ForFarmers financials show mixed start, project positive trend

By Aerin Einstein-Curtis contact

- Last updated on GMT

ForFarmers financials show mixed start, project positive trend

Related tags: Better, Generally accepted accounting principles

Dutch feed company ForFarmers reported mixed results for the first half of 2015 with a drop in net revenue, bump in gross profit and with company officials predicting a higher annual net profit than last year. 

The company released its six month financial report Friday and reported an overall operating result, without incidental items, of €32.6m [$36.5m], an 8.7% jump compared to the first half of 2014, and a gross profit increase of 10.2%, up to €220.1m. The growth is attributed to use of nutritional expertise, an improved product mix and additional specialties. With the inclusion of acquisitions, the total feed volume also increased 3% to 4.5m tons from the same time period in 2014.

However, falling raw material prices helped precipitate revenue decline of 1.2% down to €1.16b for the first six months of 2015, when compared to the same period last year, the company reported. It was partly set-off by currency and acquisition effects.

After taxes, the company profit was €22.9m - an increase of about 21.8% from the same period in 2014, reported the company. The improvement was predominantly a result of the gross profit increase.

“We use our nutritional knowledge and solutions to help customers to achieve better technical and financial results on their farm,”​ said Yoram Knoop, ForFarmers CEO in the report.

“Our product mix consequently changes and we sell more specialties. Partly because of this we were able to realize a solid result in the first half of this year. The gross profit increased by 10.2% due to a combination of like-for-like growth, acquisition and currency effects.”

Closer look at the numbers

The bump in operating results, excluding incidentals, stemmed several factors and all clusters contributed, the company reported. These include use of efficiency improvements and energy savings that offset both labor cost inflation and expense from the One ForFarmers program.

Company solvency did decline slightly from 50.9% in 2014 to 49.2%, the company reported. Additionally, milk prices dropped, having been affected by restriction in Russia and the removal of milk quotas.

However, it saw a boost in working capital from seasonality and currency, it stated. And, the net cash decreased resulting from a dividend payment and the acquisition of Countrywide.

UK sector focus

The ruminant market saw challenges from dropping milk prices, though compound volumes stayed steady through efficient feed solutions and application of nutritional knowledge, the company reported. There was progress in the swine sector.

Investments are planned for a new plant in Exeter with the capacity of 300,000 tons to replace a smaller facility, company officials said. The project is expected to cost more than £10m and take about 18 months.

The Netherlands

There was gross profit development, owing to the improvement in volumes, better use of nutritional information and changes in product mix trending toward specialty products, officials stated.  Focus remains on growing the volume of swine feed and on cooperation with Agrifirm.

Germany and Belgium numbers

The cluster saw gross profit growth attributed to the increase in storage activities and a change in product mix to include more specialty products, the Dutch company said.

What’s next?

“Since 1 June 2015, all business units in all countries have been operating under the name ForFarmers,”​ said Knoop. “This One ForFarmers approach results in better branding in the market; it also stands for a uniform way of working, better use of available knowledge, and consequently a more efficient organization. The introduction of measurable objectives (KPI’s) for several departments has meanwhile resulted in savings.”

Work on the Horizon 2020 strategy also is set to continue, the company added. Current work on the projects includes continuing client segmentation and the establishment of specific marketing groups. The partnership with Nutreco will see a new co-developed piglet range coming out in the coming months.

In the second half of the year, some market conditions are likely to remain difficult and the ruminant and swine sectors are not anticipated to improve short term, said the company. However, a higher net result for the year is expected.

A final decision on the move toward an external listing is set to be made at the general meeting in 2016, though the company has begun preparing for a technical listing on Euronext Amsterdam.

"With the Horizon 2020 strategy and the further professionalized organization we are well positioned,” ​said Knoop. “On this basis we expect, barring unforeseen circumstances, a higher net profit over the whole year 2015 compared to 2014.”

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