News Quarterly figures
ForFarmers sees feed sales and profit fall further
ForFarmers was unable to halt the decline in feed sales in the third quarter of this year. The feed company attributes this to the consequences of the corona crisis and animal diseases such as African swine fever (ASF) and bird flu. Gross profit has also fallen.
ForFarmers reports this in its quarterly report. The total volume of feed sold, called 'Total Feed' by ForFarmers, decreased by 2,8% from July to September of this year. The volume of compound feed fell by 3,7%. The decrease occurred mainly in the Netherlands, Belgium and the United Kingdom. Sales in Poland and Germany are stable.
As a result, the decrease in feed purchases at ForFarmers is leveling off somewhat compared to the first half of 2020. At that time, the total feed volume decreased by 5,6% and the sales of compound feed by 4,9%. The corona crisis has left its mark on the feed sales in the third quarter, CEO Yoram Knoop reports. Livestock farmers see the sales markets declining and product prices coming under pressure. "It remains uncertain how long corona will lead to drastic measures. As a precaution, livestock farmers, companies and consumers are becoming more cautious in their spending pattern."
Relaxations reversed
The fact that the relative decline in feed sales is leveling off in the third quarter is partly due to the relaxation of the corona policy in the countries where ForFarmers sells feed. This allowed the market to bounce back a bit. The current or announced lockdowns in, for example, Germany and the United Kingdom (UK) have stopped this positive movement.
In the Netherlands, for example, the impact of the corona crisis is mainly felt in the beef cattle sector, notes ForFarmers. In the pig sector, the volume decreased mainly due to the effect of the stopper scheme in the Netherlands. In Belgium, the lifting of export restrictions to countries outside the EU, which were imposed because of ASF, was still pending. As a result, pig prices remained low and the pig population shrank. In the poultry sector, the volume remained fairly stable, according to ForFarmers.
Change of product mix
In the UK, ForFarmers saw the volume sold in cattle farming (partly due to a good grass season), pig farming and poultry farming decline. The margin per tonne also decreased as a result of, as ForFarmers describes it, a temporary change in the product mix. In other words, the group had to process more expensive raw materials in their feeds for a period of time.
Varying results can be seen in Germany and Poland. Total feed volume in these countries combined decreased slightly, while compound feed sales remained stable. The latter is partly because a decrease in compound feed sales in Poland has been compensated for by volume growth in Germany. In its own words, ForFarmers was able to win new customers and tenders here, especially in the pig sector. There was, however, a decrease in volume in the poultry sector.
This is mainly because the Polish poultry sector is in dire straits, ForFarmers describes. First, the sector has to deal with export restrictions because bird flu was detected in Poland, then the corona measures resulted in a sharp decline in the demand for poultry meat. Sales in the poultry sector also fell in Germany due to the loss of several contracts.
Rapidly declining gross profit
As a result of all these developments, ForFarmers' gross profit fell by 6,8% in the third quarter. EBITDA, the profit before interest, tax and depreciation, also fell sharply during this period by 9,4%. The pressure on margins in Poland and the temporary deterioration of the product mix in particular affect this. ForFarmers has taken measures to compensate for this decrease in profit with falling operating expenses. For example, 2019 feed mills were closed in the second half of 4, reaching the target of €10 million in cost savings.
ForFarmers therefore states in the statement that it will achieve a much higher underlying EBITDA and net profit in 2019 compared to 2020, partly due to the efficiency measures taken. It must be said that 2019 was a weak year for the feed group with a final net profit of €17,7 million.
Eric the Thrush
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