Atria’s near future does not look good

As noted previously, Atria’s Q4-2012 was really bad.  Both Scandinavia and Russia failed.  Atria Finland and Atria Baltic were somewhat above expectations but Atria Scandinavia and Atria Russia indeed were monumentally below expectations.

Atria Finland is still doing well but all other business areas are in troubles.  The matter is nicely illustrated by the fact, announced in the financial statement release, that Atria’s targets for the proportion of international operations is removed. The target used to be 50% of the revenues. Last year’s actual proportion was about 38%. 

Atria Finland’s Q4 sales increased by 7% but large part is explained by the price increases. It can be assumed that the volumes hardly rose at all.  Also, meat raw material was more expensive.  However, operating profit increased.  That’s positive of course but more important point is that Atria Finland’s market share in retail market rose in many product groups, namely in cold cuts, poultry, convenience food and cooking sausages. Even more encouraging is that the new bovine slaughterhouse already started and cost savings are estimated to be €6 million annually.  Also the new hatchery will be in full swing this spring. In addition, savings will be achieved by centralizing production.

Atria Scandinavia is not really showing any good now. Net sales in krona remained virtually unchanged, and operating profit was lower than for many years. The usual story was told in the financial statement release: “The decrease in EBIT was due to increasing meat raw material prices. Atria Scandinavia has not been able to pass on increased raw material costs in full to sales prices.” 

Still in the Capital Markets Day presentation from last December, Tomas Back praises Atria's own brands: “The market shares of the Lönneberga and 3-Stjernet cold cut products strengthened.”  Back also tells about implemented rationalizations: “During the last four years we reduced the number of factories from 18 to 9, which have been important steps towards a more efficient supply chain.” 

So, much seems to be done. Not been reflected in earnings. One can say that Atria Scandinavia is like a poor worker who always seems to be doing something, but cannot get anything done.

Atria Russia's net sales grew by a meager 2 percent.  New products have not sold at all, one must conclude.  The report tells that “Atria Russia also invested heavily in marketing to increase future sales volumes.”  This means that campaigns were expensive and ineffective.  It is quite shivery, that the new product line is not even mentioned in the release.  Only loose talk of future sales volumes. The poor profitability of primary production was mentioned but on the other hand also Russia’s changing restrictions and import duties on meat and other regulations are characteristic to the market were complained. Nothing is good for Atria Russia, it seems. 

On the pages of Kampomos and Pit-Product one can find Executive Vice President Jarmo Lindholm says something like this: The results of 2012 show that the development of the company is in line with the strategic plan.  Measures aimed at improving the economic performance of all units of Atria Russia have led to a significant increase in return on sales.  At the moment, our key objective is the systematic increase in the volume of sales, which will allow the company to reach break-even by the end of 2013 and start earning a steady income in future periods. 

Many would like to believe. 

Atria Baltic continued in the old style:  slight losses from quarter to quarter. New managing director Olle Horm praises smaller losses, compared to reference period: "The turnover fell but it is important that we managed to reduce the loss remarkably – we have managed to considerably reorganize the company and the product portfolio, although a lot of work still has to be done.”

We will discuss Atria later but on Thursday, March 28^th we will look at HKScan’s businesses. The fact that snow has not gone away, does not change things.  Summer is coming.  I hope so.

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