Half-year financial report of Atria Plc, 1 January–30 June 2021

Atria Plc, Half-year financial report, 20 July 2021, 8.00 am


Half-year financial report of Atria Plc, 1 January–30 June 2021

Atria Group's adjusted EBIT improved clearly – Atria Finland's strong performance continued

April–June 2021
- Consolidated net sales totalled EUR 387.2 million (EUR 366.3 million).
- Consolidated adjusted EBIT was EUR 12.6 million (EUR 4.1 million), or 3.2 per cent (1.1%).
- Consolidated EBIT was EUR -32.5 million (EUR 4.1 million), or -8.4 per cent (1.1%) of net sales. The EBIT adjustment item consists of the accumulated translation differences between the ruble and the euro of EUR -45.1 million recognized in the income statement in connection with the sale of the Russian subsidiary (OOO Pit-Product).
- All business areas posted a positive EBIT.
- The EBIT of Atria Finland grew by EUR 4.0 million from the previous year. Net sales increased by EUR 14.7 million due to higher Food Service sales and exports.
- The increase in Atria Sweden's net sales and EBIT was mainly due to increased sales to fast food customers.
- Atria Denmark & Estonia's EBIT increased clearly due to lower meat raw material prices.
- Atria raised its EBIT guidance for 2021: adjusted EBIT is estimated at EUR 41–48 million (EUR 40.5 million).
- 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.
- All the packages of Atria branded chicken products will be labelled with the product's carbon footprint. The label on the packaging indicates the climate impact of the entire production chain of the product, converted into carbon dioxide equivalents (kg CO₂e / product).
- Atria distributed a dividend of EUR 0.50 per share for the financial period ended 31 December 2020.

January–June 2021
- Consolidated net sales totalled EUR 748.5 million (EUR 723.0 million).
- Consolidated adjusted EBIT was EUR 19.1 million (EUR 6.4 million).
- Consolidated EBIT was EUR -26.0 million (EUR 6.4 million), or -3.5 per cent (0.9%) of net sales. The EBIT adjustment item consists of the accumulated translation differences between the ruble and the euro of EUR -45.1 million recognized in the income statement in connection with the sale of the Russian subsidiary (OOO Pit-Product).
- Atria Finland's net sales and EBIT improved clearly. Sales grew in all sales channels, especially Food Service sales and exports to China increased. EBIT was EUR 7.6 million higher than in the previous year.
- The improvement in Atria Sweden's net sales and EBIT was due to stable raw-material prices, the strengthening of the Swedish krona and good sales development to fast food customers.
- Atria Denmark & Estonia's EBIT increased significantly 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 will be 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.
 

Juha Gröhn, CEO

"The first 6 months of 2021 have been favourable to Atria. Net sales have grown by EUR 26 million to nearly EUR 750 million. Adjusted EBIT is now EUR 19.1 million, having been EUR 6.4 million a year ago.

In the second quarter of the current year, all business areas improved their profitability compared to the same period last year and posted a positive EBIT. Adjusted EBIT now amounted to EUR 12.6 million, compared with EUR 4.1 million last year.

Atria's Russian subsidiary Pit-Product was sold and the conversion difference between the ruble and the euro accumulated over the years is recorded in the income statement. The translation difference was EUR -45.1 million. For this reason, EBIT in January-June was EUR -26.0 million. The recording has no effect on Atria's cash flow or equity ratio. At the end of June, Atria's equity ratio was 49 per cent. In Russia, the sale of Sibylla fast food continues as part of Atria's business. The operations are reported as part of Atria Sweden's business area. Sibylla's sales in Russia have developed well.

In the spring and early summer, coronavirus restrictions have been lifted in all countries where Atria operates and this has immediately revitalised Food Service and fast food sales. We are not yet at the level we were at before the coronavirus appeared, but recovery is well under way. Similarly, sales growth to the retail sector is subsiding. The changes are anticipated, and Atria is prepared for the change in the focus between sales channels.

In the early part of the year, pork exports to China in particular have increased. The price level on the Chinese market was level until early summer, but then prices turned downwards. Now we are at a new price level for late summer and early autumn deliveries. The situation for the rest of the year is open.

The strongest development of product groups is in convenience food. A year ago, the convenience food market was weak after a long and strong period of growth. We have now returned to a growth path. For other product groups, the word 'stable' best describes the situation.

