Artoparto's Blog: February 2013

Thursday, February 21, 2013

Atria’s Q4 2012 is very bad

Both Scandinavia and Russia have failed badly. Atria Finland and Atria Baltic are somewhat above expectations but Atria Scandinavia and Atria Russia indeed are monumentally below expectations. We will look at the results later next month.

Disclaimer: All content provided on this site is for entertainment purposes only. This site does not provide any investment advice and content on this site should not be construed as recommendation to buy or sell any financial instruments. Please consult a qualified financial adviser before making any financial decision. I make no representations as to the accuracy, completeness, suitability, or validity, of any information on this site or found by following any link on this site. I will not be liable for any errors, omissions, or any losses, injuries, or damages arising from displaying or using any content provided on this site. I am not responsible for users' comments. I reserve the right to update or delete any content on this site for any reason.

Friday, February 15, 2013

Atria Plc’s Q4-2012 - Analysts’ estimates vary a lot

Atria's Financial Statement Bulletin will be published on February 21^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.

Quarterly earnings before interest and taxes by year in Atria's business areas,

large write-offs excluded.

Actual EBITs are indicated by solid lines. Dashed circles show a set of reasonable country-specific Q4 EBIT figures, which could lead to EPS of €0,20, which is the same as analysts’ Q4-2012 EPS (pre-exceptional) consensus according to the data gathered by Bloomberg. There the number of participating analysts is 7 and their estimates range from €0,11 to €0,27. The range looks horribly wide. Undoubtedly each analyst’s estimate is mostly dependent on his or her thoughts about Atria Russia. However, a knockout loss - say €-10 million - in Russia does not fit into this range. Apparently, such is not expected now.

Overall, the year 2012 seems to be about as successful as the year 2009 (indicated in the chart by a white line), in Finland the year 2012 perhaps a little weaker, but in Russia and in the Baltic countries a little better. It should be recalled here, that Q4-2009 actual EPS was €0.25. Absolutely clear is that 2012 Q4 results in Finland and especially in Russia will determine the big picture of the FY 2012. Let’s now very briefly go through the country-specific figures presented on the chart, just to find out what kind of results analyst’s consensus might be based on.

Atria Finland - Atria Finland’s Q4 result will most likely be better compared to 2011, which was simply bad. One should also remember that Atria Finland’s Q4 2011 EBIT includes a non-recurring depreciation item in the amount of EUR -1.8 million on the value of the Forssa logistics site. Then anything under €9 million would be a huge surprise. It is also reasonable to assume that, in accordance with the three preceding quarters, also the Q4 result is worse compared to the year 2009. Consequently, Q4 EBIT of €10 million is a fairly sensible guesstimate.

Atria Scandinavia - Compared to 2011, Atria Scandinavia’s year 2012 has been quite weak. The company mainly uses imported meat and, compared to 2011, Krona has remained strong. Thus, Q4 result presumably will be something non-surprising, perhaps close to EBIT of €4 million.

Atria Russia - Atria Russia most likely is the key again. The year 2012 has gone well. Looking a few years back, the company seemed to be well on its way already in 2009, recovering quickly from the Campomos acquisition. One may only wonder, what went wrong during 2010-2011. Now everything should be even better compared to 2009. Hence zero result, EPS of €0 million, is surely reachable, quite likely rather low side. Expectations may vary wildly but surely everyone is waiting for timely information about Atria Russia’s new products and primary production plans.

Atria Baltic - Olle Horm, the new Executive Vice President of Atria Baltic, has not yet had time to change anything. EBIT of €-1 million is simply a reasonable guess.

More guesswork

Total of those guesses about what the analysts might have thought, is €13 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 €4 million and taxes roughly €2 million, we get the final reading of around €6 million. The number of shares is about 28,3 million. Consequently the earnings per share would be about €0,21, which is very close to analysts’ consensus of €0,20 and clearly within the range of analysts’ estimates, which goes from €0,11 to €0,27.

We will discuss Atria later but on Friday, March 1^st, we are going to look at HKScan’s businesses. But before that, on Thursday, February 21^st, we will take a brief look at just then released Atria's Financial Statement Bulletin.

One day God accidentally created the cross-country skiing competitions and the Norwegians. After that it became evident that He must also create the snow and the winter. Okay, okay! But summer will come soon.

This is Artoparto and here is my Disclaimer. Please read it.

Disclaimer: All content provided on this site is for entertainment purposes only. This site does not provide any investment advice and content on this site should not be construed as recommendation to buy or sell any financial instruments. Please consult a qualified financial adviser before making any financial decision. I make no representations as to the accuracy, completeness, suitability, or validity, of any information on this site or found by following any link on this site. I will not be liable for any errors, omissions, or any losses, injuries, or damages arising from displaying or using any content provided on this site. I am not responsible for users' comments. I reserve the right to update or delete any content on this site for any reason.

HKScan’s Q4 2012 is somewhat below expectations

Just a few words here. HKScan Finland and HKScan Baltic are somewhat below expectations. HKScan Sweden is close to expectations, the same holds for HKScan Denmark and Sokołów. We’ll look all these result later this month.

Friday, February 1, 2013

HKScan’s FY 2012 - Analysts’ consensus EPS €0,16 is reasonable

HKScan’s 2012 financial statement will be released on February and now is the right time to look at what analysts have thought about HKScan's earnings for the year 2012.

Bloomberg brings together analysts' forecasts and other company information and HKScan’s forecasts are also available. The consensus FY 2012 EPS (pre-exceptional) is €0,16. The number of participating analysts is 8. Hovering over the chart, one can find that the estimates range from €0,12 to €0,19. That’s nice. The not so nice thing is that the page says the estimates to be in U.S. dollars. The chart, however, strongly suggests that the estimates are in euros, like many but not all monetary amounts on the page. For instance, HKScan’s actual 2011 EPS really was €0,18 as the chart on the page also says.

