Finnish meat processor Atria has booked a fall in third-quarter in operating profit amid a spike in costs from M&A and expansion but said the moves would help the business make progress.
Atria reported an increase in sales for the third quarter of 2016, with growth buoyed by a recent acquisition despite tough trading conditions.
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Total net sales were EUR339.1m (US$370m) compared to EUR337.1 for the same period a year ago, Atria said today (27 October).
However, EBIT for the period was down to EUR13.2m, compared to EUR15.1m in the previous third quarter. Lower tax expenses meant Atria’s net profit increased to EUR9.6m from EUR8.1m for the same period a year ago.
Atria said its EBIT was “held back by lower sales prices than in the comparison period”, the costs related to commissioning a new pig cutting plant in Finland and the costs of taking over the Lagerbergs poultry company in Sweden. However, the company said Lagerbergs provided it with growth. In addition, Atria’s Sibylla business “showed strong growth in Russia” where there are now more than 2,700 outlets.
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CEO Juha Gröhn said: “Price competition has been unusually fierce for the entire year and it has weakened Atria’s results in comparison with the previous year. Cost management is very important in the prevailing market environment.”
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By GlobalDataHowever, Gröhn said: “The cost level and activities of Atria’s standard operations are in good order. Actions related to company acquisitions and commissioning the Nurmo pig cutting plant have temporarily increased costs but, in time, these increases will turn into savings, growth and profit.”
Gröhn added: “At the end of the third quarter, the price level began to rise in several of Atria’s key product groups. This influenced – and will continue to influence – the balancing of supply and demand on the EU meat market. The balancing factor is the increase in exports from the EU to East Asia.”
The decrease in sales prices has also affected Atria’s growth rate, Gröhn said. “An active approach to company acquisitions in line with the strategy has been a prerequisite for maintaining growth. This year, Atria has made two major acquisitions: Lagerbergs and Kaivon Liha Kaunismaa (Well-Beef), a Finnish company that processes beef. The acquired companies have combined annual net sales of approximately EUR70m.”
Gröhn said Atria’s financial position “is strong and enables the implementation of its growth strategy”, but he said “it is essential that Atria is also able to grow organically within its current businesses”. “Everything is in place to enable this and several of the businesses have demonstrated their ability to grow this year. Expanding export opportunities to markets such as China will play a part in underpinning organic growth.”
Last month, the Finnish Competition and Consumer Authority unconditionally approved Atria’s acquisition of a 70% stake in Well-Beef Kaunismaa for a purchase price of around EUR16m. Atria said the agreement to conclude the acquisition was confirmed on 3 October.
