Drought and cattle hides hindered Vion in 2018

Last year, Vion was seriously affected by the higher pig prices, partly due to the dry summer, and the low prices for cattle hides. This has partly neutralized the good financial presentations of the food group from Boxtel. The operating result fell by 5,5% and the net profit has more than halved compared to 2017. This was announced by Vion on Thursday 28 March at the presentation of the annual figures.

The dry and warm summer and low prices for cattle hides have left a red mark on Vion's financial performance. This summer, pig prices for Vion unexpectedly soared. The meat group was unable to anticipate this in time on the sales side, as a result of which margins were under severe pressure for some time. Ronald Lotgerink has been the CEO at Vion and calculates the damage caused by this summer incident for the 'Pork' division at €10 million.

In addition, the market for cattle hides was also under pressure in 2018; for example, the shoe industry bought significantly less leather, because sneakers are experiencing a strong increase among the young. The car industry in, for example, Germany, which is currently in difficult waters, also had significantly less willingness to buy. The negative effect for the 'Beef' division here is also approximately €10 million, says Lotgerink.

Falling numbers
It causes the operating result (EBITDA) for 2018 to decrease by 5,5% to €60,5 million. This also had an impact on the net profit, which at €10,6 million more than halved compared to 2017. This is partly due to the higher depreciation costs from investments (€5,4 million higher) and the lower tax benefits (a negative effect of a total of €6,7 million), Vion adds.

Turnover fell by almost 6,7% to €4,6 billion. This is mainly due to the lower sales prices of meat products, Vion reports. Volumes have decreased by approximately 1%. According to the company, the lower sales prices have been more than compensated by the lower purchase prices of raw materials and consumables, which has actually led to higher gross margins. Operating expenses are higher due to the creation of more value-added activities, which has kept the profit percentage flat.

Stronger financial base
Although Vion also invested heavily last year (€61,2 million), including in the beef locations in Leeuwarden and Waldkraiburg, it has improved its financial base. For example, net debt has been reduced to €35,1 million, a decrease of 30% compared to 2017. As a result, Vion's solvency increased by 1,1 percentage points to 45,4%.

Lotgerink is pleased with Vion's performance. "The warm summer and the bad market for cattle hides cost us about €20 million. Nevertheless, we are able to realize an EBITDA of more than €60 million. This shows that the investments we make are paying off in a structural way." The CEO is clear about the ultimate operating result. He thinks that is far too low. "We need to move towards an EBITDA of €100 to €120 million. We have now set the course for that."

Eric the Thrush

Eric is a member of the editorial staff of Boerenbusiness. As a descendant of an arable family, farmer's blood flows through Eric's veins. He considers himself a generalist, but with a preference for economics, trends, markets and marketing.

e.delijster@boerenbusiness. Nl

© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.