INTERIM REPORT OF ATRIA PLC: 1 JANUARY - 30 JUNE 2008
ATRIA BOOSTS ITS GROWTH THROUGH ACQUISITIONS IN SWEDEN AND ESTONIA, SITUATION IN
THE GLOBAL MEAT MARKET HAMPERED PERFORMANCE
- The Group's net sales totalled EUR 638.1 million (EUR 622.3 million), growing
2.5%
- EBIT was EUR 17.4 million (EUR 62.0 million)
- Operative EBIT was EUR 17.9 million (EUR 27.8 million)
- Earnings per share were EUR 0.25 (EUR 1.97).
Atria Group:
Q2/ Q2/ H1/ H1/
EUR million 2008 2007 2008 2007 2007
---------------------------------------------------------------------------
Net sales 334.7 346.2 638.1 622.3 1,272.2
EBIT 10.6 50.6 17.4 62.0 94.5
Operative EBIT* 11.1 16.4 17.9 27.8 61.4
Operative EBIT % 3.3 4.7 2.8 4.5 4.8
Profit before taxes 7.7 45.6 11.2 53.3 80.6
Earnings per share 0.18 1.70 0.25 1.97 2.56
* Operative EBIT = operating profit excluding significant non-recurring items.
Review Q2/2008
Atria Group's year-on-year net sales fell slightly. The net sales for the
comparative period include EUR 38.0 million of net sales from the Swedish
company Svensk Snabbmat för Storkök AB that was sold in 2007. The globally
increasing cost of raw materials, other materials and supplies across the food
chain continued to weaken the Group's performance. First signs of a balance
between supply of and demand for meat were observed in Q2.
During the period, Atria announced the acquisition of AB Ridderheims
Delikatesser, a specialist in delicatessen products. The company has a
production plant in Gothenburg, Sweden, and during the accounting period 2007/08
it posted net sales of approximately EUR 50 million.
In addition, Atria announced that it will expand its business in Estonia through
the acquisition of two meat processing companies, AS Woro Kommerts and AS
Vastse-Kuuste Lihatööstus. The companies are well-known manufacturers of a
variety of high-quality meat products and consumer-packed meat. Through these
acquisitions, Atria will complement and expand its current product range for
retail customers in Estonia.
Atria Finland: 1 January - 30 June 2008
Q2/ Q2/ H1/ H1/
EUR million 2008 2007 2008 2007 2007
---------------------------------------------------------------------------
Net sales 202.5 188.8 383.4 358.3 749.6
EBIT 6.6 10.2 8.8 20.3 43.2
Operative EBIT* 7.1 10.2 9.3 20.3 43.2
Operative EBIT % 3.5 5.4 2.4 5.7 5.8
Atria Finland's Q2 net sales increased by 7.3%. Sales prices to retailers
increased by about 6 per cent during the beginning of 2008. The price increase
did not fully compensate for the rapidly rising raw material, labour costs,
packaging material and energy costs.
The sales of grill sausages started briskly this summer. Atria's sales are
clearly above last year's level in both A and B class grill sausages. In terms
of value, the product groups represented by Atria continued to develop
positively during the early part of the summer, particularly in the poultry and
convenience food market. According to its own analysis, Atria maintained its
market share in nearly all product groups after the early part of year, and the
growth of its total market share slightly exceeded the growth of the industry.
Atria's market share fell a little in meat sales to industry, consumer-packed
meat and poultry.
During the period, Atria Finland completed the employer-employee negotiations
initiated as part of the company's restructuring programme. The negotiations
related to restructuring that concerns Atria's Forssa production plant,
Liha-Pouttu Oy's industrial operations and procurement and the operations of
A-Farmers Ltd and A-Rehu Oy. The negotiations concluded to reduce the number of
employees by a total of 184. Of these, about 15 employees will be employed at
Atria Finland's other production plants, and pension arrangements were made with
26 employees. The net reduction in personnel will be about 170 employees. The
measures with personnel effects will be implemented by the end of the year. The
non-recurring costs arising from the restructuring amounted to EUR 0.5 million
and were included in the figures for Q2/2008.
