ForFarmers 2016 results: Revenue down, volumes up

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ForFarmers said its net revenue for 2016 declined by 6% to €2.1bn last year, with it citing lower raw material prices and the impact of a weaker pound sterling. 

Like-for-like revenue decreased by 3.6% - €81.7m ($86.8m) - because of on average lower raw material prices than in 2015, and a change in the product mix - compound feed versus co-products, said the Dutch group.

“The change in product mix can largely be explained by the fact that more co-products were sold. This is partly due to slightly more home-mixing as farms tend to become larger and … in the UK customers buy more lower-value feed products due to lower prices for their products.”

Its gross profit decreased overall in 2016 by €16.8m (-4.%). But in the 'clusters' of the Netherlands and Germany/Belgium, it said gross profit increased (y-o-y) by 6% and 5.8%, respectively, due to higher volumes, optimal use of ingredients in feed, and the positive contribution of strategic partnerships. Gross profit in the UK, excluding the currency impact, decreased by 8.9%.

Yoram Knoop, CEO of ForFarmers, said, due to effective efficiency control measures, the decrease of the underlying EBITDA in the UK was limited.

The group reported its underlying earnings before interest, taxes, depreciation, and amortization (EBITDA) jumped by 3.5% to €93.6m and it said this was due to its cost efficiency program and acquisitions, noting the increase was partly off-set by currency impact.  

Job losses

With 2,273 employees recorded in December 2016, there were 97 fewer full-time staff members in the ForFarmers group than in the same period in 2015.

The company said that 4% dip was the result of the net effect of natural outflow and the reorganization in the UK, as well as the net effect of acquisitions and the divestments but also due to the strengthening of the commercial team in Germany and the Netherlands.

The company is aiming to optimise the supply chain in the UK and that, over time to 2020, should lead to some GBP £5m savings compared to the cost level of 2016, said Caroline Vogelzang, director of investor relations and communications at ForFarmers. Whether that means further job losses in that market she told us: "We are looking at ways of working more efficiently and are looking at all elements in that equation." 

The company is aiming to invest millions in 2017 and in 2018 in operational efficiency projects that it said should lead to a further improvement of the underlying EBITDA/gross profit ratio:

"Our capex of approximately €40m to €45m in the coming two years is for refurbishments in existing factories on the Continent, and logistics improvements throughout the group. The surplus of around €10m - the €10m more than the previously announced €35m capex - is for the optimisation project of the supply chain in the UK," said Vogelzang. 

Feed volumes in 2016

The company noted last year was a challenging one for farmers, particularly in the UK.

The group’s total feed volume sold in 2016 increased 2.5% to 9.3m tons, driven by growth in the Netherlands, and Germany/Belgium. 

Those two ‘clusters’ recorded growth rates in reported total feed volume of 5.9% and 4.4% respectively.

However, compound feed sales in all its markets was flat.

The UK had a volume decrease of 3.3% last year, which the Dutch company said was mainly due to the ruminant sector and the impact of low milk prices.

However, ForFarmers recorded an increase in the ruminant segment overall because of volume growth in the Netherlands, and Germany/Belgium, which it said more than offset the decline in the UK.

The reduction in the pig sow herd in the UK, which took place in the first half of the year, resulted in a dip in feed volumes, particularly in the second half of the year, it added.

However, ForFarmers saw a hike in the compound feed volume sold to the Dutch swine sector, which it said is fully attributable to Vleuten-Steijn – a feed maker ForFarmers acquired in October 2016.

All markets reported growth in compound feed volume in the poultry sector: “This reflects the combination of significant growth of volume sold to layer farmers and a decline of volume sold to broiler farmers. There were less broilers due to the increase of welfare concepts (fewer animals per m2),” said the group.


Knoop said the group expects geopolitical developments to continue to influence the markets in 2017.

“Furthermore, the volatility in raw material prices and on the currency markets is expected to continue, whereby the changes in the valuation of the pound sterling in particular affect our consolidated results.

“The dairy market, however, is improving somewhat, the swine sector is benefitting from the better prices and the market for poultry appears to remain stable in 2017," added the CEO.

The group said it anticipates ongoing demand from China for pig meat imports, and in the UK, it forecast that, in the medium term, the pig herd size would grow as a reaction to the devaluation of sterling.

Phosphate regulation

In the Netherlands, ForFarmers said it expects the phosphate regulation will put some pressure on the dairy sector with the Dutch government to introduce phosphate rights in 2018.

In order to reduce phosphate levels this year, the Dutch dairy chain - dairy industry, feed companies, consultancy organizations and the government - this month decided to collaborate to ensure a joint approach to phosphate reduction. "It is expected that this will result in, among other things, a limited reduction in herd size over the course of the year," said ForFarmers.

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