The analyst view: Core divisions at Nutreco performed better than expected

By Jane Byrne contact

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The analyst view: Core divisions at Nutreco performed better than expected
The fish feed segment of Dutch group, Nutreco, proved resilient in the second half of the year despite Marine Harvest’s own feed plant coming on stream, concludes a leading equity analyst.

“The challenges for Nutreco in the Norwegian salmon market were somewhat alleviated by the solid growth for non-salmon feed, particularly in the shrimp sector in Ecuador, which is an encouraging development,”​ said ABN AMRO’s Maarten Bakker.

Nutreco, in reporting full year results, said that earnings before interest, taxes and amortization (EBITA) for its fish feed division were 2.8% higher at €134.3 million compared to €130.6m for 2013, and it cited good performances in Egypt, Vietnam and Japan as well as Ecuador.

However it noted the EBITA margin for the unit dropped slightly – 6.3% against 6.5% in 2013.

The Iberian operations had a tough second half of the year due to lower poultry prices in that market, notes Bakker.  Those operations recorded an EBITA of €34.9m – a decline of 14% from last year’s €40.6m.

Hike in animal nutrition volumes

But the EBITA margin for animal nutrition was at 6.8% - jumping 0.6% from the year previous.  Earnings were up by 12% here to €125m.

“Volumes for this segment accelerated as the year played out. This performance was fuelled by an improvement in Nutreco’s product portfolio mix. And one can see the company’s investment in higher margin products coupled with its early animal nutrition focus is paying off, particularly in Europe where the reduction in the use of antibiotics is proving a favorable trend for Nutreco,”​ Bakker told us.

The group posted overall revenue of €5,253m – a hike of 3% on 2013’s €5,237.2m.

Acquisitions including Gisis in Ecuador, Hendrix Misr in Egypt, Skretting Nigeria and Fatec and BRNova in Brazil contributed 1.6% to revenues, said Nutreco.

The foreign exchange impact on EBITA, before exceptional items, was reported as €-5.0m and mainly related to the Canadian dollar and the Norwegian krone over the full year but Nutreco said there was a mitigating effect from the impact of the weaker euro against all currencies in the last quarter.

SHV acquisition

“So good results for most divisions​,” says Bakker. “But for investors the real interest is the pending acquisition of Nutreco by SHV.”

He reckons the takeover by the Dutch family investment firm is "a done deal" ​at this stage.

“SHV has secured 28% of the shares in Nutreco and, as of last week, obtained the commitment of some of the biggest shareholders in the group – AGP and NN Group,” ​added the analyst.

An EGM of shareholders is set for Monday next, 9 February, to discuss the SHV offer for the feed producer, which was bumped up to €45.25 ($51) per ordinary share on 30 January, valuing the company at €3.18 billion ($3.60bn).

Young animal feed

Meanwhile, Nutreco said its innovation agenda has made “significant progress”​ this year in the areas of young animal feed for swine and for ruminants, animal health products, feed additives and shrimp feed.

The animal and fish feed maker said results from field trials in Ecuador, Vietnam and Brazil on its MicroBalance concept for shrimp feed show significant success in reducing fishmeal inclusion rates to 15%.

"The 15% is not the end goal, obviously we will continue to work to bring the inclusion rate further down to the 5% we currently have in our flexible feed formulations for salmon.”

Strategic partnerships

In the fourth quarter of 2014, Nutreco renewed its strategic partnership with European compound feed producer ForFarmers for the purchase of premixes, feed additives and specialties as well as collaboration on research and innovation, particularly in the area of young animal feed. 

“Strategic partnerships are more important to us than ever and we obviously have plans in that area. We aim to develop additional alliances in areas such as ingredient sourcing, product development and knowledge,”​ said the spokesperson. 

In terms of global investment plans, Nutreco has ploughed €15m into the construction of new premix facilities in Indonesia and Vietnam as well as the remodeling of its Chinese premix facility. 

“The Vietnamese plant is already operational - the plants in Indonesia and China will be operational in the first quarter of 2015,”​ said the Nutreco representative. 

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