Atria Oyj — Earnings Release 2020

Feb 16, 2021

Financial Statement Release of Atria Plc, 1 January - 31 December 2020

Financial Statement Release of Atria Plc, 1 January - 31 December 2020

Atria Plc, Financial Statement Release, 16 February 2020, 8:00 am
Financial Statement Release of Atria Plc, 1 January–31 December 2020
Atria continued strong growth in the fourth quarter – result improved in all
business areas
October–December 2020
- Consolidated net sales totalled EUR 398.6 million (EUR 380.0 million).
- Consolidated EBIT was EUR 15.1 million (EUR 12.1 million), or 3.8 per cent
(3.2%) of net sales.
- All business areas improved their operating result.
- Atria Finland’s net sales increased, and the EBIT improved slightly from the
same period a year earlier. Sales to retail and export customers increased.
- Increased retail sales, the strong Swedish krona and good cost management
boosted the net sales and EBIT of Atria Sweden.
- Atria Denmark & Estonia had a steady performance. The good results are based
on growth in sales to the retail sector.
- Atria Russia's result and net sales in roubles increased due to the increased
retail and fast-food sales. The EBIT includes a EUR 0.8 million recognised brand
impairment.
- Atria decided to invest EUR 155 million to expand poultry production in
Finland.
- Atria published a new Group strategy: “Atria is a Winning Northern European
Food Company”.
January–December 2020
- Consolidated net sales totalled EUR 1504.0 million (EUR 1451.3 million).
- Consolidated EBIT was EUR 40.5 million (EUR 31.1 million), or 2.7 per cent
(2.1%) of net sales.
- Consolidated net sales increased by over 3,6 per cent owing to good sales to
the retail sector and exports. Sales to Food Service customers were down about
20 per cent from the year before.
- Atria Finland's strong retail sales, increased pork exports to China and
better profitability lead to improved EBIT.
- Atria Sweden's net sales due to increased sales to retail. The operating loss
decreased by EUR 4 million year-on-year.
- Atria Denmark & Estonia's net sales grew by over 10 per cent due to strong
sales to retail.
- Market disruption caused by the coronavirus pandemic still reduces business
predictability.
- Consolidated earnings per share were EUR 0.81 (EUR 0.54). The Board of
Directors proposes that a dividend of EUR 0.50 (EUR 0.42) be paid for each share
for the 2020 financial period.
After the review period:
- Atria concluded the sale of its Russian subsidiary OOO Pit-Product to Limited
Liability Company Agricultural Complex Mikhailovskiy. The deal is subject to the
approval of the Russian competition authority.
- Atria announced the launch of a EUR 30-million investment plan to reorganise
Atria Sweden's production lines and to increase productivity. The project
involves a viability assessment into the transfer of production from the Malmö
plant to the Sköllersta plant near Örebro.

                           Q4     Q4  Q1 - Q4  Q1 - Q4

EUR million 2020 2019 2020 2019

Net sales
   Atria Finland 284.5 271.6 1,066.3 1,033.8
   Atria Sweden 78.2 74.5 300.8 289.4
   Atria Denmark & Estonia 26.6 26.6 106.8 96.6
   Atria Russia 17.6 18.9 66.7 73.8
   Eliminations -8.4 -11.7 -36.6 -42.3
Net sales, total 398.6 380.0 1,504.0 1,451.3

EBIT
   Atria Finland 14.4 14.4 43.1 40.0
   Atria Sweden 0.7 -0.5 -2.0 -6.1
   Atria Denmark & Estonia 1.7 1.0 5.3 4.4
   Atria Russia -1.0 -2.0 -2.9 -4.0
   Unallocated -0.7 -0.8 -3.0 -3.1
EBIT, total 15.1 12.1 40.5 31.1
EBIT, % 3.8 % 3.2 % 2.7 % 2.1 %