The performance of Atria Finland in Q3-Q4/2008 will be affected significantly by
changes in the global meat market.
Atria Scandinavia: 1 January - 30 June 2008
Q2/ Q2/ H1/ H1/
EUR million 2008 2007 2008 2007 2007
---------------------------------------------------------------------------
Net sales 113.2 140.9 218.3 233.2 457.8
EBIT 5.9 40.9 11.7 42.7 54.9
Operative EBIT* 5.9 6.1 11.7 7.9 20.5
Operative EBIT % 5.2 4.3 5.4 3.4 4.5
Atria Scandinavia's comparable sales developed positively, and operative EBIT
was at the same level as last year. Q2/2007 includes EUR 38.0 million and
H1/2007 EUR 85.4 million of net sales from Svensk Snabbmat för Storkök AB in
Sweden that was sold in 2007. The EBIT for the comparative period includes the
gain from the divestment of Svensk Snabbmat för Storkök AB, and the operative
EBIT includes Snabbmat's EBIT up to the beginning of June.
With the exception of Lätta Måltider, all the business units improved their net
sales and EBIT. Year-on-year market shares in retail trade remained stable in
cold cuts and sausages and increased in cheeses and patees (Source: AC Nielsen).
The increased raw material costs affected the earnings for the period, and sales
prices will be raised in Q3.
In Q2, Atria announced the acquisition of AB Ridderheims Delikatesser, a
specialist in premium delicatessen products. Atria Scandinavia's strategy is to
focus on products with a higher degree of processing. The acquisition of
Ridderheims supports the strategy. Ridderheims' operations are to be merged with
the operations of Falbydgens Ost, a business unit of Atria Scandinavia. These
will together comprise the new business unit Atria Deli. The acquisition
strengthens Atria's position in the fresh delicatessen products market, which is
currently one of the fastest growing segments in the consumer goods retail
trade.
Ridderheims was founded in 1987 and its net sales for the accounting period
2007/08 totalled about EUR 50 million. Its product range includes among others
beer sausages, hams, cheeses, preserved foods and tapas ingredients. Ridderheims
will retain its well-known trademark and will remain in Gothenburg, where the
company has been based since the early days. The company has 110 employees. Its
main market area is Sweden, but Ridderheims also exports its products to Norway,
Denmark, Finland, Iceland, Holland, Belgium and Greece.
The Swedish Competition Authority approved the acquisition on 18 June 2008. The
process of consolidating Ridderheims will begin on 1 July 2008. The business
operations will be integrated and the new Atria Deli business unit will be
established during the latter half of the year.
Atria Russia: 1 January - 30 June 2008
Q2/ Q2/ H1/ H1/
EUR million 2008 2007 2008 2007 2007
---------------------------------------------------------------------------
Net sales 19.3 17.1 35.6 33.1 65.6
EBIT -0.1 1.5 0.4 2.7 4.3
Operative EBIT* -0.1 1.5 0.4 2.7 4.3
Operative EBIT % -0.5 8.8 1.1 8.2 6.5
Sales developed favourably in Q2 compared with Q2/2007 and Q1/2008. The market
position of the Pit Product trademark continued to improve. At the end of April,
its market share of St Petersburg's modern retail trade was 24.7 per cent
(source:
AC Nielsen). In particular, the market development of Pit Product cooking
sausages
was strong. Sales continued to grow during the summer.
The Gorelovo logistics centre will open at the end of the summer. Same time the
company will start closing down its logistics operations in central St
Petersburg. The opening of the Gorelovo meat product plant is expected to be
postponed to 2009. According to the contractor, YIT Rakennus Oy, the
postponement is due to delayed completion of the water and drain connection.
Raw material prices continued to rise in Q2, which weakened earnings. The full
impact of the price increases will be felt from the beginning of Q3. Raw
material and other cost increase pressures will continue for the rest of the
year, which will result in further increases in customer prices.
