ForFarmers reports ‘disappointing’ H1 results: ‘Fierce battle between feed producers for market share’
Commenting last Friday [August 13] on the latest performance data, ForFarmers CEO, Yoram Knoop, said the battle between feed producers for market share was fierce, with such competition resulting in significant margin pressure. And he noted the dire liquidity status of its farmer customers.
“The prolonged COVID-19 measures delayed price recovery for their products, whilst at the same time feed prices rose as a result of the sharp increase in raw material prices.
“In addition, we lost around €4m in our underlying EBITDA due to the incident in Germany where we had priced a number of contracts wrongly, as reported in our Q1 trading update.”
Compound feed volumes
Volumes increased by 1.9% to 4.9 million tons compared to the first half of 2020 as a result of the acquisition of poultry feed producer, De Hoop Mengvoeders, and equine feed manufacturer, Mühldorfer Pferdefutter, both at the beginning of this year. Like-for-like, though, volumes declined just a little, acknowledged Knoop.
The volume of compound feed rose by 2.2% to 3.5 million tons, not only through the two acquisitions, but also through organic growth in the Germany and Poland cluster. Organic growth declined in the clusters Netherlands/Belgium and the UK, reported the feed group.
“How long the current margin pressure will continue, largely depends on the diligence of the sector in fully passing on the rapidly increased costs of mainly raw materials and energy, to customers. Against this backdrop, we expect the underlying EBITDA in the second half-year 2021 (including acquisitions) to be more or less in line with the underlying EBITDA in 2H 2020,” said the CEO.
Meanwhile, Knoop said that the integration of the recently acquired businesses is progressing according to plan, and the results achieved so far have been “better than expected.”
Meat consumption trends
In terms of the ruminant sector, the company sees European dairy and meat consumption stabilizing, while consumption worldwide will continue to increase.
Looking at the pig sector, ForFarmers finds that European consumption of pig meat is slowly declining. It forecasts that the number of pigs is likely to grow in UK but will decrease in the Netherlands and Germany. It expects lower imports by China in the second half of 2021.
In terms of the outlook for poultry, it sees consumption, generally, continuing to increase, but with greater demand from consumers for products based on higher animal welfare standards.
