News Quarterly figures
Margin pressure ForFarmers: strengthen position faster
The Lochem-based animal feed giant ForFarmers published an operational progress report on the third quarter of this year this morning (Tuesday 2 November). Margins and results are also under pressure this quarter, mainly due to increased energy prices. In an explanation, Yoram Knoop, CEO of ForFarmers, indicated that he wanted to implement the 'Build to Grow' strategy announced in 2020 more quickly.
The total volume of feed sold in the third quarter fell by 1,4% compared to the same period in 2020. The volume of compound feed sold did increase by 1%. The increasing compound feed volumes were the result of organic growth in the Germany/Poland cluster (substantial organic growth in poultry feed sales), the acquisition of the Dutch De Hoop Mengvoeders and the German Mühldorfer Pferdefutter. The fact that the Total Feed volume did fall was due to a decline in livestock in the Netherlands (particularly pig farming) and declining volumes in the United Kingdom.
Gross profit up, EBITDA under pressure
Although the company does not go into detail about the financial figures in the report, it indicates that bottom-line results are under pressure due to the sharp rise in energy costs. As a result, underlying EBITDA for the third quarter decreased by 22%. The gross profit margin did increase by 2,6% thanks to the increased volumes of compound feed. In view of the volatility of the energy market, ForFarmers does not want to make any statements about the development of the results in the fourth quarter and before 2022.
Differences per cluster
The declining pig numbers in the Netherlands and Belgium are putting pressure on volumes in these markets. In the Netherlands, the warm remediation scheme was completed this year and in Belgium pig farmers are voluntarily imposing fewer animals due to poor pricing, the company reports. In cattle farming, weather conditions resulted in more grass than in the past summers, as a result of which livestock farmers in this sector bought less compound feed. The sales of feed to both broiler and laying poultry farmers did increase.
In the German/Polish cluster, the volume of feed sold to pig and cattle farmers shrank. According to ForFarmers, this was partly prompted by the decision to stop trading loose raw materials in these countries and to focus on the sale of compound feed and concentrates. The fact that sales in the cluster nevertheless increased was due to a significantly higher sales of compound feeds to Polish poultry farmers. In the United Kingdom, the company lost a large pig customer, which put pressure on volumes. However, the company speaks of a recovering sales of feed in the cattle and poultry sector.
Invest in growth, dividend in line with 2020
In the explanation of the quarterly results, CEO Yoram Knoop emphasizes that further and faster implementation of the 'Build to Grow' strategy has the highest priority. This involves efficiency improvements and cost savings amounting to €7 million and strengthening positions at home and possibly abroad through acquisitions.
In addition, ForFarmers will look at its capital allocation, in other words the availability and access to capital. Without making any more clear about this now, Knoop reports that the company will soon come up with a report on this. Given the strong balance sheet of ForFarmers, the company wants to keep the dividend to be paid out for 2021 in line with the dividend payment for 2020.
Steve Wissink
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