ForFarmers holds off on financial outlook for Q4 given ‘unpredictable’ energy prices

By Jane Byrne contact

- Last updated on GMT

© GettyImages/Aajan
© GettyImages/Aajan

Related tags: Sustainability, energy prices, eggs, broilers, Pig

ForFarmers says it is still focused on growth through M&A activity, but its latest trading update noted ongoing market challenges.

The significant increases in gas, electricity and diesel costs could not entirely be passed on to customers, it said. Consequently, the Dutch compound feed producer reported that underlying EBITDA declined by 22% in the third quarter of 2021.

How energy prices will develop is unpredictable, stressed CEO, Yoram Knoop.

“We therefore refrain from providing an outlook for the results in the fourth quarter of 2021.”

The company’s Total Feed volume fell by 1.4% in Q3 2021. Compound feed volumes were up, by 1%, however. That increase was due to a like-for-like volume growth in Germany/Poland and the acquisitions of De Hoop Mengvoeders and Mühldorfer Pferdefutter, said the manufacturer .

Like-for-like volume development in the Netherlands remained “under pressure​” due to a smaller animal herd.

“The two acquisitions that we made at the beginning of the year and our Polish activities realized good results. Our gross profit rose accordingly. During this quarter, we also made progress with structural cost savings as part of our efficiency program,”​ said Knoop.

Underlying total operating expenses increased in the quarter as well.

Efficiency program on track 

“Further and faster implementation of the strategy Build to Grow, including our efficiency program, has the highest priority. We aim to enhance our positions through M&A, in our home countries but also possibly beyond. The intent is to create a better geographical balance of activities. Within the strategy, and given our strong balance sheet, we are also looking at alternatives for capital allocation,”​ added the chief executive.

In terms of developments in the agricultural sector in Q3, average prices for milk, eggs and broilers continued to rise, said the company, so it was able to pass on higher raw material prices in those sectors, but swine farmers continue to be extremely challenged in terms of earnings.  

Sustainability, disease challenges

The general expectation is that the number of farmed animals in the Netherlands will gradually decline due to environmental measures already implemented and more still to come, said ForFarmers.

The company said it believes the sector can meet sustainability challenges best through innovating, not through culling.

It also flagged the risk that new outbreaks of animal diseases pose for the livestock industry, noting that while African swine fever (ASF) was initially detected only among wild boars in East Germany, it was found in three small pig farms in the Brandenburg state in July; the compound feed producer also noted the recent detection of a case of avian influenza in the Netherlands.

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