Profit before taxes 14.6 10.7 37.3 26.2

Earnings per share, EUR 0.22 0.19 0.81 0.54

Juha Gröhn, CEO
”For Atria, 2020 was a successful year especially considering the changes
brought on by the coronavirus pandemic on the market and on Atria's daily
operations. Atria's net sales exceeded the EUR 1.5 billion mark for the first
time. The EBIT improved to EUR 40.5 million, an increase of about 30 percent
compared to the previous year. Free cash flow amounted to EUR 59.0 million.
The fourth quarter net sales amounted to EUR 398.6 million and EBIT to EUR 15.1
million. The year 2020 ended well in terms of business operations.
The best news in the fourth quarter of 2020 were the good holiday season sales.
People stayed home for the holidays and bought groceries accordingly.
Unfortunately, the quarter's sales to Food Service customers lagged about 20 per
cent behind year-on-year due to coronavirus restrictions. Once travel
restrictions are lifted, rebound towards previous levels will be swift. Proof of
this was seen in the summer of 2020, during the weeks when COVID-19-related
restrictions were moderate, and confidence increased. During that time the Food
Service sales saw a quick recovery. The Far East has an increasingly significant
role in exports. In 2020, we exported more than 20 million kilograms of pork to
China. The significance of South Korea as an export destination is also
increasing.
Atria updated its corporate strategy last year. The new strategy header is
“Winning Northern European Food Company”. Northern Europe is the focus of our
operations. Winning here signifies, above all, operational capability and fusing
the strategy and its daily execution into an organism that stays relevant
through constant renewal.
In October 2020, Atria made the decision to invest in a poultry plant at the
Nurmo unit. The new plant will be completed in 2024. The value of the investment
is EUR 155 million. We will ensure our success in the growing poultry market by
increasing industrial capacity as the current plant nears the end of its useful
life.
After the review period Atria came to an agreement on selling Pit-Product, its
subsidiary in the St. Petersburg region in Russia. We have weighed our options
for Atria Russia's operations. The assessment culminated in the decision to sell
Pit-Product. Pit-Product product sales to retail customers have fallen behind
expectations in the past few years. On the contrary, the Sibylla concept has
remained on a path of profitable growth, and Atria continues to operate in the
Russian fast-food market.
The past year has shown that the key risks in Atria's operations revolve around
biosafety. Typically, we experience incidents as repercussions from market
-disrupting events, such as the spread of the African swine fever in Central
Europe and the resulting meat market disruption. A similar risk is the bird flu
currently circulating in Europe, harmless to humans but a grave danger to fowl.
The COVID-19 pandemic is also a biosafety hazard that materialised in a very
unfortunate way.
The sales and profitability in the current year will be greatly affected by how
the coronavirus can be managed and at which point restrictive arrangements can
be lifted. Atria has maintained its performance well during the pandemic and we
have faith in our continued handling of the situation.”
October–December 2020
Atria Group’s net sales for the fourth quarter totalled EUR 398.6 million (EUR
380.0 million). EBIT was EUR 15.1 million (EUR 12.1 million). Atria's net sales
increased by 4.9 per cent due to increased sales to the retail sector and to
Atria Finland's export customers. Sales to Food Service customers fell around 20
per cent year-on-year.
All business areas improved their operational profits due to increased sales and
better cost management. The EBIT increase in Finland was held back by changes in
the structure of sales due to the coronavirus pandemic. Steady meat raw material
costs bolstered the EBIT in Sweden.
Return to tighter coronavirus restrictions at year-end made a dent at sales
volumes to Food Service customers. On the other hand, sales to retailer
customers were significantly above those in the last quarter of 2019. At the
production plants, additional expenses were incurred from the special
arrangements made to prevent the spreading of the coronavirus.
In October, the Board of Directors of Atria Plc approved the revised corporate
strategy for the years 2021–2025, as well as updated financial targets which are
effective as of 1 January 2021.
The key objective of the strategy update is to be a Winning Northern European
Food Company with
- an strong profit-making ability,
- the most desired brands,
- deep partnerships with our customers,
- committed personnel,
- a position as a forerunner in accountability, and
- the best partnership with owner-producers.
The main changes in the business environment affecting the new strategy are
related to consumer purchase behaviour. Purchase decisions increasingly reflect
consumers' awareness of responsible food choices and the increase in the demand
of convenience foods and poultry products in particular. Additionally, the
