News Half-year figures
ForFarmers sells more feed, profits fall sharply
The Lochem-based animal feed group ForFarmers saw its net profit fall sharply in the first half of the year. CEO Yoram Knoop calls the results 'disappointing'. Despite a larger volume of feed sold, the financial results are under considerable pressure because costs for the company rose across a broad front.
ForFarmers was able to sell more feed to customers in the first half of 2021. The Total Feed volume sold - the total of compound feed, simple raw materials and by-products - increased by 1,9% to a total of 4,9 million tons. The sales of compound feeds, which are important to the company, rose by 2,2% to 3,5 million tons. The increasing volumes are the result of the acquisitions of De Hoop Mengvoeders and Mühldorfer Pferdefutter. Organically, the sales volume decreased, albeit slightly, by 0,5%.
Underlying EBITDA was ultimately 15,4% lower at €40,8 million due to rising costs. Underlying net profit decreased 26,6% to €17,9 million.
Fierce competition and battle for market share squeeze margins
Knoop indicates that the battle for market share between feed producers is fiercer than usual. The liquidity position on many farms during this period was also moderate, due to price pressure for products due to the prolonged corona measures and high feed prices. This pressure on margins in the chain and an incident with contracts that were too competitively priced in Germany depressed the results in particular.
According to the company, these German contracts have a one-time negative effect on the results of €4 million. In addition, ForFarmers was unable to fully pass on the sharply increased raw material prices across the board to customers, resulting in a €2 million lower gross profit. Higher costs due to the implementation of acquisitions and for energy resulted in a higher operating expenditure of more than €6 million.
Volume growth in all clusters
Zooming in on the results per cluster, it becomes clear that feed sales have increased in all clusters. In the Netherlands and Belgium this increase was prompted by the acquisition of De Hoop Mengvoeders. The volume increased by 1,8%. Excluding the acquisition, the organic sales volume decreased by 2,8%. According to the company, this was caused by the warm remediation of the pig population and the choice of dairy farmers to feed a relatively large amount of roughage.
Volume growth in the Germany and Poland cluster continued. The company sold 3,4% more feed to customers, both dairy and pig farmers. Further support was provided by the recovery of the poultry market and sales in Poland. The growth in this cluster was achieved almost entirely under our own steam (without acquisitions). In England volumes increased slightly by 1,0%.
View of some recovery margins
According to Knoop, how quickly the margins will recover for the company depends on 'the industry's zeal to fully pass on the rapidly rising costs for raw materials and energy to customers'. He expects underlying EBITDA for the second half of 2021 (including acquisitions) to be similar to that of the second half of 2020.
Steve Wissink
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