Atria Baltic: 1 January - 30 June 2008
Q2/ Q2/ H1/ H1/
EUR million 2008 2007 2008 2007 2007
---------------------------------------------------------------------------
Net sales 6.4 7.5 11.9 14.2 26.7
EBIT -1.2 -1.3 -2.2 -2.3 -4.4
Operative EBIT* -1.2 -0.7 -2.2 -1.7 -3.1
Operative EBIT % -18.8 -9,3 -18.5 -12.0 -11.6
Atria's net sales increased year-on-year in Estonia. Atria Baltic's net sales
fell slightly year-on-year. This is because the comparative figures include UAB
Vilniaus Mesa, which was discontinued in summer 2007. Atria Baltic's Q2/2007 net
sales include EUR 1.4 million and H1/2007 net sales EUR 2.6 million of net sales
from UAB Vilniaus Mesa.
EBIT decreased compared with Q2/2007. This was mainly a result of rising primary
production costs. The price of animal feed is still high in Estonia, which
hampers the profitability of primary production. Summer season products have
sold well. In particular, grill sausages have a strong market position. Sales
developed positively during the period. During the latter half of the year,
increases in food product prices may depress consumer demand for meat products
in Estonia.
At the end of the period, Atria announced two acquisitions in Estonia. Atria
will acquire the meat processing companies AS Woro Kommerts and AS Vastse-Kuuste
Lihatööstus. They are well-known manufacturers of a variety of high-quality meat
products and consumer-packed meat. Through these acquisitions, Atria will
complement and expand its current product range for retail customers in Estonia.
Together, these companies and Atria's current operations will comprise the
second largest player in the Estonian meat processing market, with annual net
sales of approximately EUR 42 million.
Established in 1993, AS Woro Kommerts is a company specialising in the
manufacture of meat products. Woro's product range includes smoked sausages and
meat products, cooked sausages, grill sausages and frankfurters. The company's
total market share in the retail trade in terms of value is 13% (source: AC
Nielsen 2008), which is the second highest in Estonia's meat processing
industry. In recent years, Woro has invested actively in enhancement of product
quality and development of brands. In 2007, it posted net sales of EUR 9.9
million and employed some 170 staff. The company has a production plant in Ahja,
near Tartu and a distribution centre in Tartu. Built at the turn of the
millennium, the production plant boasts modern production machinery.
AS Vastse-Kuuste Lihatööstus manufactures a variety of cold cuts, cooking
sausages, dried sausages and consumer-packed meat. The company has a
slaughterhouse and a cutting plant. Vastse-Kuuste reported net sales of EUR 8.8
million in 2007. Founded in 1994, the company's total market share in terms of
value is 6% (source: AC Nielsen 2008). The company has about 140 employees. In
recent years, Vastse-Kuuste has made investments to modernise its production
plant and to increase its capacity. The company has improved its market position
as a result of the investments. In particular, the company has a solid position
in the cold cuts market in Estonia. The production plant is located in
Vastse-Kuuste in southern Estonia.
Events occurring after the review period
After the review period, Atria announced that it will expand its operations in
Russia by acquiring the meat processing company OOO Campomos, which operates in
the Moscow and St Petersburg regions. The main products of Campomos include meat
products and pizzas. It is also planning to add consumer-packed meat to its
product portfolio. Campomos has a production plant and logistics centre in
Moscow and a distribution terminal in St Petersburg. In addition, the company
boasts a new pork breeding facility with 2,500 sows. The main market of Campomos
is Moscow, but it is also well-established in St Petersburg and some other major
cities. In 2007, Campomos reported net sales of around EUR 75 million. The
strong financial performance in the beginning of millennium has shown a
declining development and the company has been loss-making in recent years. The
company's production equipment is modern and well maintained.
The closing of the deal is subject to the approval of the Russian competition
authorities. Atria estimates that the process of consolidating Campomos will
begin on 1 October 2008. The transaction's enterprise value is approx. EUR 75
million.
At the end of July, Atria announced that Atria Russia's new meat product plant
in St Petersburg is not expected to be completed and opened before 2009.
