Atria - Nordea Research - Nordea Equity Research

Atria FinlandConsumer Goods

Commissioned Equity Research • 17 February 2021

KEY DATA

FinlandStock countryATRAV FHBloombergATRAV.HEReuters

EUR 11.76 Share price (close)42%Free Float

EUR 0.33/EUR 0.33Market cap. (bn)www.atria.fiWebsite29 Apr 2021Next report date

PERFORMANCE

Feb18 Feb19 Feb20 Feb21

6

8

10

12

14

AtriaFinland OMX Helsinki All-Share (Rebased)

Source: Refinitiv

VALUATION APPROACH (EUR/SHARE)

11.3

12.2

13.4

13.8

14.9

16.3

7.0 9.0 11.0 13.0 15.0 17.0

EV/EBIT 21E

P/E 21E

DCF

Share price, EURSource: Nordea estimates

ESTIMATE CHANGES

2023E2022E2021EYear-1%-1%0%Sales5%3%-1%EBIT (adj)

Source: Nordea estimates

Improving profitability through restructuring

Atria reported Q4 2020 adjusted EBIT of EUR 15.9m, 14% above our estimate. Retail and export sales increased, while foodservice remained sluggish in Q4. The company announced ahead of the report that it is divesting its loss-making retail and foodservice business Pit-Product in Russia, while retaining its well-performing Sibylla operations. Guidance for 2021 appears conservative to us as the adjusted EBIT guidance midpoint of EUR 40m indicates a 3% y/y decline, while we expect a positive impact from the Russian divestment and a continued good level of pork exports to China. We derive a fair value range of EUR 12.3-15.0 per Atria share.

Retail sales remained strong Q4 adjusted EBIT was 16% above Refinitiv consensus expectations on 4% higher sales. Retail remained strong, while a tailwind from SEK and good cost management supported profitability. All segments improved operating profit in Q4. The dividend proposal for 2020 was slightly above expectations at EUR 0.50. The company guides for adjusted EBIT of EUR 37-43m in 2021 (EUR 41.3m in 2020), which looks conservative as we expect a positive impact from the Russian divestment and exports to China. The company also announced a EUR 30m reorganisation plan in Sweden, which, if implemented, should be completed in 2023E.

Exiting Russian retail and foodserviceAtria announced divestment of its Russian retail and foodservice business; this should be completed in H1 2021. The sale of Pit-Product will reduce Atria's sales by around EUR 35m, while the impact on operating profit will be clearly positive. Atria retains its well-performing Sibylla brand in Russia. Sibylla sales increased 15% y/y in Russia in Q4. When the divestment is completed, Atria will record around a EUR 45m loss due to accumulated translation differences, visible in reported EBIT, but there will be no impact on equity or cash flows from this entry.

Fair value range corresponding to 2021E EV/EBIT of 11.8-13.5xWe make only minor estimate revisions to our underlying estimates but we exclude Pit-Product from our estimates from Q2 2021 onwards. Atria is proceeding well with its strategy. However, after the divestment in Russia, we expect a more moderate margin improvement before completion of the investment programme. We derive a fair value of EUR 12.3-15.0 (10.3-12.6) per share for Atria by equally weighting our DCF, P/E and EV/EBIT valuation methods.

Nordea Markets - AnalystsJoni SandvallAnalyst

Svante KrokforsAnalyst

SUMMARY TABLE - KEY FIGURES2023E2022E2021E2020201920182017EURm1,5521,5261,5081,5041,4511,4391,436Total revenue

11110610298877486EBITDA (adj)55514641332840EBIT (adj)

3.5%3.3%3.1%2.7%2.3%2.0%2.8%EBIT (adj) margin1.331.211.080.980.600.590.87EPS (adj, EUR)

9.2%12.4%10.6%62.4%2.6%-32.5%37.5%EPS (adj) growth0.500.500.500.500.420.400.50DPS (ord, EUR)0.40.40.40.30.40.30.4EV/Sales

11.211.811.911.715.714.914.3EV/EBIT (adj)8.99.710.910.116.711.213.9P/E (adj)0.70.70.70.70.70.40.8P/BV

4.3%4.3%4.3%5.1%4.2%6.1%4.1%Dividend yield (ord)0.1%-9.7%1.7%18.9%14.0%1.5%3.3%FCF Yield bef A&D, lease 260246199190223222210Net debt2.42.33.52.02.63.02.4Net debt/EBITDA

7.0%7.0%5.5%5.0%3.8%3.3%4.8%ROIC after taxSource: Company data and Nordea estimates

Marketing material commissioned by Atria

Atria17 February 2021

Deviation and estimate revisionsAtria's Q4 results were above our and Refinitiv consensus estimates on sales and EBIT. For 2021, Atria issued guidance for adjusted EBIT of EUR 37-43m, after EUR 41.3m in 2020. This appears conservative to us, given the announced divestment in Russia and positive expectations for pork exports to China. We forecast EUR 46m adjusted EBIT for 2021 and hence expect the company to upgrade its guidance during the year. In addition, Atria announced a EUR 30m investment plan to reorganise its Swedish operations. Capex levels will remain high for the next five years due to the EUR 155m poultry investment in Finland, but we expect the company to manage investments without stretching its balance sheet too much.

