional costs, but their impact on earnings was mitigated by pension contribution reductions granted by the state.

Atria Sweden's net sales for April–June totalled EUR 71.7 million (EUR 74.4 million). In the local currency, net sales decreased by 3 per cent. Net sales were weighed down by the weakening of sales to Food Service and fast food customers, which was due to restrictions and recommendations set to prevent the spread of the corona pandemic. Poultry product sales to retail continued to grow during the second quarter. EBIT was EUR -2.1 million (EUR -1.5 million). The drop in earnings was a result of the reduction in net sales and unfavourable sales structures in retail. The sales of private labels increased in the period under review. The sharp weakening of sales to Food Service and fast food customers weighed down earnings in April-May. Sales volumes and performance took a turn for the better in June. The corona pandemic weakened the sales structure and caused additional costs, but their impact on earnings was mitigated by state compensation for sick leaves.

Atria Denmark & Estonia's net sales for April–June totalled EUR 26.9 million (EUR 23.5 million). EBIT amounted to EUR 1.1 million (EUR 1.0 million). Net sales grew almost 15% due to increased sales to retail. The share of Food Service sales of total sales in Estonia and Denmark is small, which is why the corona pandemic did not have much of a negative effect on the net sales of the business area. EBIT grew with the growth in net sales. Drastically increased meat raw material costs and an unfavourable sales structure at the beginning of the year weakened the earnings improvement in Denmark.

Atria Russia's net sales for April–June totalled EUR 13.3 million (EUR 18.5 million). EBIT was EUR -1.4 million (EUR -0.3 million). Sales to retail increased, with Casademont sales in particular being strong. Sales to Food Service and fast food customers decreased significantly in April, but began to recover at the end of May. In June sales of Sibylla products were already considerably better year-on-year. The drop in earnings was a result of weakening sales and unfavourable sales structures. Measures taken to prevent the spread of corona infections at production facilities caused some additional costs.

January–June 2020

Atria Group's net sales for January–June totalled EUR 723.0 million (EUR 705.3 million). EBIT amounted to EUR 6.4 million (EUR 2.3 million). Atria's net sales in Finland grew due to increased sales to retail and for exports at the beginning of the year. Export volumes of pork to China in particular were quite good. Atria Finland's increased net sales and good operative efficiency strengthened EBIT.

Atria Sweden's net sales grew by 3 per cent in the local currency from the previous year and earnings were better than the previous year. 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 approximately 18 per cent, which was due to increased sales volumes to retail and higher prices. Sales of Atria Russia's Food Service and Sibylla products increased at the beginning of the year, but sales fell sharply in April-May.

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 the number of customers were restricted. The reductions in travel and leaving the house has reduced food sales in both fast food restaurants and service stations.

The popularity of daily foods sold to retail rose sharply at the end of March due to preparing for exceptional circumstances. Sales volumes to Food Service and fast food customers decreased significantly in April-May. With the gradual easing of corona restrictions, Food Service sales increased and the market began to revive towards the end of the period under review.

The transition to exceptional circumstances in Atria's operations was carried out quickly in order to maintain the company's operational capacity. The uninterrupted continuation of operations and maintaining the security of the supply of products were Atria's primary tasks in addition to safeguarding the health and working capacity of personnel. New practices were introduced at production plants to prevent the possible spread of the virus infection. The special arrangements continue and have entailed additional expenses. On the other hand, the switch to remote working and the end of business travel has produced cost savings.

Atria has succeeded in reaching its objective of safeguarding the health and working capacity of its personnel and maintaining the security of the supply of products.

Atria Finland’s net sales for January–June totalled EUR 515.6 million (EUR 504.7 million). The increase in net sales was due to increased sales to retail and to export customers. Food Service product sales began to decline at the end of March but started to revive again in June. EBIT amounted to EUR 13.5 million (EUR 10.3 million). The growth in EBIT were due to growth in first quarter net sales and the better overall productivity prevailing for the entire beginning of the year.

Atria Sweden’s net sales for January–June totalled EUR 143.2 million (EUR 141.0 million). In the local currency, net sales grew by 3 per cent. The increase in net sales was due to increased sales to retail in the first quarter. Net sales were boosted by strong sales of poultry products in particular. EBIT was EUR -4.1 million (EUR -5.6 million). Earnings were weighed down by the weakened Swedish krona, increased raw material costs and reduced sales to Food Service customers in the second quarters. EBIT for the comparable period includes EUR 1.4 million of costs related to employee arrangements.

Atria Denmark & Estonia’s net sales for January–June totalled EUR 53.3 million (EUR 45.3 million). EBIT amounted to EUR 1.4 million (EUR 1.6 million). The increase in net sales was due to increased sales to retail and prices raised in the spring in both Estonia and Denmark. At the beginning of the year EBIT was weighed down by increased raw material costs and an unfavourable sales structure in Denmark.

Atria Russia’s net sales for January–June totalled EUR 29.4 million (EUR 34.2 million). EBIT was EUR -2.8 million (EUR -2.5 million). Net sales weakened year-on-year, which was due to the severe disruption caused by the coronavirus pandemic in the Food Service and fast food markets in April-May. The reduced sales volumes in the Food Service and fast food channels weighed down earnings.

Energy efficiency reduces the carbon footprint of food production

The key goal of the Atria Group's corporate responsibility is combating climate change and achieving carbon-neutral food production. Atria has set itself a goal of reducing the carbon dioxide emissions of its industrial operations by 25 per cent by 2025 (compared with 2016). This objective will be reached with the current development measures. In 2019, Atria's carbon footprint in proportion to industrial operations production was approximately 15 per cent smaller than the reference year. Measures at the beginning of the year have been continued consistently. Emissions reductions are achieved through a number of different measures:
- renewable energy use has increased,
- the use and management of heat had been made more efficient and
- daily energy efficiency has been under focus.

Development measures and energy efficiency system reviews have been conducted in all of Atria's business areas.

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 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 during 2020.

The coronavirus pandemic that began in early 2020 has caused strong and rapid changes in the business environment in the food industry. This has further hindered the predictability of the company’s development. Immediate effects related to Atria's business include national restrictions on restaurant operations and public food services, which reduce sales to Food Service customers. During the coronavirus epidemic, the importance of daily food is expected to strengthen.

The possible weakening of consumer purchasing power will also affect food purchases and may shift the sales structure of Atria's products into an unfavorable direction.

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 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 half-year financial report

Atria Plc's CEO Juha Gröhn will present the company's half-year financial report in a webcast today, July 17, 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/sijoitustajat/taloustieto/osavuosikatsaukset/.


ATRIA PLC
Board of Directors


DISTRIBUTION
Nasdaq Helsinki Ltd
Major media
www.atria.com

The half-year financial report is available on our website at www.atria.com.