A sketchy review of Atria's business areas' earnings in recent years

Atria's Q3 interim report will be released on November 1^st and now it is the right time to look at the results from recent years.  The chart below illustrates Atria's quarterly EBITs starting from 2009.  The readings are highly unofficial. Large write-offs (Atria Baltic 2009-Q4 about € 7 million and Atria Russia 2010-Q3, about € 10,5 million) are excluded.  

Figure: Quarterly earnings before interest and taxes by year in Atria's business areas, large write-offs excluded.

All in all, the figures tell, that the current year so far has been neither good nor bad.  When compared to the last year, the result is much better in Finland and in Russia but worse in Scandinavia and in the Baltics.  Largest dispersion between the last few years (if quarters are pooled) can be seen in Finland and to a lesser extent in Russia and largest dispersion between quarters (if years are pooled) is recorded in Finland and to a lesser extent in Scandinavia. At present, Finland and Russia undoubtedly are the key areas, when evaluating the success of Atria Plc.

In parallel with the chart, it may be interesting to look at what analysts think of Atria's immediate future.  Reuters brings together analysts' forecasts and other company information.  Atria's forecasts are available through this link.  If I get it right, which by the way, is not at all a sure thing, estimated 2012-Q3 earnings per share are in the range of 0.13 - 0.20 euros.  However, when browsing on the pages, one can find that the Q4 estimates look just the same.  Consequently, I am not sure what to think about these estimates but let’s play with them for a while.  We obviously do not know the arguments of the analysts, but we can speculate on what kind of business area specific results these estimates could be based on.  Now let’s see what we can discover in the charts above and what analysts may have thought.

Atria Finland

Quite neatly, the annual lines illustrating Atria Finland’s quarterly EBITs do not intersect.  They follow roughly the same pattern.  But what is more important to note, is that the trend from 2009 to 20111 has been uniformly downwards.  Thanks to the moderate H1, this year’s result overall will most likely be better when compared to the last year, which was really bad.  But whether the trend has reversed, is a different matter.  As we noted four weeks ago, Atria Finland’s near-term problems are huge.  General economic conditions in Finland are getting worse and farming costs are on the rise.  Moreover, rainy summer didn't favor barbecuing at all, and it certainly has had a negative effect on Atria's net sales and earnings, when compared to a normal season.  The case is that third quarter has always been a terribly important quarter for Atria.  If the usual good result does not come, it will be a small disaster.  Soon we shall see, but Q3 EBIT about € 10 million could now be close to what analysts have predicted for Atria Finland. 

Atria Scandinavia

Atria Scadinavia’s this year’s performance has been weak.  It has brands in all product categories and price ranges.  It has, for instance Lithells’ sausages for everyone, Ridderheims’ delicatessen products for those who value luxury food and it also governs the popular fast-food chain Sibylla.   In addition, Atria Scandinavia does not have the burden of primary production, but uses mainly imported meat.  Then, one could expect, that it will show proper results quarter after quarter and especially now when the Swedish krona is strong.  This has not happened.  However, during the recent years, H2 has been almost satisfactory and much better than H1, and Q3 EBIT of about € 4 million has been routine.  It is possible that some or many analysts have ended up with it.

Atria Russia

Atria Russia's H1 went fine.  Now Campomos has launched a new family of minced meat products and has been and still is running a major campaign.  In the near-term it means extra costs and it is quite likely that Atria Russia will stay in red at least for some time.  Personnel cuts have been made and other cost reductions have been implemented to the extent that Atria itself estimates annual savings of € 7.5 million, so nearly € 2 million per quarter.  Then, just looking at the recent years’ Q3 figures, analysts may have come to the conclusion that the current year’s Q3 EBIT could be something around € -2 million. 

Atria Baltic

It seems that it is not difficult to predict the result of Atria Baltic, but one never knows.  Anyway, it is likely that Olle Horm, the new Executive Vice President of Atria Baltic, has not yet had time to change anything.  If that is the case, then a similar EBIT result as before, about € -1 million, might be expected by analysts.

So what?

Total of these guesses about what the analysts might have thought, is € 11 million.  We must now make a few subtractions, using the past few quarters’ readings as guidelines.  Some minor subtractions or additions are ignored.  Subtracting unallocated costs about € 1 million, finance cost about € 3,5 million and taxes (tax rate 24,5%) roughly € 1,5 million, we get the final reading of around € 5 million.  The number of shares is about 28,3 million.  Consequently the earnings per share would be about € 0,18.

Hence it turns out, that our guess falls in the analyst’s range of € 0,13 - € 0,20.  Practically speaking it means simply that analysts really are neither expecting a splendid nor a miserable quarter.  If Atria’s result does not surprise, positively or negatively, the greatest interest in the interim report relates to future prospects. In particular, the situation in Russia is of interest. It is reasonable to expect some information on the plans to abandon the primary production in Russia and views of how well the sale of new products has taken off in Moscow would be greatly appreciated.  

We will talk about Atria’s businesses again later but on Friday, November 9^th we are going to focus on HKScan.  But before that, on Thursday, November 1^st and on Tuesday, November 6^th we will take a brief look at just then released third quarter interim reports of Atria and HKScan respectively. 

Summer-time (Directive 2000/84/EC of the European Parliament and of the Council of 19 January 2001 on summer-time arrangements) will soon be over. Days are darkening gradually.                              

Not funny, just d      a            r                        k                                               - 

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