Q4 2020 results: Key pointsAtria's Q4 sales and profitability were supported by strong demand from retail customers and favourable SEK movements, although foodservice sales were down around 20% y/y in the quarter. Q4 sales were 4% above Refinitiv consensus and our estimates, while adjusted EBIT beat consensus expectations by 16% (EUR 2.2m) and our forecast by 14% (EUR 2.0). Profitability improved in all segments. Reported EBIT was burdened by a EUR 0.8m impairment for one brand in Russia. Reported EPS was EUR 0.22, hit by a EUR 2.1m effect from the tax treatment of the loss associated with the discontinuation of Vilniaus Mesa in 2015 and the EUR 2m writedown of deferred tax assets of the Russian business. The company applied for leave to appeal the EUR 2.1m loss from the tax ruling. In 2020, free cash flow increased by EUR 7.6m to EUR 59m due to improved working capital. Strong cash flow should support the planned EUR 155m poultry investment during 2021-25. The dividend proposal for 2020 was EUR 0.50, slightly above consensus expectation of EUR 0.48

On a divisional level, Finland beat our adjusted EBIT estimate by 5% (EUR 0.6m) based on 4% higher sales. Atria Finland benefited from increased sales to the retail sector and the export market, while the change of the sales mix (lower foodservice sales) held back profitability. Sales growth was strong across categories as poultry product sales increased 16% y/y in value, with convenience foods growth more modest at 8% y/y in Q4. In 2020, Atria exported more than 20 million kilos of pork to China (nine million kilos in 2019) with a positive outlook for 2021. We note that elevated global freight rates could slightly burden export profitability in future. According to Atria, its supplier share was about 24% in Q4 2020 (~25% in Q3 and Q2; ~24% in Q1).

In Sweden, net sales rose by 2% in local currency and were in line with our expectations. According to AC Nielsen, Atria's producer shares in Sweden were 18.7% in sausages, 13.6% in cold cuts, and 16.8% in fresh chicken products. Adjusted EBIT was improved by net sales growth, better cost management, and FX tailwinds. Atria announced a EUR 30m investment plan to reorganise its production lines in Sweden and to increase productivity. If implemented, the company will move production from its Malmö plant to the Sköllersta plant. We view the move positively as an efficiency measure and because the Malmö plant is now an ageing facility.

Denmark & Estonia were EUR 0.5m (47%) above our expectations on adjusted EBIT. The division continued to benefit from strong retail sales, and sales were bolstered by the price increases implemented early in the year. EBIT developed favourably in Denmark due to stable raw material prices and good retail sales. We think the company has slightly benefited from lower pork raw material prices in Denmark due to African swine fever in Europe.

Marketing material commissioned by Atria 2


Atria announced the divestment of Pit-Product in Russia. The Russian retail and foodservice businesses have been loss-making. According to our understanding, Sibylla, which is not included in the transaction, has been performing at above group-level profitability. The Pit-Product divestment will cut EUR ~35m off Russian sales; based on the EUR 67m sales in 2020, this indicates more than EUR 30m sales for Sibylla. The transaction should be completed during the first half of 2021 (we expect in Q2); we expect the company to reallocate the Russian Sibylla operations to another reporting division and discontinue the Russia segment. After the deal is closed, the company will record accumulated translation differences through the P&L, which should lead to roughly a EUR -45m effect on reported EBIT. Translation differences will not have a effect on equity or cash flow. In Q4, Russia sales were well above our estimates due to good retail and Sibylla sales, which rose 15% y/y. Adjusted EBIT stood at EUR -0.2m, while reported EBIT was burdened by a EUR 0.8m writedown related to value of one brand.

2021 guidance appears conservative to usWe view the 2021 adjusted EBIT guidance of EUR 37-43m as conservative. The company recorded adjusted EBIT of EUR 41.3m in 2020, and EBIT for 2021E should benefit from the divestment in Russia and a favourable outlook in pork exports. In addition, we think the company should benefit when the foodservice channel starts to reopen as this should normalise the sales mix. We forecast EUR 46.1m adjusted EBIT in 2021E, 15% above midpoint of the guidance and 7% above the guidance range.

DEVIATION TABLEActual NDA est. Actual Actual

Q4 2020 Q3 2020 Q4 2019 y/y399 383 16 385 14 382 38015.9 13.9 2.0 13.7 2.2 19.0 -16% 12.64.0% 3.6% 0.3pp 0.3pp 3.6% 0.4pp 5.0% -1.0pp 3.3% 0.7pp0.22 0.31 -0.09 -29% 0.31 (0.09) -29% 0.51 -57% 0.19 17%0.50 0.44 0.06 0.48 0.02

Divisional sales, EURm284.5 274.3 10 4% 266 7% 272 5%78.2 78.0 0 0% 79 -2% 75 5%26.6 28.0 -1 -5% 27 -1% 27 0%

Russia 17.6 13.6 4 30% 20 -10% 19 -7%-8.4 3 -24% -10 -13% -12 -28%

398.6 383 15.7 382 380

Divisional adj. EBIT, EURm14.4 13.8 0.6 5% 15.2 -5% 14.4 0%0.7 0.5 0.2 55% 1.4 -50% -0.5 -240%1.7 1.2 0.5 47% 2.1 -19% 1 70%

Russia -0.2 -0.7 0.5 -70% 0.9 -122% -1.5 -87%-0.7 -0.8 0.1 -9% -0.6 17% -0.8 -12%15.9 13.9 2.0 19 -16% 12.6

Deviation Deviationvs. actual vs. actual

Source: Company data, Refinitiv and Nordea estimates

Estimate revisionsWe fine-tune our estimates after the Q4 results. We make only minor top-line revisions to our estimates, while we exclude Pit-Product from our estimates from Q2 2021 onwards. Our 2022E-23E adjusted EBIT revisions stem mainly from Russia, where we expect good profitability from Sibylla. Swedish operations should continue to benefit from FX tailwinds. Meat raw material prices will remain volatile, due to African swine fever cases in Germany.



WE MAKE THE FOLLOWING CHANGES TO OUR ESTIMATES AFTER THE Q4 REPORT

359 1,508 1,526 1,552 n.a. 1,510 1,537 1,564 n.a. -1% -1%3.2 46.1 50.8 54.7 n.a. 46.3 49.5 51.9 n.a. -1%

0.9% 3.1% 3.3% 3.5% n.a. 3.1% 3.2% 3.3% n.a. 0.0pp 0.1pp 0.2pp0.05 1.08 1.21 1.33 n.a. 1.08 1.17 1.23 n.a.

0.50 0.50 0.50 0.46 0.48 0.50 9% 4% 0%

Divisional sales EURm253 1,085 1,101 1,118 n.a. 1,067 1,083 n.a. n.a. 2% 2% n.a.77 315 321 328 n.a. 314 321 n.a. n.a. 0% 0% n.a.26 105 107 109 n.a. 106 108 n.a. n.a. -1% -1% n.a.

