ForFarmers is in the corner where the blows fall. Due to challenging market conditions, the listed cattle feed giant from Lochem no longer dares to rely on forecasts. This leaves investors in the dark. After the publication of the third quarter figures, the price even plunged to a new low below €4 per share.
A public stock exchange listing is nice when things are going well. However, it is currently a burden for ForFarmers as sales volumes are declining and profits are eroding. In the run-up to the third quarter figures, the Telegraaf and the Financieel Dagblad already devoted extensive analyzes to the disappointing performance. Several bank analysts also recently expressed this concern strong criticism and want to see action quickly. Patience with ForFarmers is running out, the dip in form has been going on for more than three years.
Stock price further down
Things got bad in the summer of 2018 and things have gotten worse almost every quarter since then. The one presented today third quarter figures did not bring any change. In fact, Ebitda, the indicator for investors, plummeted by 22%. The expectations for the fourth quarter and 2022 were also withdrawn. This can be seen as a disguised profit warning. ForFarmers has been one of the worst-performing funds on the Midcap for some time now, and the share had another bad day today.
The price fell by about 5% today and stood at €3,92 just before the stock market closed. Based on the disappointing quarterly figures, investment bank Degroof Petercam decided to lower the price target by €1 to €4,20 while maintaining the 'hold' advice. This indirectly indicates that the share is currently undervalued. KBC Securities also lowered the price target and removed ForFarmers from the buy list.
Setback after setback
They now know in Lochem what Murphy's Law entails. The setback started in 2018 when water transport was no longer possible due to the drought and logistics costs increased significantly. Raw material costs also skyrocketed, which was at the expense of margins. This was followed by outbreaks of African swine fever in Belgium and Germany and bird flu in Poland. Animal diseases are a threat to animal numbers and therefore sales figures. An even greater threat is the changing political policies in Western Europe. Animal numbers are subject to discussion, especially in the Netherlands' home market. It is clear that the forming parties want to further reduce the livestock herd. The question is how deep the political knife will cut.
Brexit has also not really given sales volumes in the United Kingdom a boost, although CEO Yoram Knoop stated this in advance. had been estimated. Sales and margins in the United Kingdom are under heavy pressure. Recently, investment bank Kempen even hinted at an 'exit strategy' by ForFarmers in the UK, although that was probably mainly intended to be stimulating. The poison cup for ForFarmers is not yet empty, because the rapidly rising energy prices are currently the next setback in a row. In the background, ForFarmers also has to cope with the rapidly rising raw material prices in the fiercely competitive feed market in our country. There are bright spots to be found in the dark market conditions. An example is Poland, where autonomous feed sales have shown a nice increase this year.
Acquisitions and cost savings as medicine
In the cocktail of setbacks, ForFarmers is trying to maintain the confidence of (institutional) investors by indicating that the dividend this year will remain the same as last year. The rock-solid balance sheet is also emphasized once again. This allows acquisitions to be made in existing markets and possibly beyond. A year ago the takeover of De Hoop compound feed was announced, but after that it remained quiet. Competitor De Heus stole Coppens this summer. It is not known whether ForFarmers missed the mark.
Furthermore, ForFarmers wants the new strategy build to grow accelerated implementation. According to a spokesperson, this phrase mainly concerns the cost savings of €10 million that were initially not supposed to be realized until 2025. The target Ebitda of between €125 and €135 million that should then be achieved is currently out of sight. However, ForFarmers still has some time to turn the tide. In the meantime, the patience of investors is being put to the test. It is possible that a new share buyback program could boost the price.