What is required for the FY 2012 EPS to be €0.16?

Due to the weak H1, EPS after Q3 is only €0,01. The Q4 EPS must therefore be € 0,15. Incidentally in 2011 the Q4 EPS was € 0.14 and in 2010 the Q4 EPS was €0,15. So it seems that analysts on average expect roughly the same Q4 result as it was in the preceding two years. Now, let’s look at actual quarterly EBITs from recent years.

The chart below illustrates HKScan’s quarterly EBITs starting from 2009. The readings are highly unofficial and possible errors are all mine. Actual EBITs are marked with solid lines. Dashed circles show a set of reasonable market-specific Q4 figures, which could ensure the realization of the analysts’ consensus. Please note that Group administration costs, they may be some €2 million, are subtracted from the whole HKSscan Group’s result.

The case looks simple. In order to reach the FY 2012 consensus EPS, the entire Group's Q4 EBIT should be approximately €19 million. First adding the share of associates' results perhaps some €0,5 million, then subtracting net financial expenses perhaps about €8 million, then continuing guesswork and subtracting taxes about €2 million and finally subtracting profit attributable to non-controlling interests, perhaps about €1 million, we end up with the sum of €8,5 million. The number of shares is approximately 55 million. Then, Q4 EPS would be about €0,15, which is exactly as required for the FY 2012 consensus EPS €0,16 to be achieved. Please remember, that EPS after Q3 is already €0,01. In all, the consensus does not look particularly unrealistic. Let's look at each of the market area.

HKScan Finland

In Finland, HKScan needs to reach a moderately good Q4 result, preferably better than those achieved in recent years. Such a result is not a cakewalk. The 2011 Q4 EBIT was a little over 7 million and in the 2011 financial statement it was considered a good result. In particular, the company stated that the Christmas season 2011 succeeded thanks to the newly launched rapeseed pork ham. On this season no major new products were in the product range. However, as the chart also tells, 2012 quarters Q1 to Q3 have gone better when compared to the previous year. Therefore, a modest improvement also in Q4 is well possible. Then Q4 EBIT of 8 million is achievable.

HKScan Sweden

As HKScan has repeatedly stated, the HKScan Sweden’s weak performance may lower the whole Group's annual result below FY 2011 level. Especially H1 was insanely bad. Then, one cannot expect any super Q4. However, it should also be noted, that the 2011 Q4 EBIT, slightly more than € 7 million, was specifically not considered a good result, and according to the company, the Christmas season 2011 was quieter than expected. Now the things could be changed. It is precisely because there was now a new season product, rapeseed ham, the same product which was a success in Finland already in 2011. Then Q4 EBIT of € 6 million, slightly lower than in 2011, does not sound impossible.

HKScan Denmark

In Denmark the Q4 2012 result should be better than the corresponding result in 2011. There were clear reasons for 2011 Q4's disappointing result. One of them was the clearing of export stocks of chicken leg quarters, as mentioned in the 2011 financial statement release. Moreover, production in Vinderup has been restarted in early December. Then Q4 EBIT of €1 million is within the realms of possibility. In addition, a non-recurring income of fire insurance compensation is possible, as the company itself has said

HKScan Baltics

HKScan Baltics is in a good shape and one can expect a good Q4 result, something similar to Q4 2011. It is true, that the Q4 2011 was a success and Christmas season sales went well, but the last Christmas was a success as well. Both Tallegg and Rakvere Lihakombinaat sales were up in many important product groups. Then Q4 EBIT of € 3 million is undoubtedly possible.

HKScan Poland

HKScan Poland’s Q4 2012 may have been worse than the previous year’s corresponding period, even though all the first three quarters in 2012 have been better when compared to the previous year. In 2011 December sales reached all-time high. Perhaps now Sokołów has failed to reach the same. Boguslaw Miszczuk, president of Sokołów, in a journal article points out a rather pessimistic view, something like this:

The deteriorating economic situation in Poland may limit the consumption of foods, including meat and dairy products – it may be expected that consumers are increasingly interested in lower-priced products.

Miszczuk’s statement refers to the current year but one may suppose that the last quarter of 2012 did not go to the most optimal way. It is possible that the demand has shifted to private label brands and cheaper product groups. Exports could still go well, even if the zloty was stronger compared to Q4 2011. Then Q4 EBIT of €3 million, somewhat lower than in 2011, is thinkable.

What else?

As already mentioned, analyst’s FY 2012 EPS estimates range from €0,12 to €0,19. They all are decent, if they are compared to recent years’ results. However, compared to the company's targets, they all sound only trashy.

HKScan's top management always emphasizes the company's strong market position in all its market areas. Unfortunately it just has not been reflected in the company's success in Finland and Sweden. Positively thinking, the company has tremendous potential. In the best case, HKScan’s earnings in Finland and Sweden will improve dramatically within only a few years. In the slightly longer term Poland, with its population of 40 million, may bring almost half of the profits, despite the fact that HKScan's share of Sokołów is only 50%. EBIT readings may then be on a totally different level than today. We’ll see.

Perhaps the success comes tomorrow, but today the most striking feature is the fact that HKScan has a huge pile of debt. Consequently, the company is burdened by enormous financial expenses. It is almost senseless, that (now ignoring financial income) for example in 2011 HKScan financial expenses were €38,3 million and at the same time EBIT was only slightly more, €39,6 million.

We will discuss HKScan later but on Friday, February 15^th, we are going to look at Atria’s Q4 2012. Midday is no longer as dim as it could be, but I believe that summer will not come prior to spring.

This is Artoparto and here is my Disclaimer. Please read it.