Russia 14 40 34 35 n.a. 63 66 n.a. n.a. -37% -49% n.a.-10 -37 -37 -38 n.a. -40 -41 n.a. n.a. -8% -8% n.a.

Group 359 1,508 1,526 1,552 n.a. 1,510 1,537 n.a. n.a. -1% n.a.

Divisional adj. EBIT 5.7 44.0 45.1 46.2 n.a. 43.9 45.0 n.a. n.a. 0% 0% n.a.

-1.0 0.5 1.8 3.4 n.a. 2.2 3.7 n.a. n.a. -78% -52% n.a.0.5 5.2 5.5 5.6 n.a. 4.9 5.2 n.a. n.a. 6% 6% n.a.

Russia -0.8 0.3 2.4 2.7 n.a. -1.2 -0.9 n.a. n.a. -122% -368% n.a.-1.2 -3.9 -4.0 -4.0 n.a. -3.4 -3.5 n.a. n.a. 14% 14% n.a.

Group 3.2 46.1 50.8 53.9 n.a. 46.3 49.5 n.a. n.a. -1% n.a.

0% 2% 1% 1% n.a. 1% 1% n.a. n.a. 0.8pp 0.0pp n.a.7% 5% 2% 2% n.a. 5% 2% n.a. n.a. 0.2pp 0.0pp n.a.

-2% -2% 2% 2% n.a. -2% 2% n.a. n.a. 0.3pp 0.0pp n.a.Russia -12% -41% -15% 5% n.a. 0% 5% n.a. n.a. -41pp -20pp n.a.

n.a.Group n.a. n.a. n.a. -1.2pp -0.6pp n.a.

EBIT margin2.3% 4.1% 4.1% 4.1% n.a. 4.1% 4.2% n.a. n.a. -0.1pp -0.1pp n.a.

-1.4% 0.2% 0.5% 1.0% n.a. 0.7% 1.1% n.a. n.a. -0.6pp -0.6pp n.a.1.9% 4.9% 5.1% 5.2% n.a. 4.6% 4.8% n.a. n.a. 0.3pp 0.3pp n.a.

Russia -5.7% 0.7% 7.0% 7.6% n.a. -2.0% -1.3% n.a. n.a. 2.7pp 8.4pp n.a.n.a.n.a. n.a. n.a. 0.0pp 0.1pp n.a.




ValuationWe derive a fair value range based on the combination of a DCF-based valuation and a relative multiples-based valuation. In our relative valuation, we compare Atria to companies that we consider its most relevant European peers using various metrics. Based on these methods, we derive a fair value range of EUR 12.3-15.0 per share for Atria.

DCF valuation yields EUR 13.4-16.3 per shareThe outcome of our DCF valuation is EUR 13.4-16.3 per share. We use a WACC of 6.9-7.5%, assuming a terminal growth rate of 1.5% and an EBIT margin that will gradually rise to 3.5%.

WACC COMPONENTS

Risk-free interest rate 2.0%4.5%

1.6-1.4Cost of equity 9-8.1%Cost of debt 4.0%Tax-rate used in WACC 20%Equity weight 75%WACC 7.5-6.9%


DCF VALUE (EURm AND EUR)

DCF value579-663 20.5-23.5

(Net debt) -190 -6.7Market value of associates 0 0.0(Market value of minorities) -16 -0.6Surplus values 0 0.0(Market value preference shares) 0 0.0Share based adjustments 0 0.0Other adjustments 0 0.0

5 0.2DCF Value 377-461 13.4-16.3


DCF ASSUMPTIONS2021-26 2027-31 2032-36 2037-41 2042-46 2047-51

Sales growth, CAGR 2.0% 1.5% 1.5% 1.5% 1.5% 1.5%EBIT-margin, excluding associates 3.1% 3.5% 3.5% 3.5% 3.5% 3.2%Capex/depreciation, x 1.4 1.0 1.0 1.0 1.0 1.0Capex/sales 5.1% 5.1% 5.1% 5.1% 5.1% 5.1%

-0.3% -0.3% -0.3% -0.3% -0.3% -0.3%44.9% -2.3% 1.5% 1.5% 1.5% -0.5% 1.5%


DCF VALUATION COMPOSITION

14%

22%

16%

12%

9%7%

20%

2021-26 2027-31 2032-36 2037-41 2042-46 2047-51 Sust.

80%




DCF valuation sensitivityTo highlight the sensitivity of our DCF valuation, we also provide sensitivity matrices that model variations in revenue growth, margin assumptions, and cost of capital. The sensitivities in our WACC are outlined in the following tables.

When we use sensitivities to changes of ±0.5 pp for WACC, ±0.5 pp for sales growth, and ±0.5 for EBIT margin, our DCF model gives us a value range of EUR 11.3-18.8 per share.

SENSITIVITY OF OUR DFC MODEL (EUR)

Sensitivity analysis: WACC vs EBIT margin

1.0pp 22.1 21.7 20.2 18.8 17.6EBIT marg. 0.5pp 20.2 18.8 17.5 16.3 15.2

0.0pp 17.2 16.0 14.8 13.8 12.9-0.5pp 14.2 13.1 12.2 11.3 10.5-1.0pp 11.1 10.3 9.5 8.8 8.1

Sensitivity analysis: WACC vs Sales growth

1.0pp 20.0 18.6 17.2 16.0 14.90.5pp 18.5 17.2 16.0 14.9 13.80.0pp 17.2 16.0 14.8 13.8 12.9

-0.5pp 16.0 14.8 13.8 12.8 11.9-1.0pp 14.8 13.8 12.8 11.9 11.1

Sensitivity analysis: Sales growth vs EBIT margin

-+1.0pp -+0.5pp +0.0pp +0.5pp +1.0pp1.0pp 17.5 18.8 20.2 21.7 23.3

EBIT margin 0.5pp 15.2 16.3 17.5 18.8 20.30.0pp 12.8 13.8 14.8 16.0 17.2

-0.5pp 10.5 11.3 12.2 13.1 14.2-1.0pp 8.1 8.8 9.5 10.3 11.1

WACC

WACC


Relative valuation versus European peersWe compare Atria to European food processing peers that we find relevant for the company. Atria continues to trade at a clear discount on next-twelve-month EV/EBIT and P/E multiples, and the discount increased in 2019-20.

