Atria Plc – Q3 expectations are only moderate

Atria's Q3-2013 Interim Report will be published on November 1^st and now it is 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 let’s look at what analysts might think of Atria's immediate future.  FT summarizes analysts' forecasts and for Atria Plc, 2013 EPS Q3 consensus is €0.31.  Individual estimates range from €0.25 to €0.38. 

Obviously we do not know the arguments of the analysts, but we can speculate on what kind of country-specific results their estimates could be based on.  Let’s suppose that non-recurring costs are not included in the analysts’ estimates.

In the chart below, actual EBITs are indicated by solid lines.  Dashed circles show a set of reasonable country-specific Q3 EBIT guestimates, which could lead to Q3 EPS of €0.32 which is close to analysts’ consensus.

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

Some additional guesswork – Total of those country specific guesses is €17 million.  We must now make a few subtractions using the past few quarters’ readings as guidelines.  Some minor subtractions or additions are ignored.  After subtracting unallocated costs about €2 million, we have a guestimate for the whole Group’s EBIT.  Then subtracting finance cost about €4 million and taxes roughly €2 million, we get the final reading of around €9 million. Number of shares is about 28 million. Hence earnings per share would be about €0.32, which is very close to analysts’ consensus. It does not look very challenging.

Atria Finland – Q3 2013 EBIT of €12 million could be a reasonable guess. It is not a good result but during Q2 and Q3 Atria Finland has sought to obtain more market share by aggressive pricing.  Hence EBIT likely will be slightly lower compared to last year. It is likely that Atria Finland may not continue aggressive pricing, but rather its competitors will do it instead.  Anyway, during the whole Q3, Atria Finland was the one with price reductions on many season products.

Atria Scandinavia – Q3 2013 EBIT of €4 million is a pure guess, but looking at the previous Q4 results, one may ask, what else could be expected.  There’s no really big news from Sweden.  Atria Scandinavia’s Ridderheims brand, targeted to wealthy consumers, is now the main sponsor of a Swedish television series ‘Solsidan’, broadcasted also in Finland by FST5 channel mainly for Swedish speaking audience.  According to Agneta Olsson, Ridderheims’ marketing manager, the series is a perfect match to the brand:  both are for those who want joy and luxury in everyday life. Somewhat frightening is to hear that, according to Olsson, they had only one hour to make the decision. That kind of hurrying surely is not normal Swedish-type decision-making.  The conclusion is clear: the company Ridderheims is currently not doing well. 

Atria Russia – Q3 2013 EBIT of €1 million may be a reasonable guess. Non-recurring costs due to closing of primary production and the plant in Moscow are not taken into account. Already Q2 went well, and now it seems that Atria Russia aims to be profitable as quickly as possible. It is evident that the steps Atria Russia’s has now taken were widely known a long time. As early as the end of September, nationwide business newspaper Vedomosti interviewed Jarmo Lindholm, EVP Atria Russia, and asked direct questions about closures of both the pig farm and the Moscow plant. Lindholm tells that the company is ready to sell them both if the price is good.  Well, now the company abandoned them both even though there is no buyer.  Stated reasons for closing pig farms are not fully clear but now it is history, so let them be. The Vedomosti interview is very broad and straightforward and of course worth reading.

                                                                                                     

Atria Baltic – Q3 2013 EBIT of €0 million is a pure guess but that is the result, the chart above strongly suggests.  This year seems to be slightly better than last year. Closing of pig farms is Russia may indicate that the same could take place also in Estonia.  Atria Group apparently believes that it can succeed without primary production in Russia and it gets along without primary production also in Sweden despite the fact that the product range there is really wide, so why not then put an end to the primary production in Estonia as well?  And indeed, noticed also on this blog in September, Olle Horm, CEO Atria Baltic, recently complained about the fact that the consumers do not value domestic meat. In this situation, maybe he could propose to abandon the primary production. No doubt, own pig farm has been a burden to Atria Baltic.  Besides, in Estonia the Group’s focus has never been on fresh meat but always and only on highly processed products.  


We will look at Atria later but on Friday November 8th, we are going to look at HKScan's businesses. But before that we will take a very brief look at Atria's and HKScan's Q3 interim reports just after they have been released.  


Profit my favorite, loss - just chaos.  Good poem is short!  Didn't you know that?

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