According to Atria's original announcement, the plant should have been ready for
operations by year-end 2008. According to the contractor, YIT Rakennus Oy, the
postponement is due to delayed completion of the water and drain connection.
Atria and YIT have agreed on the compensation to be paid for the delays.
On 16 July 2008, the Estonian competition authorities approved Atria's
acquisitions in Estonia. The process of consolidating the companies will begin
on 1 August 2008.
Investments
The construction of a new production plant and logistics centre is underway in
the Gorelovo area in St Petersburg. The logistics functions of the new plant
will be operational at the end of the summer. The total value of the investment
is approximately EUR 70 million.
The Groups investments in Q2 totalled EUR 19.9 million and investments during
the first half of the year totalled EUR 35.8 million.
Personnel
The Group had an average of 5,831 employees (5,908) during the period under
review.
Personnel by business area:
Atria Finland 2,425 (2,295)
Atria Scandinavia 1,691 (1,757)
Atria Russia 1,299 (1,287)
Atria Baltic 416 (569)
Atria Plc's Administration
In its organisation meeting following the General Meeting, Atria Plc's
Supervisory Board re-elected retiring Board members Matti Tikkakoski and Martti
Selin.
Ari Pirkola was elected Chairman of the Supervisory Board, and Martti Selin,
Chairman of the Board of Directors, was reappointed.
Atria Plc's Board of Directors now has the following membership: Chairman of the
Board Martti Selin, Vice Chairman of the Board Timo Komulainen, members Tuomo
Heikkilä, Runar Lillandt, Matti Tikkakoski and Ilkka Yliluoma.
Short-term Business Risks
The globally high level and unpredictability of raw material prices across the
food chain that may lead to decreasing profitability and sales volumes is a
significant short-term risk. In particular, the imbalance in the global pork
market situation has a substantial impact on performance in all Atria market
areas.
In Russia, a significant risk is the delayed start of the meat product plant in
Gorelovo, St Petersburg and its impact on Atria's growth in Russia in the near
future.
No other significant changes have occurred in Atria's business risks during Q2
when compared with the risks described in the Financial Statements 2007.
Outlook for the Future
Atria Group's net sales are expected to grow in 2008, but the operative EBIT is
expected to decrease significantly from the result of 2007. Changes in the
global meat market create uncertainty in all of Atria's business areas.
Board Authorisations
The General Meeting authorises the Board of Directors to decide, on one or
several occasions, on a share issue involving a maximum of 10,000,000 new Series
A shares at the nominal value of EUR 1.70 per share.
The Board is also authorised to decide on all terms and conditions of the share
issue. The authorisation thus also includes the right to issue shares in
deviation from the proportion of the shares held by the shareholders under the
conditions provided in law, as well as the right to decide on a share issue to
the company itself without payment, subject to the provisions of the Finnish
Companies Act regarding the maximum number of treasury shares held by a company.
The authorisation is intended to be used for the financing or execution of any
acquisitions or other arrangements or investments relating to the company's
business, for the implementation of the company's incentive programme or for
other purposes subject to the Board's decision.
The authorisation is valid until the closing of the next Annual General Meeting,
or until 30 June 2009, whichever occurs first. The authorisation does not repeal
the Board's current authorisation to decide on a reserve increase.
The General Meeting of 3 May 2007 authorised the Board of Directors to decide,
on one or several occasions, on a reserve increase, which may increase the
company's share capital by a maximum of EUR 850,000. The authorisation is valid
for a maximum of five years from the date of the General Meeting's decision.
KEY FIGURES
EUR million 1-6/08 1-6/07 1-12/07
Equity/share, € 16.24 16.11 16.77
Interest-bearing liabilities 371.9 349.3 321.9
Interest-bearing receivables 45.2 48.1 45.4
Equity ratio (%) 44.7 45.8 47.6
Gross investments 35.8 242.0 284.1
Gross investments,
% of net sales 5.6 38.9 22.3
Average number of personnel 5,831 5,908 5,947
Accounting Principles
This interim report has been compiled in accordance with the IAS 34 Interim
Financial Reporting standard. In producing this interim report, the company has
applied the same accounting principles as in its Financial Statements 2007. This
interim report is unaudited.
