Half-year financial report of Atria Plc, 1 January - 30 June 2022

Atria Plc, half-year financial report, 19 July 2022, 8.00 am

Half-year financial report of Atria Plc, 1 January–30 June 2022

Atria’s net sales continued to grow in all business areas – result improved in second quarter

April–June 2022
- Consolidated net sales totalled EUR 431.9 million (EUR 387.2 million).
- Consolidated adjusted EBIT was EUR 13.8 million (EUR 12.6 million), or 3.2 per cent (3.2%) of net sales.
- Consolidated EBIT was EUR 15.9 million (EUR -32.5 million), or 3.7 per cent (-8.4%) of net sales.
- Consolidated net sales grew in Foodservice and retail channels. Sales to feed customers also increased.
- Sales prices increased in the retail and Foodservice channels.
- At the end of the review period, meat producer prices paid by Atria in Finland were some 30 per cent higher than in the corresponding time the year before.
- As part of Atria Sweden’s efficiency improvement programme, Atria sold the Malmö industrial property in Sweden in April.
- In May, Atria withdrew from its business operations in Russia and sold its subsidiary engaged in the fast-food business there.
- EBIT includes a total of EUR +12.8 million in adjustment items with an impact on cash flow. The consolidated EBIT also includes an accumulated translation difference loss of EUR 10.7 million with no cash flow effect.
- The adjusted item in the EBIT of the comparison period consists of the accumulated EUR -45.1 million in translation differences recognised in the income statement in connection with the divestment of a Russian subsidiary (OOO Pit-Product).
- Atria joined the UN Global Compact corporate responsibility initiative.
- Atria distributed a dividend of EUR 0.63 per share for the financial period which ended on 31 December 2021.

January–June 2022
- Consolidated net sales totalled EUR 806.7 million (EUR 748.5 million).
- Consolidated adjusted EBIT was EUR 16.2 million (EUR 19.1 million), or 2.0 per cent (2.6%) of net sales.
- Consolidated EBIT was EUR 18.2 million (EUR -26.0 million), or 2.3 per cent (-3.5%) of net sales.
- Consolidated net sales grew in Foodservice and retail channels. Sales to feed customers also increased.
- Exports declined compared to the corresponding period the year before, particularly exports to China.
- The consolidated adjusted EBIT was burdened by the first quarter’s weak profitability, resulting from an increase in the costs of raw materials, supplies, commodities and external services.
- EBIT includes a total of EUR +12.8 million in adjustment items with an impact on cash flow. The consolidated EBIT also includes an accumulated translation difference loss of EUR 10.7 million with no cash flow effect.
- The adjusted item in the EBIT of the comparison period consists of the accumulated EUR -45.1 million in translation differences recognised in the income statement in connection to the divestment of a Russian subsidiary (OOO Pit-Product).
- In January 2022, Atria Finland received a licence for exporting poultry products to South Korea. The first product batch to South Korea was delivered in March.

Juha Gröhn, CEO

“The second quarter of 2022 was an unusual period of time. The increase in costs was exceptionally rapid. We have not experienced inflation of this kind in decades. The increase in costs began to accelerate in 2021, and Russia’s invasion of Ukraine took the inflation to a new level. In addition, many operating chains, which were already suffering from disruptions caused by the coronavirus, were faced with more problems to solve due to the war. These problems impact both prices and the availability of commodities.

Thanks to the strong growth in net sales in particular, Atria has performed well in the operating environment which has changed very rapidly. Sales prices have been increased. Net sales during the second quarter grew by EUR 45 million compared to the corresponding period last year.  Net sales now amounted to EUR 432 million, compared with EUR 387 million last year. The solid growth in net sales also supported our result development. Adjusted EBIT now amounted to EUR 13.8 million, compared with EUR 12.6 million last year.

Net sales increased to EUR 806.7 million from the beginning of the year. The growth compared to the first half of 2021 amounts to slightly less EUR 60 million. Most of this growth took place during the second quarter.  This also applies to the EBIT. The adjusted EBIT accumulated in January–June this year totals EUR 16.2 million. The adjusted EBIT fell by some EUR 3 million from last year, even though, in terms of the result, the second quarter was better than during the year before.