We derive an EV/EBIT valuation range of EUR 11.3-13.8 by taking 2021E adjusted EBIT of EUR 46.1m, multiplying it by the accepted multiple range of 11.2-12.8x and deducting our 2021 net debt assumption of EUR 199m (including IFRS 16 lease liabilities).

Similarly, we derive a P/E valuation range of EUR 12.2-14.9 by taking 2021E adjusted EPS of EUR 1.08 and multiplying it by an accepted multiple range of 11.3-13.8x.

ATRIA AND EUROPEAN PEER GROUP NTM EV/EBIT (x)

8.0x9.0x

10.0x11.0x12.0x13.0x14.0x15.0x16.0x17.0x18.0x

Feb-16 Feb-17 Feb-18 Feb-19 Feb-20Atria Peer median

Source: Refinitiv

ATRIA AND EUROPEAN PEER GROUP NTM P/E (x)

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

20.0x

22.0x

Feb-16 Feb-17 Feb-18 Feb-19 Feb-20Atria Peer median

Source: Refinitiv



PEER GROUP VALUATION MULTIPLES

Local 2019 2020 2019 2020 2020Apetit Oyj 12.4 78 74 16.4 13.4 12.3 22.7 17.8 15.4 3.6% 3.8%Bell Food Group Ag Switzerland 253.0 1,471 2,108 18.6 14.5 14.0 13.1 17.0 10.8 12.6 12.6 1.3% 2.5%Cranswick Plc 3,506.0 2,106 2,239 13.2 16.6 15.2 14.9 15.7 19.7 18.2 17.6 1.8% 2.0%

France 23.5 103 227 26.0 17.5 65.3 7.8 2.8% 3.8%Hkscan Oyj 2.3 213 533 31.3 23.7 19.7 35.0 21.7 0.0% 0.4%

3.7 606 523 19.1 18.1 17.4 15.8 21.6 24.5 25.4 22.3 3.5% 3.9%Scandi Standard Ab (Publ) 64.6 424 616 14.5 12.7 12.5 11.5 16.8 12.8 12.4 10.3 3.9% 4.3%Societe Ldc Sa France 101.5 1,738 1,666 8.6 8.8 8.2 7.7 12.3 11.8 11.2 10.9 1.5% 1.5%Ter Beke Nv 106.5 188 304 17.8 16.4 43.5 11.4 10.0

770 921 15.3 16.9 16.3 14.1 16.6 20.8 23.2 14.3 2.3% 2.8%424 533 16.2 16.4 14.6 14.0 16.6 19.7 17.8 12.6 2.3% 3.1%

Atria (NDA) 11.4 323 546 15.7 13.2 11.8 10.7 16.7 10.1 10.6 9.4

Brf Sa Brazil 23.3 2,909 5,488 7.4 13.6 13.8 12.8 56.1 20.7 19.6 16.8 0.4% 1.2%Gruppa Cherkizovo Pao Russia 2,087.0 1,206 1,926 10.5 11.4 7.3 6.9 8.6%Sanderson Farms Inc 150.3 2,769 2,749 57.3 29.5 14.4 73.4 315.8 40.4 20.6 0.9% 1.2%Tyson Foods Inc 65.6 19,733 27,179 9.9 9.6 10.3 9.5 10.8 10.5 11.1 10.0 2.7% 2.8%

6,654 9,336 21.3 11.5 17.9 12.2 36.9 88.5 23.7 15.8 3.2% 1.7%2,839 4,118 10.2 11.4 13.8 12.8 33.4 15.6 19.6 16.8 1.8% 1.2%

Atria (NDA) 11.4 323 546 15.7 13.2 11.8 10.7 16.7 10.1 10.6 9.4

Div yield %

Source: Refinitiv and Nordea estimates (as of market close on 15 February)

PEER GROUP KEY FIGURES

2019 2020 2019 2020 2019 2020Apetit Oyj 10.4% -0.7% 1.0% 1.4% -1.5% 1.4% 1.8% 1.9% -5.6% 3.4% 4.3% 4.9%Bell Food Group Ag 4.6% -0.3% 1.1% 1.7% 3.0% 3.9% 4.0% 4.2% 3.9% 9.0% 7.7% 8.0%Cranswick Plc 9.5% 14.0% 5.9% 2.9% 9.4% 6.6% 6.8% 6.7% 14.2% 14.5% 14.2% 13.3%

3.1% -1.6% 2.0% 2.0% -1.5% -0.8% 1.2% 1.7% -12.8% -14.8% -0.2% 0.0%Hkscan Oyj 1.7% 2.1% 1.7% 1.5% -0.1% 1.0% 1.2% 1.5% -12.9% 0.4% 2.1% 3.4%

-17.3% -1.1% 4.9% 6.3% 11.6% 12.4% 12.2% 12.7% 9.6% 8.7% 9.3% 9.6%Scandi Standard Ab (Pu 10.5% 4.0% 5.8% 3.9% 4.6% 5.0% 4.8% 5.0% 14.2% 11.5% 18.8% 18.7%Societe Ldc Sa 7.2% 1.8% 3.0% 2.6% 4.5% 4.3% 4.4% 4.6% 10.8% 9.8% 9.3% 9.1%Ter Beke Nv 7.0% 2.0% 5.4% 2.3% 0.0% 0.0% 0.0% 3.4% 0.0% 0.0% 0.0%

4.1% 2.2% 3.4% 2.8% 3.6% 3.7% 4.1% 4.2% 2.7% 4.7% 7.3% 7.4%7.0% 1.8% 3.0% 2.3% 3.0% 3.9% 4.0% 4.2% 3.9% 8.7% 7.7% 8.0%