The recovery of the Food Service market and the growth in demand for convenience food shows that even the coronavirus pandemic is not causing a lasting change in our eating habits. We want a balance between eating at home and outside the home. We also want to keep the time spent cooking reasonable.

Construction of the poultry plant in Nurmo has started with earthmoving works in the planned schedule."

April–June 2021

Atria Group’s net sales for April–June totalled EUR 387.2 million (EUR 366.3 million). Adjusted EBIT was EUR 12.6 million (EUR 4.1 million). Consolidated EBIT was EUR -32.5 million (EUR 4.1 million). The EBIT includes a translation difference of EUR -45.1 million of the sold Russian subsidiary (OOO Pit-Product). Atria's net sales increased by 5.7 per cent due to increased sales to Food Service customers and export customers in Finland and growth in Atria Sweden's fast food sales.

Atria Group's adjusted EBIT was bolstered through increased sales, a favourable sales structure and better cost management. In particular, Atria Finland's EBIT growth was clear, which was the result of increased net sales, increased Food Service sales and exports, and good cost management.

Atria raised its EBIT guidance for 2021 and estimates the adjusted EBIT at EUR 41–48 million (EUR 40.5 million). The reason for the improvement in the EBIT forecast during the first half of the year 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 Hansted 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.

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 32 million. Apart from the translation difference, the divestment had no other effect on Atria's consolidated result. 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.

As a result of the sale of Atria's Russian subsidiary Pit-Product, MBA Ilari Hyyrynen has been appointed CEO of Sibylla Russia, the fast food chain operating in Russia, Kazakhstan and Belarus, as of 5 May 2021. Ilari Hyyrynen previously acted as Executive Vice President of the Atria Russia business area. Ilari Hyyrynen is a member of Atria Group's management team and reports to CEO Juha Gröhn.

Atria Finland's net sales for April–June totalled EUR 277.7 million (EUR 263.0 million). The increase in net sales was mainly due to the recovery of the Food Service market compared to the corresponding period of the previous year. However, Food Service sales in April–June were still somewhat behind the corresponding period in 2019, when there were no coronavirus restrictions in the market yet. Sales to retail customers were almost at the level of the corresponding period of the previous year, although in the comparison period retail sales were at a significantly higher level due to coronavirus hoarding. Exports to China continued to increase. A-Rehu's feed sales also developed positively during the review period. EBIT was EUR 11.3 million (EUR 7.3 million). EBIT growth was due to stronger net sales, a favourable sales structure and good cost management. The reduction in statutory employment pension contributions was removed from the beginning of May and had a negative impact on EBIT.

Atria Sweden's net sales for April–June totalled EUR 88.0 million (EUR 78.3 million). In the local currency, net sales grew by 8.9 per cent year-on-year. Sales of Sibylla and Food Service products continued to be below normal levels due to coronavirus restrictions. The Food Service and fast food market in Sweden began to recover at the end of the review period with the gradual removal of coronavirus restrictions. Sales to retail were slightly lower than the previous year’s figures. Sales to fast food customers improved significantly – especially in Russia. Due to coronavirus restrictions, domestic tourism has increased in Russia, which has grown the local fast food market. EBIT was EUR 0.3 million (EUR -1.6 million). EBIT growth was due to stable raw-material prices and the strengthening of the Swedish krona as well as improved sales to fast food customers.

Atria Denmark & Estonia's net sales for April–June totalled EUR 26.7 million (EUR 26.9 million). EBIT amounted to EUR 2.0 million (EUR 1.1 million). Atria Denmark & Estonia’s EBIT increased clearly year-on-year. Sales to retail increased, but coronavirus restrictions weakened exports. EBIT grew strongly, which was due to the lower price level of meat raw material.

January–June 2021

Atria Group’s net sales for January–June totalled EUR 748.5 million (EUR 723.0 million). Adjusted EBIT was EUR 19.1 million (EUR 6.4 million). Consolidated EBIT was EUR -26.0 million (EUR 6.4 million). Atria Group's net sales increased owing to good sales to the retail sector and exports during Q1. Sales to Food Service customers strengthened in Q2, especially in Finland. Consolidated adjusted 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 in all sales channels, especially Food Service sales and exports to China were higher than in the corresponding period of the previous year. Atria Finland saw its EBIT improve as a result of increased net sales, a better sales structure and good cost management. Chinese export prices started to decline at the end of the review period.

