ForFarmers: solid profit, gloomy outlook

The bottom of the 2017 ForFarmers annual result has already been laid in the first half of the year. Thanks to better milk and pig prices and volume growth in the Netherlands and Germany, the net profit is significantly higher than last year.

For the second half of the year, the feed supplier is keeping a lid on it. Analysts immediately responded to this on Thursday, August 17 by changing the price target: from keeping to reducing.

Also organic volume growth
In the first 6 months, ForFarmers realized a volume growth of 4,7 million tons (a plus of 3,6%), of which 1% was organic. The sale of compound feed was particularly successful and increased by 3,3 million tons, an increase of 6,2%. This is mainly thanks to the acquisition of Vleuten-Steijn feeds.

ForFarmers does point out, however, that the number of 'self-mixers' is not increasing any further. The growth figures come mainly from the Netherlands and Germany. Sales in the United Kingdom, on the other hand, stagnated.

A combination of volume growth and cost efficiency means that operating profit (Ebitda) increased by 11,7% to €51,5 million. Net profit also received a strong boost, rising 21,9% to €30,4 million. According to CFO, Arnout Traas, it is noticeable in the item 'debtors' that the income on the farm is flowing in more freely.

Great Britain remains a worry child
The compound feed manufacturer is particularly successful on the mainland. In Great Britain the results are less positive. Sales there fell by 1,5 million tons, a minus of 3,9%. This was mainly the result of lower animal numbers. In addition, the depreciation of the British pound has had a significant impact on the overall result.

Second half year less prosperous
According to CEO Yoram Knoop, it is likely that the results will turn out lower in the further course of this year. The value of the British pound will probably continue to fall, which will negatively affect the result. In addition, the prospects for the pig market are less positive now that the Chinese pig herd is growing and European exports are declining.

The results of Vleuten-Steijn feeds were also included in the results last year in quarter 4, so that this acquisition will only count as acquisition growth in quarter 3. The impact of the fipronil affair will probably not or hardly affect ForFarmers

Changed price target
Market bureau KBC Securities lowered the advice for the share of ForFarmers from keeping to reducing on Thursday. This is due to the bleak outlook. The price target of € 9,20 per share remained intact.

Since the launch of the share in May 2016, the price has mainly been on the rise. The ForFarmers share closed 0,9% higher on Wednesday at €10,75. After publication of the half-year figures, this was more than 1% off. Incidentally, this is well above the stated price target of KBC Securities. 

Wouter Job

Wouter Baan is editor-in-chief of Boerenbusiness. He also focuses on dairy, pig and meat markets. He also follows (business) developments within agribusiness and interviews CEOs and policymakers.

w.baan@boerenbusiness. Nl

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