'No surprise divestment process halted' - analyst says there was limited interest in Nutreco's Iberian units

“Perhaps, they should have got more of a feel for the market before announcing they were selling the Spanish and Portuguese compound feed and meat units,” ​said Maarten Bakker, analyst at Dutch bank ABN Amro.

He told us he was not that surprised the divestment process, which started in February this year, was halted.

“There has been limited interest in those assets but it’s a real shame for Nutreco. ​

A sale of those low growth operations this year would have allowed it to concentrate on its higher margin generating animal nutrition and fish feed segments,” ​said Bakker.

A ‘fair valuation’ not obtained ​

Yesterday, the Dutch feed giant said that a thorough process was undertaken, and negotiations took place with several interested parties:

“As these discussions developed, it became clear that no fair valuation could be obtained at the current time. ​

In the best interests of Nutreco's shareholders and in order to bring certainty to its employees, customers and other stakeholders, the divestment process has been halted."​

Bakker said the sale was also complicated by the fact the Iberian feed and meet companies are so intertwined.

“I was talking to a large Dutch feed compounder who was hoping to acquire the feed operations but it was not given the opportunity to buy them as a standalone business so it walked away.​

Nutreco will try to exit these businesses eventually. It will just take a little longer than they initially thought,”​ said the analyst.

Well managed, cash generative businesses ​

A communications spokesperson for Nutreco told feednavigator.com the feed giant was not prepared to sell the Iberian meat and feed units piecemeal in order to guarantee a sale.

“These [Iberian] businesses are well-managed, combine market leadership with operational excellence and are cash generative,”​ said the Dutch group.

They comprise poultry meat producer Sada, which is said to have a 26% share of the Spanish poultry meat market, the Nanta compound feed business in Spain and Portugal, which, reportedly, has 13% feed sector penetration, and Inga Food, which operates pig farming and trading activities in Spain.

Iberian operations an ‘odd fit’​

Nutreco acquired the Spanish and Portuguese operations from Cargill in 2009 but they had been under review since July last year.

They were always an “odd fit”​ in the Dutch feed group's portfolio, said Bakker, when commenting previously on the divestment of the Iberian units.

He said the Netherlands-headquartered firm bought up such assets in a bid to have full control over the value chain.

But it soon became apparent, said the analyst, such a strategy was resulting in a capital drain and also serious volatility in earnings given those sectors’ heavy reliance on commodities.

Outlook for 2014 reconfirmed ​

Meanwhile, Nutreco has reconfirmed its outlook for the first half of 2014, which, it says, will now include the results of the Iberian business unit.

It expects the operating result for its animal nutrition business to be slightly higher than last year, which for the first half of 2013 hit the €56.9 million ($77m) mark.

The result for the fish feed business is also set to go higher than the €35.1m seen for the first half of 2013, said the company.

And Nutreco estimates a higher return for its compound feed and meat operations in Iberia which came in at €13.8m for H1 2013.