Atria (NDA) -1.3%

Brf Sa -9.0% -19.2% 9.0% 3.7% 10.1% 6.8% 6.1% 6.4% 16.3% 11.7% 10.7% 12.4%Gruppa Cherkizovo Pao 37.7% -100.0% 10.6% 11.8% 11.2%Sanderson Farms Inc 13.4% -5.6% 10.7% 3.9% 1.5% -0.7% 2.8% 5.6% 2.9% -1.0% 5.1% 9.3%Tyson Foods Inc 11.6% -5.1% -0.8% 2.5% 7.0% 7.7% 7.2% 7.7% 14.6% 14.7% 12.9% 13.3%

13.4% -10.0% -20.3% 3.4% 7.3% 6.4% 5.4% 6.5% 11.3% 8.5% 9.6% 11.7%12.5% -5.6% 4.1% 3.7% 8.6% 7.2% 6.1% 6.4% 12.9% 11.7% 10.7% 12.4%

Atria (NDA) -1.3%

EBIT margin

Source: Refinitiv and Nordea estimates (as of market close 15 February)



Valuation conclusionBased on our DCF-based valuation, a relative multiples-based valuation and dividend-based valuation, we derive a fair value range of EUR 12.3-15.0 per Atria share.

VALUATION (EUR)

11.3

12.2

13.4

13.8

14.9

16.3

10.0 11.0 12.0 13.0 14.0 15.0 16.0 17.0

EV/EBIT 21E

P/E 21E

DCF

Share price, EUR




Detailed estimatesANNUAL ESTIMATES (EURm)

2013 2014 2015 2016 2017 2018 2019 2020Sales 1,411 1,426 1,340 1,352 1,436 1,439 1,451 1,504 1,508 1,526 1,552

5.0% 1.1% -6.0% 0.9% 6.2% 0.2% 0.9% 3.6% 0.3% 1.2% 1.7%

174 177 163 164 173 153 163 166 175 180 18612.3% 12.4% 12.2% 12.2% 12.1% 10.6% 11.2% 11.1% 11.6% 11.8% 12.0%

84 89 76 79 87 74 85 97 57 106 1106.0% 6.2% 5.6% 5.8% 6.1% 5.1% 5.9% 6.5% 3.8% 7.0% 7.1%

D&A -64 -48 -47 -47 -46 -45 -54 -57 -56 -56 -56

19.7 40.6 28.9 31.8 40.9 28.2 31.1 40.5 1.1 50.8 53.937.0 39.6 36.1 31.2 39.6 28.2 33.0 41.3 46.1 50.8 53.9

2.6% 2.8% 2.7% 2.3% 2.8% 2.0% 2.3% 2.7% 3.1% 3.3% 3.5%

Net finance -15 -13 -9 -6 -7 -6 -6 -5 -7 -6 -6Associated companies 2 6 0 1 2 0 1 1 1 1 1Adj. PTP 24.2 33.0 27.3 25.7 34.1 22.3 28.2 37.9 40.7 45.9 49.0

-7.2 -5.5 -6.6 -7.1 -4.5 -9.2 -12.6 0.9 -9.2 -9.8-4.3 26.8 14.6 19.6 28.4 17.8 17.0 24.5 -3.5 36.7 39.2

0.0 -0.6 -0.8 -1.4 -2.5 -1.4 -1.9 -1.8 -2.0 -2.4 -2.6Adj. Net Profit 12.9 21.5 21.0 17.8 24.5 16.5 17.0 27.6 30.5 34.3 37.5

0.46 0.76 0.74 0.63 0.87 0.59 0.60 0.98 1.08 1.21 1.33

Divisional sales EURm 2013 2014 2015 2016 2017 2018 2019 2020887 946 929 932 986 1,019 1,034 1,066 1,085 1,101 1,118

307 288 289 301 315 321 32899 98 97 107 105 107 109

Russia 122 99 75 72 86 75 74 67 40 34 35-25 -25 -27 -30 -42 -41 -42 -37 -37 -37 -38

Group 1,411 1,426 1,340 1,352 1,436 1,439 1,451 1,504 1,508 1,526 1,552

Divisional operative EBIT 2013 2014 2015 2016 2017 2018 2019 202031.9 32.5 29.8 24.2 36.3 36.7 40.0 43.1 44.0 45.1 46.2

1.0 -7.1 -4.6 -2.1 0.5 1.8 3.45.2 5.3 4.3 5.2 5.2 5.5 5.6

Russia -3.6 -6.2 -2 -1 0.9 -4.1 -3.6 -2.0 0.3 2.4 2.7-4.6 -2.2 -4.5 -0.9 -3.8 -2.7 -3.1 -2.9 -3.9 -4.0 -4.0

Group 37.0 39.6 36.1 31.4 39.5 28.2 33.1 41.3 46.1 50.8 54.7

2013 2014 2015 2016 2017 2018 2019 20208% 7% -2% 0% 6% 3% 1% 3% 2% 1% 1%

n.a. -6% 0% 4% 5% 2% 2%n.a. -1% -1% -2% 2% 2%

Russia -4% -19% -24% -4% 19% -12% -2% -10% -41% -15% 5%

Group -6%

EBIT margin 2013 2014 2015 2016 2017 2018 2019 20203.6% 3.4% 3.2% 2.6% 3.7% 3.6% 3.9% 4.0% 4.1% 4.1% 4.1%

0.3% -2.5% -1.6% -0.7% 0.2% 0.5% 1.0%5.3% 5.4% 4.5% 4.9% 4.9% 5.1% 5.2%

Russia -3.0% -6.3% -2.9% -1.0% 1.1% -5.5% -4.9% -3.0% 0.7% 7.0% 7.6%

Source: Company data and Nordea estimates



QUARTERLY ESTIMATES (EURm)

Sales 336 369 366 380 357 366 382 399 359 374 380 395-2.6% 2.7% 2.5% 0.8% 6.0% -0.7% 4.5% 4.9% 0.7% 2.0% -0.6% -0.9%

30.3 38.5 45.9 48.0 33.9 36.0 47.2 49.1 35.9 38.6 48.8 51.69.0% 10.4% 12.5% 12.6% 9.5% 9.8% 12.3% 12.3% 10.0% 10.3% 12.8% 13.1%

