Atria Plc expectations - FY 2013 very high, Q1 relatively low

Atria's Q1-2013 Interim Report will be published on April 26^th and now 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. 

Together with the chart, it may be interesting to look at what analysts might think Atria's immediate future.  Bloomberg summarizes analysts' forecasts and other company information.  Analysts’ FY-2013 EPS (pre-exceptional) consensus for Atria is €0,68 (individual estimates ranging from 0,41 to 0,80 euros). Their corresponding Q1 consensus is €0,00 (from -0,05 to 0.04 euros).  Let’s play with these 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. 

In the chart below, actual EBITs are indicated by solid lines.  Dashed circles show a set of reasonable country-specific Q1 EBIT figures, which could lead to EPS of €0,00 which in turn is the same as analysts’ Q1-2013 EPS (pre-exceptional) consensus. 

 

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

Overall, the first impression is that the analysts’ full financial year 2013 consensus EPS of €0,68 looks difficult to achieve.  We must recall that in 2012 EPS was €0,35. On the contrary, Q1 consensus EPS of €0,00 does not look challenging at all. Let’s go now very briefly through the country-specific figures presented on the chart, just to find out what kind of results analysts’ consensus of Q1-2013 EPS €0,00 might be based on. 

Atria Finland – Q1 2013 EBIT of €6 million could be a reasonable guess although it is even better than last year’s corresponding EBIT of €5 million which was considered a good result.  When times are good, this kind of results are chicken feed, but general economic conditions in Finland are worsening.  Food in general has low elasticity of demand but there are substitutes in the sense that consumers are prone to switch to cheaper imported products and lower priced product groups.  It is more than possible that Atria’s success in Finland will later this year be worse than in recent years.  That could even ruin the whole Group’s result.

Atria Scandinavia – Q1 2013 EBIT of €1 million is a pure guess.  The latest result, last year’s Q4, was such a horrible letdown that now the result is not at all easy to predict.  The guess may be overly optimistic although there were spending cuts which are fully realized as of the beginning of the year, centralizing ham and cold cut production to Malmö is mentioned in the Financial Statement Release 2012. Ridderheims is considered an important part of Atria Scanidanvia.  However, Ridderheims’ key figure trends are partly worrisome.  It seems that net sales have fallen a lot. To be a significant part of the Group, Ridderheims should increase net sales, mainly export I suppose, and still stay profitable.  My guess is that the company will try to do it in Russia.

Atria Russia - Q1 2013 EBIT of €-2 million may be a reasonable guess. EUR 2 million improvement to the latest result, namely last year’s Q4, could be achieved due to decrease in marketing expenses. The latest Q4 was really a huge disappointment.  The company launched a new product group – minced meat ready meals - and evidently the launch was a failure.  Campaigning was strong and expectations were certainly high.  Quite unexpectedly, to say the least, the Board of Directors only mention the launch in the 2012 Financial Statement but deny that it would have been the most significant. 

An entirely new product category – pre-cooked minced meat products – was introduced in Russia. Skinless frankfurters in resealable packages were last year’s most significant launch.

The only interpretation is that the minced meat ready meal campaign was a total failure.  Overall, it seems that Atria Russia’s potential is fading away, leaving only up to some €150 million turnover and consequently only some €6 million to €8 million yearly EBIT at most.

Atria Baltic – Q1 2013 EBIT of €-1 million is a pure guess. In the 2012 Financial Statement Olle Horm, head of Atria Baltic, says that they are seeking rapid growth in fresh and marinated meat.  On the other hand, somewhat contradictory in relation to that, they intend to focus on further processed products. Meat sales are going well already but boosting the sales of processed products under their most valuable brand Maks & Moorits may be troublesome. Anyway, the Group rather stubbornly wants to succeed in higher-end products also in the Baltics.  It may mean just marketing costs.

Some more guesses – Total of those guesses about what the analysts might have thought, makes €4 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 €2 million and taxes roughly €1 million, we get the final reading of around €0 million. Then of course also earnings per share would be about €0,00, which is the same as the analysts’ consensus.

We will look at Atria later but on Friday, April 26th, we are going to look at HKScan’s businesses.  But just before that, also on Friday April 26th, we will take a very brief look at just then released Atria's first quarter interim report.

Summer will come one day, so sure about that! In the meantime it may be helpful to take a short pop-punk introduction to the subject matter.

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