The UK arm of international agricultural feed firm ForFarmers UK has announced profits fell by more than two-thirds in 2019.
ForFarmers’s latest trading statement showed net profit in the UK fell by 69.8% to €17.7 million in 2019. The trading update also showed that the firm’s Dutch parent company had imposed a €25.6 million goodwill impairment fee due to in the UK.
‘A difficult and turbulent year’
The headline figures from the firm’s 2019 results include a 0.7% increase in total feed volume to 10.1 million tonnes, despite a like-for-like decline (-2.9%), especially in the second half of 2019, when volumes fell by 4%.
Compound feed volume increased by 1.9% to 7.1 million tonnes; but like-for-like declined by 3.2%, especially in the second half of the year.
Gross profit fell 0.6% to €440.7 million; despite further volume decline, a recovery was made in the second half of the year.
The trading statement explained that the first half of the year was hit due to “the impact of an unfavourable purchasing position” as well as volume decline.
The proposal was made to pay a total of €0.28 per ordinary share (regular dividend of €0.19 and a special dividend of €0.09)
Working capital improved by 36.2% to €48.7 million due to operational improvements and net cash flow from operating activities rose 17.1% to €96 million.
ForFarmers chief executive Yoram Knoop said: “2019 was a difficult and turbulent year for us. We were faced with the consequences of an unfavourable purchasing position as a result of which the first-half 2019 result was severely put under pressure.
“We have since further tightened our purchasing procedure in order to minimise the chance of such a risk recurring.
In the second half of 2019, we realised better results despite further like-for-like volume decline due to challenging market circumstances in all countries except for Poland.
“This was, among other things, due to the implementation of our efficiency plans, which included the closure of five mills.
“We are well on track with the realisation of the earlier announced €10 million cost-saving in 2021 (compared to 2018).
The integration of the four companies which we acquired in 2018 has been completed. Our market positions have been strengthened through these acquisitions.
“We are pleased Tasomix’s volumes are increasing in the growth market Poland. Consequently, our market share in the growing European poultry sector is expanding.
“Volume development in the United Kingdom is slower than anticipated, which is why a goodwill impairment was required.
“Finally, we have improved our operational cash flow through our continuous focus on working capital. In addition, we are pleased to have significantly reduced lost time incidents.”
Changing market conditions
Knoop said there was a “new reality” acting as a base for determining the strategy for the next five years.
“We see market circumstances in which we operate changing rapidly. This is mainly the case in our home market the Netherlands, where, as of the second half of 2019 the political debate about the necessity to reduce nitrogen emissions, is creating an uncertain outlook for livestock farming,” he said.
“Although the Government declared that it was not a goal in itself to reduce livestock numbers, it has become clear that the proposed measures will in due course definitely lead to a small decline in animal numbers.
“As ForFarmers, we support the Agricultural Collective – the group that discusses the necessary measures with the Ministry of Agriculture, Nature and Food quality such as adjustments in feed and technical innovations in barns.
Apart from changing market circumstances, we are also facing animal diseases which are having a large impact on the sector for already some time and are a concern for the livestock farming industry.
“African swine fever has resulted in more export of pig meat and poultry products to China and a sharp rise in pig prices.
“In the meantime, however, the illness has also been detected among wild boars in regions including Poland and close to the German border.
“Poultry farmers are also on the alert because the contagious version of avian flu has been detected among wild birds in Poland. We are monitoring this closely.
“During past years important steps have been made in determining hygiene protocols and in collaboration in the sector to combat the spreading of animal diseases.
These are turbulent times and a new market reality is appearing rapidly.
“By implementing strategy Horizon 2020 in the past years, we have positioned ourselves stronger in four countries and made a successful start in the growth market Poland as fifth country of operation.
“Our market positions and our scale form a solid base from which we can continue to create value for our stakeholders in the current new reality. We will be announcing the strategy for the years 2020-2025 on May 12, 2020.”