popularity of the Food Service channel and private labels is on the increase.
For the company to achieve its objectives, it is essential to continue striving
towards commercial excellence, continued improvement of operational efficiency
and further enhancement of the Atria Way of Work. Additionally, it is especially
important for us to succeed in the six focus areas that are the most essential
for our profit-making in accordance with our strategy. These six focus areas
are:
- Grow Sweden profitably
- Drive next level Supply Chain efficiency
- Optimize red meat
- Win big in poultry
- Expand in convenience food
- Strengthen in Food Service including fast food
Atria's new Group strategy sets out the following comprehensive financial
targets:
- EBIT percentage: 5% (unchanged)
- Equity ratio: 40 % (unchanged)
- Capital distribution of profit from period: 50% (unchanged)
- Return on equity (ROE): 10 % (revised target)
- Above-market growth (new target)
Atria made a decision in October to invest in expanding its poultry production.
The investment has a value of EUR 155 million and it involves the construction
of new slaughtering, cutting and packaging lines at the company's production
plant in Nurmo. Poultry consumption has been increasing rapidly in Finland for
several years. The growth was around 4% per year between 2010 and 2019. The
growth rate in 2020 was 3,6%. The new processing plant will help the company to
meet growing consumer demand, and it will strengthen Atria's position as market
leader in poultry products. Construction work at the site of the new plant will
begin as soon as possible with completion estimated in 2024 at the earliest. The
investment will increase Atria Finland's poultry production capacity by 40%.
In October, Atria Finland Ltd acquired the entire stock of Domretor Oy, contract
manufacturer in the food business. Ownership and holding of the company were
transferred to Atria as from 1 October 2020. Domretor Oy has been an associated
company of Atria since 2013, when Atria acquired a 24.9 per cent shareholding in
it. The transaction price has no major impact on Atria's financial position or
earnings. Domretor Oy's production plant is situated in Kauhava. The company has
personnel of 70 around the year plus some 40 seasonal employees. Domretor Oy's
2019 net sales were EUR 8.8 million.
Atria Finland's net sales for October–December totalled EUR 284.5 million
(EUR 271.6 million). The increase in net sales was due to increased sales to the
retail sector and to export customers. The sales of pork to China have increased
substantially year-on-year. Sales of Food Service products fell year-on-year.
EBIT was EUR 14.4 million (EUR 14.4 million). The EBIT remained at a good level.
The EBIT increase was held back by changes in the structure of sales due to the
COVID-19 pandemic. Under normal circumstances, Christmas holiday sales are very
significant to the Food Service's all-year sales, but their share was
significantly smaller than usual this year.
Atria Sweden's net sales for the fourth quarter amounted to EUR 78.2 million
(EUR 74.5 million). In the local currency, net sales improved by 1.6 per cent
year-on-year. Coronavirus restrictions had a negative impact on the Atria Food
Service sales in the fourth quarter as well. Overall net sales increased, since
sales to the retail sector continued stronger than earlier. EBIT was EUR 0.7
million (EUR -0.5 million). The improvement in EBIT was due to increased net
sales, better management of costs and the strengthening of the Swedish krona.
Atria Denmark & Estonia's net sales for October–December totalled EUR 26.6
million (EUR 26.6 million). EBIT amounted to EUR 1.7 million (EUR 1.0 million).
Atria Denmark & Estonia had a steady performance. Sales to the retail sector
remained at a good level. Atria's Food Service sales were at a lower level than
in the corresponding period last year both in Denmark and Estonia. Net sales
were bolstered by the price increases implemented early in the year. The growth
of EBIT in Denmark was due to the stable raw material prices and good retail
sales.
Atria Russia's net sales for the fourth quarter amounted to EUR 17.6 million
(EUR 18.9 million). In the local currency, net sales grew by nearly 20 per cent.
EBIT was EUR -1.0 million (EUR -2.0 million).  Sales to the retail sector
increased by almost 30 per cent, in particular due to good Casademont product
sales. Sales of Sibylla products increased by more than 15 per cent year-on
-year. The measures carried out at the production plants to prevent the
spreading of the coronavirus continued to incur some additional expenses.
Following the changes in Atria Russia's retail sales structure, a EUR 0.8
million impairment was recognised on the value of one brand.
January–December 2020
Atria Group's net sales for January–December totalled EUR 1,504.0 million
(EUR 1,451.3 million). EBIT amounted to EUR 40.5 million (EUR 31.1 million).
Atria Group's net sales increased owing to good sales to the retail sector and
exports. Sales to Food Service customers were down about 20 per cent from the