10.8 18.6 30.1 25.8 16.2 17.9 32.7 30.2 16.8 -24.1 33.8 30.33.2% 5.0% 8.2% 6.8% 4.5% 4.9% 8.6% 7.6% 4.7% -6.4% 8.9% 7.7%

D&A -14 -14 -14 -14 -14 -14 -14 -15 -14 -14 -14 -13

-2.8 5.1 16.6 12.1 2.2 4.1 19.0 15.1 3.2 -38.3 19.3 16.8-1.3 5.1 16.6 12.6 2.2 4.2 19.0 15.9 3.2 6.7 19.3 16.8

-0.4% 1.4% 4.5% 3.3% 0.6% 1.1% 5.0% 4.0% 0.9% 1.8% 5.1% 4.3%

Net finance -1.2 -1.3 -1.4 -1.6 -1.4 -0.8 -1.4 -0.8 -1.5 -1.5 -1.8 -1.8Associated companies 0.2 -0.3 0.4 0.3 0.3 0.2 0.3 0.3 0.2 0.3 0.3 0.3Adj. PTP -2.2 3.5 15.7 11.2 1.1 3.6 17.9 15.4 1.9 5.5 17.9 15.4

-0.2 -1.0 -3.0 -4.9 -0.4 -1.3 -3.0 -7.9 -0.4 7.9 -3.6 -3.1-4.0 2.4 12.7 5.8 0.7 2.3 14.9 6.6 1.5 -31.6 14.3 12.3

-0.4 -0.4 -0.5 -0.6 -0.4 -0.2 -0.5 -0.6 -0.1 -0.2 -1.1 -0.5Adj. Net Profit -2.9 2.1 12.1 5.8 0.3 2.0 14.4 6.9 1.4 13.2 13.1 11.8

-0.10 0.07 0.43 0.21 0.01 0.07 0.51 0.24 0.05 0.47 0.47 0.42

Divisional sales EURm241 264 258 272 253 263 266 285 253 274 271 28767 74 74 75 72 72 79 78 77 77 82 8022 24 25 27 27 27 27 27 26 26 26 26

Russia 16 19 21 19 16 13 20 18 14 6 10 10-9 -12 -10 -9 -10 -8 -10 -9 -10 -8

Group 337 369 366 380 357 366 382 399 359 374 380 395

Divisional operative EBIT 3.9 6.4 15.3 14.4 6.2 7.3 15.2 14.4 5.7 8.1 15.7 14.5

-2.6 -1.5 0.0 -0.5 -2.1 -2.1 1.4 0.7 -1.0 -1.4 1.8 1.10.6 1.0 1.7 1.0 0.3 1.1 2.1 1.7 0.5 1.3 2.0 1.4

Russia -2.2 -0.3 0.4 -1.5 -1.3 -1.4 0.9 -0.2 -0.8 -0.3 0.7 0.7-1.0 -0.5 -0.8 -0.8 -0.9 -0.7 -0.6 -0.7 -1.2 -0.9 -1.0 -0.8

Group -1.3 5.1 16.6 12.6 2.2 4.2 19.0 15.9 3.2 6.7 19.3 16.8

-2% 3% 3% 1% 5% 0% 3% 5% 0% 4% 2% 1%-4% 4% 2% 1% 7% -4% 8% 5% 7% 7% 3% 2%-6% -3% 0% 5% 22% 14% 9% 0% -2% -2% -2% -2%

Russia -9% 0% 7% -5% 2% -28% -5% -7% -12% -58% -49% -44%

Group -3% -1% -1% -1%

EBIT margin1.6% 2.4% 5.9% 5.3% 2.5% 2.8% 5.7% 5.1% 2.3% 3.0% 5.8% 5.1%

-3.9% -2.0% 0.0% -0.7% -2.9% -2.9% 1.8% 0.9% -1.4% -1.8% 2.2% 1.4%2.8% 4.3% 6.9% 3.8% 1.1% 4.1% 7.8% 6.4% 1.9% 4.9% 7.6% 5.2%

Russia -13.9% -1.6% 1.9% -7.9% -8.1% -10.5% 4.6% -1.1% -5.7% -5.6% 7.2% 6.8%

-0.4%




Risk factorsIn this section, we highlight the main risks that we find relevant for Atria. We list risks according to their relevance, with the most relevant on top. The following is not an exhaustive list but rather our view of some key risks for the company.

Increasing raw material pricesAtria's profitability depends on changes in global market prices for meat raw materials, which affect Atria with a lag. As Atria and other meat processing companies are in the middle of the value chain, it might be difficult to fully implement the product price hikes needed to protect EBIT margins in the case of elevated meat raw material prices.

Changes in customer demandAtria's key market areas of retail trade are highly centralised, making it dependent on individual customers. Shifts in consumer demand could thus affect Atria's margins.

Outbreak of animal diseasesAnimal disease discovered at a critical point in Atria's production chain could interrupt production in the unit concerned and disrupt operations throughout the chain. The recent development of African swine fever (ASF) may cause similar restrictions and government guidance pressure, much like avian influenza did in Sweden in H2 2017. Diseases may even lead to import and export restrictions on meat products. The latest outbreak of ASF in Germany caused pressure on prices in Germany due to restrictions on exports to China. Expansion of the current H5N8 avian influenza cannot be ruled out, while direct impact on Atria should be limited as the company has only limited exposure to poultry exports outside the EU. An outbreak of animal diseases in Atria's operating countries could have a substantial effect on Atria's sales.

Changes in consumer demandIn the long term, consumer behaviour may change the pattern of demand for Atria's products across different categories. As a result, shifts in consumer demand could affect Atria's net sales and eventually margins.

Operational disturbancesAtria has production plants in Finland, Sweden, Denmark, Estonia, and Russia. Its operations are process-centric and disturbances in a critical part of the process could result in the suspension of plant operations.

