Trend break in ForFarmers results

The listed ForFarmers suffered volume losses in the Netherlands in the third quarter of 2018. In addition, the rising raw material prices, as a result of drought, could not be passed on in full to the customers. 

The results in the Netherlands are most striking. Without mentioning figures, ForFarmers reports lower sales in the dairy sector. The reason for this is the shrinkage in the dairy herd as a result of the phosphate rights system introduced in 2018. In pig farming, total sales (including individual raw materials) show an increase.

The sales of compound feed declined, however. Sales in the organic sector, through the Reudink subsidiary, rose slightly. On balance, less volume was sold compared to the same period in 2017. 

Trend break
The volume loss can be seen as a break in the trend, because for a long time ForFarmers made quarterly profits. Sales in the cluster Germany, Belgium and Poland did increase, partly due to the acquisition of the Polish Tasomix. In the United Kingdom, feed sales in dairy farming increased, but pig feed sales fell.

According to ForFarmers, the EBITDA (measure of gross profit before deduction of overheads) clearly shows a decrease, driven by the results in the Netherlands. This is an important parameter for investors. Gross profit, on the other hand, did increase.

Tempered Expectations
ForFarmers is tempering expectations for the coming months. Thus, integrating 4 acquisitions time before it leads to benefits. Margins (the Netherlands and Poland) are under pressure. This is due to rising raw material prices, which respond to drought in key production regions.

Due to the drought, the water levels are low, which means that the group is often forced to partly organize logistics over land. This entails additional costs, while energy prices (oil) also rise.  

Course down
The share of ForFarmers is the stock market depression in October passed through fairly unscathed. However, Thursday morning, November 1, the share traded sharply lower at €10.00 per share, a decrease of more than 9,60% compared to the closing price of 5 day earlier. Nevertheless, analysts are fairly positive about the strategic course that runs the company. 

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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