No significant changes have taken place in the development between the product groups represented by Atria. Consumers’ eating habits have remained, at least so far, unchanged, but then the clear increase in food’s consumer prices began only a few months ago. The inflation will certainly impact people’s purchasing power, and therefore the contents of their shopping trolleys may very well change during the autumn and winter. We are keeping an eye on any changes and will carry out the measures necessary for responding to the situation at any given moment.

Sales value to the retail and Foodservice channel have grown in value. Feed sales to livestock farms have also been good. Export volumes have declined from last year because of reduced exports to China.

The highest cost increases have been seen in primary production. Atria has increased the producer prices of the meat it purchases in such a way that the producer prices exclusive of value added tax at the end of June this year were 30 per cent higher year-on-year. This boils down to the continuity of primary production. The price increases made so far are not sufficient to offset the increase in costs.

The costs of Atria’s industrial processes have been on the rise, and this increase has not stopped. It seems that the period of rising costs will be longer than anticipated. Indications to this end include the exceptionally high price of energy during the summer.

In May, Atria sold its fast-food business in Russia for EUR 8 million. Following the completed transaction, Atria will no longer have business operations in Russia.

In Sweden, we are working on the structural change of our industrial operations. The Malmö plant will be closed, and its production will be relocated primarily to the Sköllersta plant, by the end of 2023. The Malmö plant was sold for EUR 21 million in April. In Sköllersta, we are investing in a new production facility.

The construction of a new poultry plant in Nurmo is on schedule and on budget.

Covid-19 resulted in many absences among our personnel during the months of winter and early spring. While the situation has been much better in the spring and summer, Covid-19 continues to pose a risk to Atria’s operating capability.

In addition to the quality of everyday operations, what is critically important at this moment is the ability to detect changes in the operating environment and promptly make the necessary adjustments to policies.” 

April-June 2022

Atria Group’s net sales in April–June were EUR 431.9 million (EUR 387.2 million). Consolidated adjusted EBIT was EUR 13.8 million (EUR 12.6 million), or 3.2 per cent (3.2%) of net sales. Consolidated EBIT was EUR 15.9 million (EUR -32.5 million), or 3.7 per cent (-8.4%) of net sales.

The Group’s net sales increased in the retail and Foodservice channels of all business areas. Sales prices were at a higher level than in the corresponding period of the previous year. The Easter sales season took place in the second quarter. The Covid-19 restrictions for restaurants were lifted completely at the end of the first quarter. Sales to feed customers in Finland grew significantly. Exports declined compared to the corresponding period the year before, particularly exports to China. Year-on-year sales to fast-food customers declined because of Atria’s withdrawal from the Russian fast-food business.

The adjusted EBIT was slightly better than in the corresponding period the year before, due to the increase in net sales. EBIT continued to be weighed down by the increase in the prices of meat raw materials, materials, supplies, commodities and external services. Meat producer prices paid by Atria were markedly higher year-on-year. Coronavirus-related absences among the personnel and the attendant costs in April–June declined from January–March.

The EBIT includes a EUR 9.9 million non-recurring sales gain on the divestment of an industrial property in Malmö and a EUR 1.0 million non-recurring refund of an employment pension contribution. The EBIT also includes a EUR 1.9 million sales gain recognised on the divestment of the Sibylla Rus fast-food company, which operated in Russia, and an accumulated EUR 10.7 million translation difference loss incurred from the exchange rate differences between the Russian rouble and the euro. The translation difference was recognised in the income statement, but it has no effect on the Group’s equity ratio or cash flow.

The adjusted item in the EBIT of the comparison period consists of the accumulated EUR -45.1 million in translation differences recognised in the income statement in connection to the divestment of a Russian subsidiary (OOO Pit-Product).

As part of the efficiency programme initiated earlier, Atria sold the industrial property in Malmö for EUR 21 million at the end of April. Atria will continue its industrial operations at the plant until the end of its production in the premises during 2023. The transaction was completed on 26 April 2022. A non-recurring sales gain of EUR 9.9 million was recognised on the sale of the property.

In May, Atria divested its subsidiary Sibylla Rus LLC, engaged in the fast-food business, to Limited Liability Company Agricultural Complex Mikhailovskiy, which is part of Cherkizovo Group. The transaction price was EUR 8.2 million. The transaction does not include the Sibylla brand. The net sales of the Russian fast-food company have accounted for approximately 2 per cent of Atria Group’s net sales, and the business has been profitable. The fast-food operations have been reported in the Atria Sweden segment. Atria recognised a EUR 1.9 million sales gain and a EUR 10.7 million translation difference loss on the divestment in the Group’s result.