COVID-19-related risksIn addition to possible changes in raw material prices, operational disturbances and changes in consumer and customer demand, COVID-19 imposes various risks for Atria. FX changes and geopolitical risks have increased, while lockdowns have increased the risk of trade receivable writedowns. Investments may also be hard to conduct during social restrictions. All risks related to COVID-19 might cause a sudden decline in sales, while fixed costs would occur in any case.

Product safety issuesAs a food manufacturing company, Atria is exposed to internal and external quality and safety issues throughout the production chain. Product safety issues may hamper Atria's reputation as a quality producer.

Financial risksThe key financial risks are translation, transaction, and refinancing risks. Atria's main transaction and translation risks are in its Swedish and Russian operations.

Increasing competition from foreign productsAtria primarily uses domestic meat raw materials, and domestic customers demand mostly domestic meat products. In a scenario with changes in demand and foreign competitors entering the market, increased competition could affect profitability.



Reported numbers and forecastsINCOME STATEMENT

2023E2022E2021E20202019201820172016201520142013EURm1,5521,5261,5081,5041,4511,4391,4361,3521,3401,4261,411Total revenue1.7%1.2%0.3%3.6%0.9%0.2%6.2%0.9%-6.0%1.1%5.0%Revenue growthn.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.of which organicn.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.n.a.of which FX1101065797857487796890101EBITDA-56-56-56-57-54-45-46-47-47-48-64Depreciation and impairments PPE-9-9-9-9-9000000of which leased assets545114131284132224237EBITA000000007-1-17Amortisation and impairments

545114131284132294120EBIT00000000000of which associates11111021062Associates excluded from EBIT

-6-6-7-5-6-6-7-6-9-13-15Net financials00000000000of which lease interest00000000000Changes in value, net

4946-4372622362620347Pre-tax profit-10-91-13-9-5-7-7-5-7-11Reported taxes3937-325171828201527-4Net profit from continued operations00000000000Discontinued operations

-3-2-2-2-2-1-3-1-1-10Minority interests3734-523151726181426-4Net profit to equity

1.301.21-0.190.800.530.590.920.650.490.93-0.16EPS, EUR0.500.500.500.500.420.400.500.460.400.400.22DPS, EUR0.500.500.500.500.420.400.500.460.400.400.22of which ordinary0.000.000.000.000.000.000.000.000.000.000.00of which extraordinary

Profit margin in percent7.1%7.0%3.8%6.5%5.9%5.1%6.1%5.8%5.1%6.3%7.2%EBITDA3.5%3.3%0.1%2.7%2.1%2.0%2.8%2.3%1.6%2.9%2.6%EBITA3.5%3.3%0.1%2.7%2.1%2.0%2.8%2.3%2.2%2.8%1.4%EBIT

Adjusted earnings11110610298877486787689119EBITDA (adj)5551464133284031294154EBITA (adj)5551464133284031364037EBIT (adj)

1.331.211.080.980.600.590.870.630.740.760.46EPS (adj, EUR)

Adjusted profit margins in percent7.1%7.0%6.8%6.5%6.0%5.1%6.0%5.8%5.6%6.2%8.4%EBITDA (adj)3.5%3.3%3.1%2.7%2.3%2.0%2.8%2.3%2.2%2.8%3.9%EBITA (adj)3.5%3.3%3.1%2.7%2.3%2.0%2.8%2.3%2.7%2.8%2.6%EBIT (adj)

Performance metricsCAGR last 5 years

1.5%1.2%2.2%2.3%0.4%0.4%1.3%0.8%0.6%1.6%0.8%Net revenue8.3%4.1%-6.3%7.3%-1.0%-6.2%1.8%7.2%2.5%1.2%3.7%EBITDA

13.8%4.4%-49.2%6.9%-5.2%7.4%6.2%31.9%24.3%8.1%-12.5%EBIT17.2%5.8%n.m.10.4%-10.6%n.m.21.3%n.m.n.m.30.2%n.m.EPS4.6%0.0%1.7%4.6%1.0%12.7%17.8%18.1%9.9%9.9%1.9%DPS

Average last 5 years2.4%2.0%1.9%2.4%2.3%2.4%2.3%2.2%1.9%1.6%1.4%Average EBIT margin6.0%5.6%5.5%5.9%5.6%5.7%6.1%6.1%5.8%5.7%5.7%Average EBITDA margin

VALUATION RATIOS - ADJUSTED EARNINGS2023E2022E2021E20202019201820172016201520142013EURm

8.99.710.910.116.711.213.918.212.28.716.8P/E (adj)5.65.65.44.96.05.76.67.05.84.84.3EV/EBITDA (adj)

11.211.811.911.715.714.914.317.515.210.59.4EV/EBITA (adj)11.211.811.911.715.714.914.317.512.210.813.8EV/EBIT (adj)

VALUATION RATIOS - REPORTED EARNINGS2023E2022E2021E20202019201820172016201520142013EURm

9.19.7n.m.12.318.911.213.217.818.57.1n.m.P/E0.400.390.360.320.360.290.390.410.330.300.36EV/Sales5.65.69.75.06.15.76.57.06.44.75.0EV/EBITDA

11.411.8513.112.016.814.913.817.320.310.313.8EV/EBITA11.411.8513.112.016.814.913.817.315.210.525.8EV/EBIT

4.3%4.3%4.3%5.1%4.2%6.1%4.1%4.0%4.4%6.0%2.8%Dividend yield (ord.)2.7%-7.1%4.3%20.8%17.1%1.0%5.6%-0.8%26.8%23.8%24.9%FCF yield0.1%-9.7%1.7%18.9%14.0%1.5%3.3%6.9%15.9%31.3%23.1%FCF Yield bef A&D, lease adj

38.5%41.2%n.m.62.3%79.1%68.3%54.4%71.2%81.8%43.0%n.m.Payout ratioSource: Company data and Nordea estimates



BALANCE SHEET2023E2022E2021E20202019201820172016201520142013EURm

249249249249246249256263237239242Intangible assets00000000000of which R&D

8484848485878994797677of which other intangibles165165165165161163167170158164165of which goodwill545507449421423401409405395391434Tangible assets