Atria Sweden's net sales in local currency strengthened by 2.1 per cent compared to the corresponding period of the previous year, and EBIT improved by more than EUR 2 million. COVID-19 restrictions had a negative impact on the Food Service and fast food business, but the market began to recover at the end of the review period. The development of Atria Sweden's EBIT in Q1 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 2.5 million. The EBIT improvement was due to low raw material prices at the beginning of the year and good cost management.

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–June totalled EUR 537.9 million (EUR 515.6 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. EBIT increased to EUR 21.1 million (EUR 13.5 million). EBIT growth was due to higher net sales, a better sales structure and good cost management. During the first part of the year, Chinese export prices were reasonably stable, but began to decline at the end of the review period.

Atria Sweden’s net sales for January–June totalled EUR 164.7 million (EUR 156.3 million). In the local currency, net sales grew by 2.1 per cent year-on-year. COVID-19 restrictions had a negative impact on the Food Service and fast food business, but the market began to recover at the end of the review period. Sales to retail declined at the end of Q2. EBIT was EUR -1.0 million (EUR -3.3 million). The development of EBIT in Q1 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 net sales for January–June totalled EUR 51.2 million (EUR 53.3 million). EBIT amounted to EUR 4.0 million (EUR 1.4 million). Net sales 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.

Atria Finland states the carbon footprint of chicken products in its packaging and invests in the use of renewable energy – Atria Sweden and Atria Denmark reduce the amount of plastic in their packaging

Atria Finland has expanded the calculation of the carbon footprint of its chicken products, and now a label indicating the product's carbon footprint is added to all packaging of Atria brand chicken products. The label on the packaging indicates the climate impact of the product throughout the production chain, converted into carbon dioxide equivalents. The carbon footprint is calculated and reported per product item (kg CO₂e / product). By calculating the carbon footprint of primary production, it is possible to gain a more thorough understanding of the origin of carbon emissions from all operations and where emissions can be reduced. This is one step on the road to Atria's goal of a truly carbon-neutral food chain by 2035.

Atria Sweden launched a new Lönneberga chicken package in which the amount of plastic has been significantly reduced. The new packaging contains 57 per cent less plastic, which means 20 tonnes less plastic per year. Atria Denmark launched a new packaging for Aalbaek cold cuts, which uses about 20 percent less plastic than before.

In May, Atria Finland launched a project to build a wind farm. There are plans to build a wind farm of about 45 megawatts, which would mean that 7 windmills would be built in the vicinity of the Nurmo plant. The project company Lakeuden Taivaanraapija Oy has been established to implement the wind farm. The project is based on domestic, provincial ownership. The company is owned by Itikka Co-operative (60%), Skarta Group (30%) and Atria (10%). The company would produce renewable energy for Atria, and the income is returned to the owners, Finnish family farms.

Atria Finland, together with Nurmon Aurinko Oy, is implementing an extension of the solar power plant next to the Nurmo plant. The panel capacity of the current power plant, commissioned in 2018, will almost double: the panel capacity of the extension will be 5 MWp and it will consist of more than 9,400 solar panels. The solar power park covers an area of almost 7 hectares, which is equivalent to more than 9 football fields. It produces about 4,250 MWh of solar power per year, which corresponds to the annual consumption of about 2,100 studio apartments. Construction work on the extension of the solar power park will start in July–August, and it will be ready for commissioning during 2022. The project implementer, Nurmon Aurinko Oy, has received a 20 per cent energy subsidy from Business Finland for the project. The total value of the project is approximately EUR 2.7 million. After the commissioning of the extension, Atria's annual solar power production will exceed 9,000 MWh.
 

Outlook for the future
 

Atria raised its EBIT guideline for 2021 and estimated the adjusted EBIT to be EUR 41-48 million (EUR 40.5 million).

The reason for the improvement in the EBIT forecast is increased pork exports from Finland to China, favourable sales structure and cost control during the first half of the year. In addition, the negative impact of the operating activities of OOO Pit-Product on the Group's EBIT was shorter than forecast. OOO Pit-Product was sold on April 30, 2021. 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 and the amount of translation differences accumulated from the sale of OOO Pit-Product are updated in the new guidelines. In other respects, the guidelines have remained unchanged.

Updated guidelines:
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 -45.1 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.

Previously published guidelines were:
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.

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 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, July 20, 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


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www.atria.com

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