Atria Finland’s net sales in April–June were EUR 319.5 million (EUR 277.7 million). The net sales grew in the retail and Foodservice channels. Sales to feed customers also increased. The sales prices were higher than in the corresponding period the year before. The Covid-19 restrictions for restaurants were lifted completely at the beginning of March, which boosted Foodservice sales in April–June. The Easter sales season took place in the second quarter. Exports declined compared to the corresponding period the year before, particularly exports to China. EBIT totalled EUR 13.4 million (EUR 11.3 million). Year-on-year EBIT improved due to the increase in net sales and the more favourable structure of sales: Foodservice sales grew, while exports declined. At the end of the review period, meat producer prices paid by Atria were some 30 per cent higher than the corresponding time the year before. Atria has increased meat’s producer prices since the review period. Cost inflation continued to be strong, while the number of absences resulting from the coronavirus and the related costs were substantially smaller in April–June than in January–March.

Atria Sweden’s net sales in April–June were EUR 95.1 million (EUR 88.0 million). In the local currencies, net sales grew by 11.1 per cent year-on-year. Sales to Foodservice and retail customers developed favourably. Year-on-year sales to fast-food customers declined, given that Atria withdrew from the Russian fast-food business. Adjusted EBIT was EUR 0.7 million (EUR 0.3 million). EBIT was EUR 11.6 million (EUR 0.3 million). The EBIT includes a EUR 9.9 million non-recurring sales gain on the divestment of an industrial property located in Malmö and a EUR 1.0 million non-recurring refund of an employment pension contribution. Increased raw-material, transport and energy costs brought down EBIT during the review period. While Atria commenced price negotiations with its customers, due to which sales prices increased in the retail and Foodservice channels, these price increases were not fully commensurate with the increase in costs.

Atria Denmark & Estonia’s net sales in April–June were EUR 28.4 million (EUR 26.7 million). EBIT totalled EUR 0.7 million (EUR 2.0 million). Atria’s net sales in Estonia grew by 7.5 per cent year-on-year. In Denmark, sales to export customers grew significantly, while sales to retail customers declined slightly. The growth in net sales was the result of increased sales prices for retail customers in both Denmark and Estonia. EBIT was weighed down by increased energy and raw material costs.

January-June 2022

Atria Group’s net sales in January–June were EUR 806.7 million (EUR 748.5 million). Adjusted EBIT was EUR 16.2 million (EUR 19.1 million), or 2.0 per cent (2.6%) of net sales. Consolidated EBIT was EUR 18.2 million (EUR -26.0 million), or 2.3 per cent (-3.5%) of net sales.

Atria Group's net sales grew in the retail and Foodservice channels. Sales to feed customers also increased. Sales prices were at a higher level than in the corresponding period of the previous year. Exports declined compared to the corresponding period the year before, particularly exports to China. Sales prices increased in the retail and Foodservice channels of all business areas, particularly during the second quarter. The consolidated adjusted EBIT was burdened by the first quarter’s weak profitability, resulting from an increase in the costs of raw materials, supplies, commodities and external services.

The EBIT includes a EUR 9.9 million non-recurring sales gain on the divestment of an industrial property in Malmö and a EUR 1.0 million non-recurring refund of an employment pension contribution. The EBIT also includes a EUR 1.9 million sales gain recognised on the divestment of the Sibylla Rus fast-food company, which operated in Russia, and an accumulated EUR 10.7 million translation difference loss incurred from the exchange rate differences between the Russian rouble and the euro. The translation difference was recognised in the income statement, but it does not have an effect on the Group’s equity ratio or cash flow.

The adjusted item in the EBIT of the comparison period consists of the accumulated EUR -45.1 million in translation differences recognised in the income statement in connection to the divestment of a Russian subsidiary (OOO Pit-Product).

In January 2022, Atria Finland received an export licence for poultry products to South Korea. The first product batch to South Korea was delivered in March.

The construction project of the new poultry plant has progressed according to plan. Currently, the project’s focus lies on installations related to technical building services.

