Focusing on Europe
ForFarmers: no percent affected by phosphate reduction plan
Content, that's ForFarmers with the annual figures for 2016† In a year in which a lot happened for the feed manufacturer, operating in a market with challenging conditions, the company is able to refute excellent results. In a specially convened press conference, the board of ForFarmers looked back and forward. In view of the phosphate reduction plan, a lot is in the pipeline for 2017.
2016 was a year full of highlights and challenges for ForFarmers. The Bursgang in may and the acquisition and integration of VleutenStein feeds the management considers positive events of the past year. ForFarmers also considers the recovery in the pig and cattle farming sector to be positive, given the rising prices. Incidentally, CEO Yoram Knoop warned that pig farmers should not regard sales in China as a certainty.
Brexit, on the other hand, due to interests in Great Britain, may well take hold in the longer term advantageous from. In the short term, however, it is a jammer for the results. Nevertheless, ForFarmers closed the year well, given the net profit of 67,8 million. Of this amount, 53,3 million will be distributed to owners of the Company. The growth in the feed volume, an important indicator according to Knoop, increased in 2016 by 2,5 percent to 9,25 million tons. This is mainly due to the increased sales of by-products. The production of compound feed remained more or less stable in 2016.
Brexit affects results
While market conditions in the Netherlands and Germany improved, there is still a patchwork of uncertainty about the British market. For example, ForFarmers saw volumes fall in Great Britain last year, mainly due to poor earnings from British livestock farmers. The depreciation of the British pound is also hurting the feed company. As a result, the overall gross result will shrink by 4 percent on balance to approximately 407 million euros.
Despite the uncertainty of the British market, Knoop looks positively ahead. 'In England we are working on a reorganization, which should ultimately lead to a more efficient approach. The fact that the British are far from self-sufficient also shows potential,' says Knoop. He is referring to the rising import costs for the British.
Phosphate reduction is joint responsibility
Not only in Great Britain, but also in the Netherlands, ForFarmers will face the necessary challenges in 2017. Element of the phosphate reduction plan is the feed track. COO Jan Potijk is hopeful for its implementation. 'In January we started lowering the phosphorus in feed, from 4,5 to 4,3 grams per kilo. I expect that the entire compound feed industry will adhere to this agreement, so that phosphate reduction via the feed track will be successful this year.'
The consequences of the LU scheme According to Potijk, this will probably only have a minimal effect on the results for 2017. 'Due to the LU scheme, the volume of cattle to be sold in the Netherlands will shrink by approximately 7 percent. This 7 percent includes approximately 5 percent volume shrinkage for the beef division within ForFarmers', says Potijk. According to the COO, this will probably reduce the total feed volume in the Netherlands, including pigs and poultry, by 1,7 percent. 'If we calculate across the countries, our feed volume will decrease by only 0,7 percent in 2017 due to the LU scheme.' Despite the fact that the LU scheme has a significant impact on the size of the Dutch cattle herd, ForFarmers expects little inconvenience from it.
Ambitions and acquisitions
Due to its strong and healthy balance sheet, ForFarmers has the ambition to strengthen its market position in 2017. 'We are continuously looking for interesting takeover candidates and for this we mainly focus on Europe and the surrounding area', says Knoop. Many animal numbers and the potential to occupy a leading position are the criteria that ForFarmers uses in the country selection. According to Knoop, Spain is therefore not interesting, because the market there is already divided with strong chain integrations. According to the CEO, the German market is interesting, but other countries are also being looked at. Based on the balance sheet in 2016, ForFarmers has approximately 295 million euros in cash to make acquisitions and other investments.
Marketability of shares increased
As a result of the results of 2016, earnings per share increased by 4,8 percent to more than 50 cents. Because the ForFarmers share has been traded on the Euronext since May 2016, the tradability has increased enormously. This is because institutional investors, such as pension funds, have better access to the platform than before. Every year, approximately 5 to 8 percent of the shares in the hands of farmers are transferred to investors. This percentage has not changed since the IPO. Incidentally, ForFarmers intends to repurchase approximately 2018 to 40 million of the shares in the period up to October 60.
Based on the results in 2016 and the expectations for 2017, ForFarmers sees no reason to revise the medium-term objectives. 'We see the future positively and will grow where we can', says Knoop.
Wouter Job
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