year before. Consolidated 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 to the
retail sector and to export customers. Atria Finland saw its EBIT improve as a
result of increased sales to the retail sector, increased pork exports to China
and better productivity.
Atria Sweden's net sales, measured in the local currency, grew by 3.1 per cent
from the previous year and earnings were up by EUR 4 million from the previous
year. Profitability has increased due to improved efficiency and lower costs.
The Swedish krona strengthened against the euro during the year and hit its
highest level in the fourth quarter. 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 over 10 per cent due to strong sales
to retail. All through 2020, Atria Russia's sales to the retail sector were at
substantially higher than in the previous year. The improvement in earnings was
due to the increase in net sales and a more favourable sales structure.
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 customer numbers were restricted. Furthermore, the reductions in travel and
leaving the house have reduced food sales in both fast-food restaurants and
service stations.
The popularity of daily foods sold to the retail sector rose sharply at the end
of March due to preparations for exceptional circumstances. The volumes of sales
to fast food and Food Service customers decreased significantly in April and
May. Following the gradual lifting of coronavirus restrictions, Food Service
sales increased, and the market began to recover towards the end of the second
quarter, yet failing to return to its pre-coronavirus level by September's end.
In the last quarter, with a renewed tightening of coronavirus restrictions,
sales to Food Service customers fell again. Sales to the retail sector were at a
substantially higher level than in the previous year.
The transition to exceptional circumstances in Atria's operations was carried
out quickly in order to maintain the company's operational capacity. Ensuring
uninterrupted continuation of operations and maintaining reliability of product
deliveries were Atria's primary tasks alongside safeguarding the health and
working capacity of personnel. New practices were introduced at production
plants to prevent the spread of any virus infections. The special arrangements
continue, and they have incurred additional expenses. However, the switch to
remote working and the cessation of business travel have produced cost savings.
Atria has succeeded in reaching its objective of safeguarding the health and
working capacity of its personnel and maintaining its delivery reliability.
Atria Finland’s net sales for the year amounted to EUR 1066.3 million (EUR
1033.8 million). The increase in net sales was due to increased sales to the
retail sector and to export customers. Sales of Food Service products fell by
approximately one fifth year-on-year due to the coronavirus restrictions. The
company’s EBIT increased to EUR 43.1 million (EUR 40.0 million). The EBIT growth
was due to increased net sales, favourable export development and better
productivity. The coronavirus pandemic has incurred additional expenses, but
their negative impact on profit has been mitigated by the reduction in statutory
employment pension contributions.
Atria Sweden’s net sales for the year amounted to EUR 300.8 million (EUR 289.4
million). In the local currency, net sales grew by 3.1 per cent year-on-year.
COVID-19 restrictions had a negative impact on the Food Service and fast-food
business. On the other hand, sales to the retail sector increased substantially,
which had a positive impact on all-year net sales. Net sales were boosted by
strong sales of poultry products. EBIT was EUR -2.0 million (EUR -6.1 million).
Earnings were burdened by a reduction in sales to fast food and Food Service
customers. Furthermore, the coronavirus pandemic caused additional expenses,
whose effect on profit was nevertheless mitigated by the compensation for sick
leaves paid by the government. Profitability has increased due to improved
efficiency, lower costs and the strengthening of the Swedish krona. EBIT for the
comparable period includes EUR 1.4 million of costs related to employee
arrangements.
Atria Denmark & Estonia’s net sales for the year amounted to EUR 106.8 million
(EUR 96.6 million). EBIT amounted to EUR 5.3 million (EUR 4.4 million). The
increase in net sales followed from substantial growth in sales to the retail
sector in both Estonia and Denmark. Net sales were bolstered by the price
increases implemented early in the year.
Atria Russia’s net sales for the year amounted to EUR 66.7 million (EUR 73.8
million). In the local currency, net sales grew by 3,0 per cent. EBIT was EUR
-2.9 million (EUR -4.0 million). Sales to the retail sector grew significantly
from the previous year. Sales of Casademont products increased substantially
throughout the review period. Food Service product sales suffered from the
coronavirus restrictions, but picked up again in the fourth quarter. The
increase in earnings was due to the increase in net sales and a more favourable
sales structure.