Atria Finland’s net sales in January–June were EUR 593.8 million (EUR 537.9 million). The increase in net sales was due to an increase in sales to feed, Foodservice and retail customers. Feed sales prices were higher year-on-year, which was the result of an increase in the cost of feed raw materials. The growth in Foodservice sales was a result of the coronavirus restrictions on restaurants being lifted from the beginning of March. Exports declined from the corresponding period the year before. Sales prices increased in the retail and Foodservice channels, particularly during the second quarter. EBIT totalled EUR 16.5 million (EUR 21.1 million). The decline in EBIT was the result of weak profitability in the first quarter. EBIT was weighed down by the increase in the costs of raw materials, supplies, commodities and external services. Meat producer prices paid by Atria were higher year-on-year.

Atria Sweden’s net sales in January–June were EUR 177.3 million (EUR 164.7 million). Net sales in local currencies were some 11 per cent higher year-on-year. The sales of Foodservice products have increased in step with the lifting of the Covid-19 restrictions. Sales to retail customers have also increased. Adjusted EBIT was EUR -0.2 million (EUR -1.0 million). EBIT totalled EUR 10.7 million (EUR -1.0 million). The EBIT includes a EUR 9.9 million non-recurring sales gain on the divestment of an industrial property located in Malmö and a EUR 1.0 million non-recurring refund of an employment pension contribution. Increased costs weighed down EBIT. Increases in the sales prices have not set off the cost increases in full.

Atria Denmark & Estonia’s net sales in January–June were EUR 54.4 million (EUR 51.2 million). EBIT totalled EUR 1.5 million (EUR 4.0 million). The growth in net sales resulted from the increase in Atria Denmark’s exports and the increases in sales prices at the end of the review period in both Estonia and Denmark. Sales to retail customers in Estonia strengthened. EBIT was weighed down by record-high energy and raw material costs.
 

Sustainability

Atria has joined the UN Global Compact corporate sustainability initiative. In its earlier sustainability work, Atria had already committed to the Ten Principles of the Global Compact and the UN’s Sustainable Development Goals for human rights, labour, the environment and anti-corruption. Joining the UN Global Compact corporate sustainability initiative strengthens Atria’s development work in environmental and social responsibility. Atria has been approved in the Climate Ambition Accelerator programme, designed to equip companies with the knowledge and skills they need to accelerate progress towards setting science-based emissions reduction targets. The goal of these joint targets is to limit global warming to 1.5 °C.  The programme includes 900 companies from 54 countries, and Atria is one of the 26 Finnish companies involved. The commitment to the UN Global Compact and participation in the Climate Ambition Accelerator programme solidify the execution of Atria’s comprehensive sustainability programme and commitment to science-based targets. They also support the development of Atria’s own operations and the operations of its entire value chain in an increasingly responsible and sustainable direction.

Atria’s poultry products, the packaging of which includes a label indicating their carbon footprint, were recognised in the respected European Award for Cooperative Innovation competition organised by Cogeca. The award was presented in Brussels on 27 April. In 2022, the awards focused on cooperative innovations advancing sustainability. In late 2021, Atria became the first food company in the world to add a label indicating the carbon footprint of its poultry products on consumer packages. The ability to trace the meat raw material to an individual farm has allowed the carbon footprint to be marked on product packaging. The year 2022 marks the 10th anniversary of Atria adding farm-specific markings indicating the origin of the meat to its packaging.

In May, Atria launched new packaging for Lönneberga cold cuts, which is 50 per cent bioplastic. The bioplastic used in the packages is made from ISCC-certified material.

Outlook for the future

In 2022, Atria Group's adjusted EBIT is estimated to be lower than in the previous year (EUR 49.2 million).

The significant and rapid rise in costs and the imbalance between global pork demand and supply will create uncertainty in the business environment in 2022. However, Atria's strong market position, long-term investment in its own brands, as well as good customer relationships and reliable industrial processes provide the preconditions for business stability even in these market situations.

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 2022 as an attachment to this stock exchange release. The full release is available on the company's website at www.atria.com.

Publication of the interim report

Atria Plc's CEO Juha Gröhn will present the company's interim report in a webcast today, July 19, 2022 at 8:15 - 9:00 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

For more information, please contact: Juha Gröhn, CEO, Atria Plc, tel. +358 400 684224.

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www.atria.com

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