2525252530000000of which leased assets1817161515151514131315Shares associates11111111112Interest bearing assets00024567765Deferred tax assets555551091111117Other non-IB non-current assets00000000000Other non-current assets

817778719692694681696701665663706Total non-current assets10910710310311010693908193114Inventory110108106106107105114109101117114Accounts receivable

99999000000Short-term leased assets44444345478Other current assets71182744354329Cash and bank

238229240248235219214208190220265Total current assetsn.a.n.a.n.a.n.a.n.a.0000417Assets held for sale

1,0561,007959940929900910909855923978Total assets

491468448423420415419410400402408Shareholders equity00000000000Of which preferred stocks00000000000Of which equity part of hybrid debt

2320181614131212543Minority interest514489466439434428431422405406412Total Equity

3939393941434749454445Deferred tax189169139139141153122178156203216Long term interest bearing debt

77777667787Pension provisions00001000010Other long-term provisions222277811666Other long-term liabilities

2525252525000000Non-current lease debt00000000000Convertible debt00000000000Shareholder debt00000000000Hybrid debt

263243213212221209184245214260273Total non-current liabilities00000000000Short-term provisions

225221226234211188202200192199174Accounts payable999109000000Current lease debt00000013000Other current liabilities

45454545547592404452119Short term interest bearing debt279275280289274262295242236250293Total current liabilities

00000000070Liabilities for assets held for sale1,0561,007959940929900910909855924978Total liabilities and equity

Balance sheet and debt metrics260246199190223222210212194249304Net debt

3434343434000000of which lease debt-3-3-13-21102771-61862Working capital

814775706670705708703703659681768Invested capital782737684657663656645640604660746Capital employed

7.6%7.5%-1.3%5.4%3.6%4.0%6.2%4.5%3.4%6.5%-1.0%ROE7.0%7.0%5.5%5.0%3.8%3.3%4.8%3.8%4.4%5.2%3.9%ROIC7.4%7.3%7.0%6.4%5.1%4.4%6.4%5.1%5.8%6.5%5.1%ROCE

2.42.33.52.02.63.02.42.72.82.83.0Net debt/EBITDAn.m.n.m.0.2n.m.n.m.n.m.n.m.n.m.n.m.n.m.n.m.Interest coverage

46.5%46.5%46.7%45.0%45.2%46.2%46.0%45.1%46.8%43.5%41.8%Equity ratio50.5%50.3%42.7%43.4%51.3%51.9%48.7%50.3%48.0%61.5%73.8%Net gearing




CASH FLOW STATEMENT2023E2022E2021E20202019201820172016201520142013EURm

1101065797857487796890101EBITDA (adj) for associates-10-91-9-9-1-10-6-4-8-6Paid taxes-6-6-7-5-6-6-8-4-9-7-13Net financials000010-10-11-1Change in provisions002-25015-1-513Change in other LT non-IB00000000000Cash flow to/from associates00000000000Dividends paid to minorities00455-18-6-10-16616521Other adj to reconcile to cash flow

9491988759605958115136115Funds from operations (FFO)0-10-81529-1367-24-44-26Change in NWC

94818910289476565919289Cash flow from operations (CFO)-85-105-75-41-40-45-53-43-50-34-39Capital expenditure

9-2414614831122405850Free cash flow before A&D00000-18633194Proceeds from sale of assets000-3000-30-5-330Acquisitions9-24145848219-2684454Free cash flow0-326534031122405850Free cash flow bef A&D, lease adj

-14-14-14-12-12-15-13-11-11-6-6Dividends paid00000000000Equity issues / buybacks

20300-13-4013-315-55-81-36Net change in debt-9-9-9-9000001816Other financing adjustments000-241-4-1-2-1-6Other non-cash adjustments6-16-92201-101-2522Change in cash

Cash flow metricsn.m.n.m.n.m.72.0%73.8%98.0%n.m.90.9%n.m.68.9%47.3%Capex/D&A

5.5%6.9%5.0%2.7%2.8%3.1%3.7%3.2%3.7%2.4%2.7%Capex/Sales

Key information121212101071211978Share price year end (/current)

332332332278284185341324255186218Market cap.615599550485521420563548441426509Enterprise value28.328.328.328.328.328.228.228.228.228.228.2Diluted no. of shares, year-end (m)




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Analyst ShareholdingNordea analysts do not hold shares in the companies that they cover.No holdings or other affiliations by analysts or associates.

Market-making obligations and other significant financial interestNordea has no market-making obligations in Atria.

Fair value and sensitivityWe calculate our fair values by weighting DCF, DDM, SOTP, asset-based and other standard valuation methods. Our fair values are sensitive to changes in valuation assumptions, of which growth, margins, tax rates, working capital ratios, investment-to-sales ratios and cost of capital are typically the most sensitive. It should be noted that our fair values would change by a disproportionate factor if changes are made to any or all valuation assumptions, owing to the non-linear nature of the standard valuation models applied (mentioned above). As a consequence of the standard valuation models we apply, changes of 1-2 percentage points in any single valuation assumption can change the derived fair value by as much as 30% or more. All research is produced on an ad hoc basis and will be updated when the circumstances require it.

Investment banking transactionsIn view of Nordea’s position in its markets readers should assume that the bank may currently or may in the coming three months and beyond be providing or seeking to provide confidential investment banking services to the company/companies

Marketing MaterialThis research report should be considered marketing material, as it has been commissioned and paid for by the subject company, and has not been prepared in accordance with the regulations designed to promote the independence of investment research and it is not subject to any legal prohibition on dealing ahead of the dissemination of the report. However, Nordea Markets analysts are according to internal policies not allowed to hold shares in the companies/sectors that they cover.

Issuer Review

This report has not been reviewed by the Issuer prior to publication.

Completion Date

16 Feb 2021, 22:13 CET

Nordea Bank Abp Nordea Bank Abp, filial i Sverige Nordea Danmark, Filial af Nordea Nordea Bank Abp, filial i NorgeBank Abp, Finland

Nordea Markets Division,Research




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Documents

Atria - Nordea Research - Nordea Equity Research