ATRIA PLC
CONSOLIDATED BALANCE SHEET
Assets
mill. EUR 30.6.08 30.6.07 31.12.07
Non-current assets
Property, plant
and equipment 466.1 432.6 455.6
Goodwill 151.5 149.1 151.8
Other intangible assets 64.0 70.3 64.3
Loan and
other receivables 45.3 42.3 43.6
Investments 8.1 8.0 8.7
Total 735.0 702.3 724.0
Current assets
Inventories 100.2 94.4 87.3
Trade and
other receivables 164.3 156.0 153.8
Cash in hand
and at bank 31.0 45.4 35.6
Total 295.5 295.8 276.7
Total assets 1 030.5 998.1 1 000.7
Equity and liabilities
mill. EUR 30.6.08 30.6.07 31.12.07
Equity
Shareholders' equity 459.1 455.4 474.1
Minority interest 1.9 2.0 1.9
Equity, total 461.0 457.4 476.0
Non-current liabilities
Interest-bearing
liabilities 170.0 280.7 194.1
Deferred tax liabilities 42.5 44.9 42.8
Other non-interest-bearing
liabilities 0.6 0.3 0.3
Total 213.1 325.9 237.2
Current liabilities
Interest-bearing
liabilities 201.9 68.6 127.8
Trade and
other payables 154.5 146.2 159.7
Total 356.4 214.8 287.5
Liabilities, total 569.5 540.7 524.7
Total equity and
liabilities 1 030.5 998.1 1 000.7
CONSOLIDATED INCOME STATEMENT
mill. EUR 4-6/08 4-6/07 1-6/08 1-6/07 1-12/07
Net sales 334.7 346.2 638.1 622.3 1 272.2
Expenses -311.9 -284.4 -596.6 -538.6 -1 133.2
Depreciations -12.2 -11.2 -24.1 -21.7 -44.5
EBIT 10.6 50.6 17.4 62.0 94.5
* % of Net sales 3.2 14.6 2.7 10.0 7.4
Financial income and
expenses -3.1 -5.0 -6.4 -8.8 -14.3
Income from associates 0.2 0.2 0.1 0.4
Profit before tax 7.7 45.6 11.2 53.3 80.6
* % of Net sales 2.3 13.2 1.8 8.6 6.3
Income taxes -2.6 -3.3 -4.0 -5.5 -13.0
Profit for the period 5.1 42.3 7.2 47.8 67.6
* % of Net sales 1.5 12.2 1.1 7.7 5.3
Profit distribution for
the accounting period:
To parent company
shareholders 5.1 41.8 7.2 47.1 66.7
To minority shares 0.5 0.7 0.9
Total 5.1 42.3 7.2 47.8 67.6
Basic earnings/share, € 0.18 1.70 0.25 1.97 2.56
Diluted
earnings/share, € 0.18 1.70 0.25 1.97 2.56
CALCULATION OF CHANGES IN SHAREHOLDERS' EQUITY
mill. EUR Equity belonging to the shareholders of the parent Mino- Share
company rity holders'
inte- equity
Share Share Fair Inv. Trans- Retained Total rest in total
capital premium value non- lation earnings
fond rest. diff.
equity
cap.
