Meat processor Vion again in the red

For meat processor Vion, 2022 is a year to quickly forget. The annual figures show a considerable imbalance between the benefits and the costs. Although the underlying went slightly better than in 2021, when a loss of millions was also collected, the bottom line result is a loss of more than €100 million. Much of this is attributable to restructuring and write-downs. This is due to strong headwinds on the German market.

Vion cites a series of reasons why it was disappointing in 2022. Among other things, corona, African swine fever in Germany, the labor shortage and cost inflation (partly as a result of the war in Ukraine) are driving the margin down. Vion says it cannot pass on the price increases directly to its customers. As a result, the normalized Ebit shows a loss of €23,5 million. The only positive thing about this is that this is a fraction better than the year before. For shareholder ZLTO there is of course little left for dividend distribution. Turnover rose by more than 15% to €5,3 billion. 

Restructuring on the German market
The story is not over yet. This is because Vion is forced to take a charge of no less than €63,5 million for restructuring and impairment, resulting in a net loss of €108 million. This is particularly the case in Germany, where Vion realizes more than half of its turnover. The German market has been giving the meat processor serious headaches for some time now as a result of the rapid shrinkage of the pig herd. Recent figures from the sector organization ISN show that the number of pig slaughters at Vion locations fell by no less than 17,1% to 5,8 million last year. Since 2020, there has been a decline of almost 25%. Nowhere was the shrinkage so great.

As a result, Vion is faced with considerable overcapacity in the slaughterhouses. In an industry in which the fixed costs are preferably spread over as many slaughter hooks as possible, such a decline hits hard. "Market developments in Germany have gone faster than we anticipated. That is why we have reduced and consolidated a significant part of our slaughtering capacity in the German market," says CEO Ronald Lotgerink.

Improvement plan ahead of schedule
To turn the tide, Vion started an improvement plan last year with the aim of achieving a result improvement of €2025 by 150. In his own words, this plan is ahead of schedule. In the meantime, Vion has already closed several slaughter locations in Germany. It was recently announced that the company's German operations further restructuring and places it in a separate business unit, which will be separate from the Dutch part.

Vion emphasizes that the Dutch branch performed as expected last year. Vion does indicate, however, that many livestock farmers see insufficient prospects, which means that declining slaughter numbers are also on the horizon in their own country. This is already taking shape at the moment, given the current market conditions in pig farming. They represent a tight supply. The Dutch capacity is in line with the market, but we remain sharp on this," says Lotgerink.

Also read one interview with the management of Vion, consisting of CEO Ronald Lotgerink and CFO Tjarda Klimp. 

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

© 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.