CEO Vion: 'It's better to take the pain than to muddle through'

The fact that the bottom line result amounts to a loss of €108 million deserves a few serious nuances, according to Vion's top management. The sting in the problem is mainly the German pig market, but hard work is being done to turn the tide. According to CEO Ronald Lotgerink and CFO Tjarda Klimp, black figures are not suddenly very far away. "With the major restructuring in Germany and a one-off charge of €63,5 million, we have now taken the pain and can move forward," said the CEO.  

Despite the solid loss cautious optimism can also be detected in discussions with Vion's management at the head office in Boxtel. Although the normalized Ebit shows a substantial loss of €2022 million over 23,5, this is slightly better than the year before. "We are keen on it. The reorganization program we started last year is ahead of schedule," emphasizes CFO Klimp, who directs this plan from her position.   

The numbers again look disappointing. What is your own interpretation of the result?
Lotgerink starts off: "The current market situation feels like a hot and cold bath at the same time, because it forces us to respond adequately. The problems that arose in 2021 will continue in 2022. If you look at the external circumstances, there are many things against. Take corona, for example, which we were still suffering from at the beginning of 2022. The biggest challenge, however, is to manage the situation in Germany. Because of African swine fever (ASF), we cannot export to third countries from there. This may affect Vion the most of all slaughterhouses, given that our activities there are strongly focused on export. In addition, animal numbers in Germany are declining and we are struggling with overcapacity. We knew that the herd would shrink, although we did not expect this speed." Klimp adds: We anticipate this with various factory closures. This brings the capacity back in line with the animal numbers."

You mainly look for the causes in external factors. To what extent are things going wrong internally?
Klimp: "Things can of course also be improved internally, but we are working on that. Our approach to the German market, for example, is much too fragmented and therefore inefficient. We will organize this differently by presenting ourselves as one Vion in Germany."

Is divesting the loss-making German branch also an option, or is that too easy? After all, you once also left England when things went against you…
Lotgerink: "You cannot compare the situation in Germany with England. Our German activities were running fine until a few years ago, but the export boycott weighs heavily. There is perspective on this point, because access to South Korea will soon reopen We have traditionally had good contacts there. The Chinese market could also reopen. With our restructuring program we have now taken the pain, that is better than muddling through. However, the money will not pour out for the time being, we have to be realistic We are certainly not writing off the German market. Of all the major slaughterhouses, we are the only ones with a regional orientation, which offers opportunities. We are at the forefront with our chain approach, which is also successful in the Netherlands. This will pay off in the long term Sales in Germany are largely via discounters, much more than in the Netherlands These parties traditionally shop at the cheapest slaughterhouse, but discounters are increasingly looking for regular suppliers to guarantee sustainability and animal welfare aspects. It is not possible to control animal welfare via a pork tenderloin, but only via the animal. You can only organize this in a chain."

In the world of football, when results deteriorate, the trainer is often very upset. You have been CEO at Vion for five years; has the sacred fire not yet been extinguished by the adverse wind?
Lotgerink hurry up and say with conviction: "Of course not, what do you think. I'm in a great position here and expect to get Vion back on top. We have a super team, I really want to emphasize that. I've been in the meat world for over 30 years and have already experienced the necessary bumps. We will also take this bump. How do they say it again: "What doesn't kill you makes you stronger". That's how I see it." Klimp adds: "When I started here in 2021, I knew it wasn't going to be easy. This motivates me even more to get the result back on track.”

The first half of 2023 is almost over. Do the results already show improvement?
Klimp: "Our solvency and cash position are still good, let me put that first. The restructuring plan aims to achieve a result improvement of €2025 million by 150. Two-thirds of this is cost reduction, the rest must come from the market. This is a challenging plan, but we are ahead of schedule.” When asked whether black figures are already within reach, Lotgerink says: "I am not pessimistic on that point. The wind has been against us in recent years, but under normal economic conditions the tide can turn again. Pork has a low CO2 footprint. That is positive. In addition, wages are often compensated for inflation, which also offers perspective."

Speaking of inflation; are the current high carcass prices the new reality?
Lotgerink: "Of course I don't have a crystal ball, but I expect that prices will indeed be structurally higher. However, we should not lose sight of the situation on the world market. Europe is heavily overpriced compared to Brazil, the United States and China. You often see that world market prices balance out again in the long term."

We have already extensively discussed the shrinking animal numbers in Germany, but how do you actually see this developing in the Dutch home market?
Lotgerink: "The contraction is more gradual here than in Germany, but we are monitoring it closely. If there is reason to do so, we will anticipate this. The sector is in transition, with an aging population. In terms of pig slaughter, we foresee a contraction of around 10%. For cattle, this percentage will probably be slightly higher."

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.