Shareholders'
equity
1-1-2007 39.3 138.5 0.7 128.1 306.6 5.8 312.4
Translation
differences -1.1 -1.1 -0.1 -1.2
Other changes -4.4 -4.4
Profit for
the period 47.1 47.1 0.7 47.8
Distribution
of dividends -13.7 -13.7 -13.7
Share issue 8.8 110.2 -2.5 116.5 116.5
Shareholders'
equity
30-6-2007 48.1 138.5 110.2 -0.4 159.0 455.4 2.0 457.4
Shareholders'
equity
1-1-2008 48.1 138.5 1.9 110.5 -3.4 178.5 474.1 1.9 476.0
Translation
differences -0.8 -0.8 -0.8
Other changes -1.8 0.2 -1.6 -1.6
Profit for
the period 7.2 7.2 7.2
Distribution
of dividends -19.8 -19.8 -19.8
Shareholders'
equity
30-6-2008 48.1 138.5 0.1 110.7 -4.2 165.9 459.1 1.9 461.0
CASH FLOW STATEMENT FOR GROUP
mill. EUR 1-6/08 1-6/07 1-12/07
Cash flow from operating activities
Operating activities 14.8 19.2 92.3
Financial items
and taxes -13.8 -20.1 -28.4
Cash flow from operating activities,
total 1.0 -0.9 63.9
Cash flow from investing activities
Tangible and
intangible assets -35.7 -40.0 -92.1
Investments -0.2 1.6 -1.4
Sold shares in subsidiaries 33.0 39.1
Bought shares in subsidiaries -123.7 -124.6
Cash flow from investing activities,
total -35.9 -129.1 -179.0
Cash flow from financing activities
Cash share issue 116.6 116.5
Loans drawn down 97.5 254.5 304.1
Loans repaid -47.4 -217.7 -292.1
Dividends paid -19.8 -13.7 -13.7
Cash flow from financing,
total 30.3 139.7 114.8
Change in liquid funds -4.6 9.7 -0.3
SEGMENT-SPECIFIC INFORMATION
GEOGRAPHICAL
mill. EUR 4-6/08 4-6/07 1-6/08 1-6/07 1-12/07
Net sales
Finland 202.5 188.8 383.4 358.3 749.6
Scandinavia 113.2 140.9 218.3 233.2 457.8
Russia 19.3 17.1 35.6 33.1 65.6
Baltic 6.4 7.5 11.9 14.2 26.7
Eliminations -6.7 -8.1 -11.1 -16.5 -27.5
Total 334.7 346.2 638.1 622.3 1 272.2
EBIT
Finland 6.6 10.2 8.8 20.3 43.2
Scandinavia 5.9 40.9 11.7 42.7 54.9
Russia -0.1 1.5 0.4 2.7 4.3
Baltic -1.2 -1.3 -2.2 -2.3 -4.4
Unallocated -0.6 -0.7 -1.3 -1.4 -3.5
Total 10.6 50.6 17.4 62.0 94.5
Operative EBIT
Finland 7.1 10.2 9.3 20.3 43.2
Scandinavia 5.9 6.1 11.7 7.9 20.5
Russia -0.1 1.5 0.4 2.7 4.3
Baltic -1.2 -0.7 -2.2 -1.7 -3.1
Unallocated -0.6 -0.7 -1.3 -1.4 -3.5
Total 11.1 16.4 17.9 27.8 61.4
Segment reporting was redefined from the beginning of 2008 onwards in such
a manner that each business area (Finland, Scandinavia, Russia and Baltic) form
their own segment. In addition, Group costs are now reported separately under
unallocated items. Group costs mainly consist of personnel and administration
costs as well as costs arising from the share-based incentive plan. Previously,
Group costs have been included in the figures reported for the segment Finland.
Comparative figures have been adjusted to correspond to the current segment
structure.
LIABILITIES
mill. EUR 30.6.08 30.6.07 31.12.07
Debts with mortgages or other collateral
given as security
Loans from financial
institutions 4.6 61.4 13.5
Pension fund loans 4.4 4.6 4.6
Total 9.0 66.0 18.1
Mortgages and other securities given
as comprehensive security
Real estate mortgages 6.1 94.9 22.0
Corporate mortgages 1.3 45.9 2.2
Other securities 51.5 46.7 45.4
Total 58.9 187.5 69.6
Guarantee engagements not included
in the balance sheet
Unused limits 30.2 107.4 30.2
Guarantees 6.4 3.7 3.6
ATRIA PLC
Board of Directors
For further information, please contact Mr Matti Tikkakoski, President and CEO,
tel. +358 50 2582.
DISTRIBUTION
Helsinki Stock Exchange
Major media
www.atria.fi
The interim report will be mailed to you upon request and is also available on
our website at www.atria.fi/konserni
Stock exchange releases | 01.8.2008