Key indicators

EUR million 31.12.2020 31.12.2019

Shareholders´ equity per share EUR 14.96 14.85
Interest-bearing liabilities 218.1 228.3
Equity ratio, % 46.8 % 46.9 %
Net gearing, % 43.6 % 51.6 %
Gross investments 45.6 40.1
% of net sales 3.0 % 2.8 %
Average FTE 4,444 4,454

Atria is the first meat company to disclose the carbon footprint on chicken
product packaging
Atria will be the first meat company to add a label of chicken products' carbon
footprint on consumer product packages. The ability to trace the meat raw
material to an individual farm also allows the carbon footprint to be marked on
product packaging. The first carbon footprint marked products are chicken
products from the Alatalo farm.
"Traceability of the meat raw material all the way to the farm has allowed us to
calculate and mark the carbon footprint of individual products. Initially we add
the carbon footprint label on chicken products from the Alatalo farm, and as the
calculation capacity advances at individual farms, we will be extending the
labels gradually to more products," says Merja Leino, Executive Vice President
of Sustainability at Atria.
Atria continues to develop its product safety, quality, environmental and energy
expertise
Certification of standardised systems are third-party proof of Atria's ongoing
work on product safety, quality, environmental and energy expertise.  Six of
Atria's Swedish production plants acquired certification for their ISO 14001
environmental management systems. The ISO 14001 certification of the Sköllersta
plant was renewed. All seven of Atria's Swedish production plants renewed their
ISO 50001 energy management system certificates in the last quarter of 2020.
Atria Finland's FSSC 22000 food safety system certification, ISO 14001
environmental management system certification and ISO 50001 energy management
system certification also had their follow-up audits carried out in the fourth
quarter. Atria Denmark & Estonia's production plants in Horsens and Valga as
well as Atria Russia's production plants in Gorelovo and Sinyavino in the
vicinity of St Petersburg have been audited and their quality system and product
safety certificates are valid.
Events after the period under review
After the review period, Atria concluded the sale of its Russian subsidiary Pit
-Product to Limited Liability Company Agricultural Complex Mikhailovskiy, which
belongs to the Cherkizovo Group. Cherkizovo is Russia's leading meat products
manufacturer and a listed company on the Moscow Stock Exchange
since 2006.
OOO Pit-Product is a wholly owned subsidiary. Atria has owned the company since
2005. At the end of 2020, the company had approximately 700 employees. The
company produces food products for the retail and Food Service channels and owns
the Gorelovo and Sinyavino plants. The sale transaction does not include Atria
Russia's subsidiary Sibylla Rus LLC, which conducts fast food business in
Russia.
The transaction is expected to close during the first half of 2021. The
transaction is subject to the approval of the Russian Competition Authority. The
impact of the divested business on Atria Group's net sales is approximately EUR
35 million. The business has been loss-making.
The amount of accumulated translation differences related to Pit-Product on
December 31, 2020 was EUR
-45 million. The translation difference has arisen from exchange rate changes
during Pit-Product's ownership. Atria acquired Pit-Product in 2005. At that
time, the exchange rate of the Ruble against the euro was about 34 and at the
end of 2020 about 92. Upon divestment of a foreign subsidiary, the accumulated
translation differences related to that subsidiary, presented already earlier in
equity, are recognized in profit or loss. As the accumulated translation
differences already reduce the Group's equity, this entry will not have an
effect on the Group's equity nor cash flow. Translation differences are not
recognized until the final completion of the transaction.
The final purchase price will be determined at the closing of the transaction
and the divestment is not expected to have any other significant effect on the
consolidated result.
After the review period, Atria announced the launch of an investment plan to
reorganise Atria Sweden's production lines and to increase productivity. The
investment is estimated to total around EUR 30 million. The investment plan will
thoroughly investigate the reorganisation of production lines, potential
transfers and investment needs related to the construction of new production
lines. The project will involve assessing the option of moving production from
the Malmö plant to the Sköllersta plant. After the planning phase, the
implementation of the investment will be decided on. If implemented, the project
is expected to be fully completed during 2023.
Outlook for the future
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 recognized in the income
statement for material items that affect comparability. These may include events
that are not part of the ordinary business activities, such as the restructuring
of operations, capital gains and losses attributable to the sale of operations,
impairment, and the costs of discontinuing significant operations. Such an item
affecting the EBIT, if completed, is the translation difference related to the
divestment of OOO Pit-Product. The amount of accumulated translation differences
related to Pit-Product on December 31, 2020 was EUR -45 million. Translation
differences depend on the development of the Ruble exchange rate and are made at
the final completion of the transaction.

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 early 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.
Board of Directors' proposal for profit distribution 2020
The Board of Directors proposes that a dividend of EUR 0.50 (EUR 0.42) be paid
for each share for the 2020 financial period.
Disclosure
Atria Plc complies with the disclosure procedure in accordance with standard
5.2b of the Financial Supervisory Authority and publishes its financial
statement release for 1 January to 31 December 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 financial statement release
Atria Plc's CEO Juha Gröhn will present the company's full year financial report
2020 in a webcast today, February 16, 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
DISTRIBUTION
Nasdaq Helsinki Ltd
Major media
www.atria.com
The financial statement release is available on our website at www.atria.com.

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