Atria Russia poised for growth?

Atria Russia, as well known, has been Atria Group’s headache and more.  Is there any turnaround in sight?  Maybe one thing is about to ease.  Let’s look first at the latest Interim Report Q2.  About Atria Russia - among other things - it says this:

The result for industrial operations improved considerably and the launched efficiency improvement measures generated the planned profits. The weakening of primary production profitability, which started at the end of last year, weighed down first-half profits.

So, primary production has been in troubles since H2 last year.  Undoubtedly one reason is the fact that the pig farm Dan Kub, Atria’s joint venture with Dan Invest in southern Russia has been, due to ASF outbreak,  in quarantine since the second half of last year, and if I got it right, quarantine was imposed for one year.  Then, it should be over now. So, from now on Atria Russia should have one problem less.

There is positive progress also in Gorelovo.  The whole meat-processing plant has now been certified against FSSC 22000.  Some single production lines were certified already last year.  This is not just some corporate responsibility nonsense whatever, but also rigorous business.  Atria Russia’s management has stated earlier:

Certification scheme FSSC 22000 offers new opportunities for the company, " Atria Russia ," for example , work with Western retailers and businesses HoReCa, for which such certification is required for all products suppliers .

In principle Atria Russia has every chance of success. USDA’s report from last May tells, that food processing sector in Russia continues to build upon its recent growth supported by rising disposable income, increasing real wages, declining unemployment and growing food expenditure. The report even gets enthusiastic and says that The Russian food processing industry is poised for a rapid growth and is set to become one of the highest yielding sectors in Russia.  

Ok, this is not to say, that Atria Russia will succeed, but there are chances.

There is another USDA's report which among many other facts and estimates gives some statistics about food ingredient import to Russia.  Just picking there one thing:  Belarus is currently the leading country in live pigs imports to Russia.  The volume has increased rapidly, and Belarus has surpassed even the Denmark and Estonia. 

I wonder if also Atria is engaged. In late August came a news where was told that The Belarusian Ambassador Vladimir Drazhin and other diplomats held a number of meetings with Finnish businessmen.  At the end of the news, as some sort of an additional remark was reported this:

Vladimir Drazhin provided his assistance in organizing the negotiations on joint projects in meat processing between the Belarusian company Beldan and Atria Oy, the leading producer of meat products in Finland and the Baltic states.

Ambassador involved in arranging negotiations? Quite possible and of course this news may be fully positive but it can also be interpreted in such a way that problems have emerged and diplomats have been asked for rescue. The company Beldan sells live pigs.  Company’s name suggests that besides Belarusians, also Danes are involved.  Where's a pig, there's a Dane.

Atria Finland is likely to be in excellent shape.  The biggest competitor HKScan may well have destroyed their own third quarter net sales due to stubbornness, keeping prices up while Atria Finland has maintained aggressive pricing.  It is probable that Atria has increased its market share compared to last year's third quarter and maintained the advantage that emerged already in the second quarter of this year. Even HKScan’s poultry products may have been hit by Atria.  Counterstrike will follow but not very soon. Currently the biggest competitor is totally messed up.

Anyway, the whole Atria Group’s life is not a bed of roses. Atria Scandinavia’s performance lags and Atria Baltic shows no positive signs at all.  Products just don’t sell enough.  Product development is not neglected.  It is active.  New products are launched without a break also in Sweden and in Estonia.  Flagship products perhaps are missing.  Atria Scandinavia’s wide brand palette, up to 16 brands, surely is hard to manage. Atria Baltic’s primary production is a big problem in Estonia.  This is quite inconceivable, because it is just primary production in which Atria Group should be at its best.  It does not help that Olle Horm, EVP Atria Baltic, second year in the company, maybe the last, has now taken a wrong step and has blamed consumers that they cannot make a difference between exported and domestic meat.  But Horm, yes they can:  Imported meat is cheaper.  Domestic meat should bring some added value, concrete of abstract, and if it is not better, tastier, or generally more respected, it will not sell.  As such a small yet fun detail is that both in Sweden and in Estonia, Atria has recently launched products that draw from tradition.  In Sweden Lithells’ “Oxfordkorv” is originally a traditional British Banger type sausage now with the slogan “A Jolly Good Banger!” while in Estonia VK’s“Retro” sausage product family draws from  Soviet era with the slogan “nagu vanasti”, roughly ”like the old days”.

We will discuss Atria later but on Friday, October 11^th, we are going to look at HKScan’s businesses. But now, for a change, some true poetry.

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 - nothing's well

Having served as EVP of HKScan’s Consumer Business in Finland and the Baltics and as HKScan Finland’s General Manager about one and a half year, Anne Mere has now been appointed Chief Marketing Officer of HKScan Group.  Practically speaking, she has got fired. Perhaps she was too professional and sought effective solutions of a kind producers’ cooperative or Finnish workers did not accept. It is HKScan’s problem, not Mere’s.  I guess she receives a dozen of great job offers every day, while still taking care of some HKScan’s meaningless strategy issues whatever.  In a newspaper Äripäev’s interview Mere tells, that the new position does not require residence in Finland and she decided to move back to Estonia.

In fact, the case seemed clear already in last March, and even on this blog we observed that nothing had changed, no significant renovations were made.  At that time is was a big disappointment considering what was written on this blog last October: Overall, the management team has changed a lot.  There is one new person, full of promise, fully proven to achieve results.  Anne Mere, HKScan’s only hope, an Estonian.

I will stay with the statement until otherwise proven.  HKScan does not have any hope.  Maybe it is an exaggeration, maybe not.  One must note that the company has a long, long history and it is almost necessary to add here a link to a video which outlines HKScan's 100-year journey. The documentary itself won awards at the 18^th Aurora Awards international film competition in the United States in August.

Hannu Kottonen, CEO HKscan, has been crying poor results.   And he has found lots of reasons:  expensive feed, private labels, low demand, aging population, recession, surplus of meat and also lack of meat, for instance. Now he has reacted: the Group’s earnings targets were lowered, amusing indeed.

In an interview in the magazine Kotitilalta 2/2013 Kottonen complains HKScan’s cultural mosaic, its local companies with local practices.  But elsewhere in the same interview, he says, that he wants to try to ensure that the Group is perceived as a local food company. There is still one specifically alarming comment in the interview. Kottonen hopes that rapeseed pork will be a success.  Isn't it already a success?  As far as I understand, HKScsan has praised the popularity of the whole rapeseed pork product family both in Finland and in Sweden.

One positive thing there is, namely the price of feed may be decreasing.  The harvest is expected to be good in many important production areas, the magazine says.  One can conclude that it is very important for the producers, because Kotitilalta 3/2013 tells us that in meat production feed costs account for 40 to 65 percent of total costs.

Matti Murto, producers' co-operative, chairman of the board, has in turn said in the newspaper Maaseudun Tulevaisuus, that Southern Finland’s 141 subsidies are terribly important because for many farmers they are what you are left with after costs. If I get it right, vast majority of the HKScsan’s pork producers locate in the 141 area.  Negotiations on the future of the whole Article 141 are currently in progress. Reductions are now likely and within a few years these subsidies will be discontinued.

We will discuss HKScan later but on Friday, September 27^th, we are going to look at Atria’s businesses.  Words like birds / go away / here I stay.  Yes, DIY again. I’m awfully sorry.

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.