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A year of two sides

There were two sides to 2018. In the first half of the year we achieved a solid improvement in the result compared to the first half of 2017. In the second half of 2018 we made four great acquisitions, as a result of which we are now active in five countries and have further increased our sales opportunities in the expanding poultry sector. Moreover we became the first European Total Feed company to sell more than 10 million tonnes of feed in a year. Apart from these positive developments, however, in the autumn of 2018 we also came up against the effects of the exceptionally hot and dry summer months, putting pressure on our results.

For 2018 as a whole our Total Feed approach, which is aimed at helping farmers achieve better on-farm returns with healthy animals, once again proved successful. Amid tough market conditions we succeeded in attracting new customers and achieving further growth among existing customers.

How we create value in changing markets

As the leading livestock feed company in Europe and adjacent regions (Europe+) we want to build scale, through organic growth as well as acquisitions, which we can use to benefit the broader agricultural sector, as set out in our mission For the Future of Farming.
In light of meeting the climate targets the European agricultural sector is being put under growing pressure. Furthermore quality and provenance of food is increasingly important to consumers. Consumers in Western Europe are moreover being told more and more often that it would be good to eat less meat. Despite this, research suggests that per capita consumption of meat does not (yet) fall. Livestock farmers are however subject to an increasing number of legal and other requirements in terms of the environment and animal health and welfare. This leads to additional on-farm investments and hence continuing consolidation among farming businesses.
Considering these trends, we continuously adapt our Total Feed-approach, comprising innovative products, advice and data driven tools. By doing so we create value for livestock farmers in a changing environment by enabling them to update and achieve their business objectives.

Growth through acquisitions

We are particularly pleased to have been successful in making four acquisitions in 2018. In July we acquired a 60% stake in Tasomix, one of the most advanced feed companies in the growing Polish poultry sector. In Belgium we acquired Voeders Algoet in a move that made us the second-largest feed producer on the local market. And we made two acquisitions in the Netherlands: Van Gorp Biologische Voeders to further expand our position in the organic sector, and Maatman in the poultry sector. This has resulted in a more balanced portfolio across the species, with sales volumes now more or less equally divided among the ruminant, swine and poultry sectors.

Sustainable business

We are well aware of our position in the food and feed chain. We are therefore constantly working to further reinforce our sustainability agenda and have defined five key performance indicators (KPIs), which were assessed by our external auditor for the first time this year.
These KPI’s and other important initiatives are consistent with our vision of contributing to a circular society, in which the agricultural sector has a long-term role to play. Our contribution is our commitment to reducing the on-farm carbon footprint. We focus on constantly improving animals’ feed efficiency under the slogan ‘more (protein production) with less (feed)’. In addition we are increasingly using residual flows from the human food industry, adding these co-products to compound feed or supplying them directly to livestock farmers. Finally, we also took part in a manure-processing project in the Netherlands in 2018.

Scientific research has shown that the Dutch agricultural sector has the smallest relative CO₂ footprint in the world. Our specialists apply this knowledge and experience at all our customers in all our countries of operation. The continued production of agricultural products in Western Europe therefore remains of crucial importance to feeding the growing global population.

The health and safety of our employees is very important to us, at our own locations, on the road and on-farm at our customers. The number of Lost Time Incidents (LTI's) – accidents at work resulting in at least one day’s absence from work – rose during the past year and we were not successful enough in raising safety awareness. We must and shall take further steps in this regard.

Our team and governance

By investing a lot of time, money and attention in internal training courses and facilitating the sharing of knowledge and experience within the organisation we create a culture based on teamwork and permanent education. This is one of the reasons we have been increasingly successful in attracting and retaining young, ambitious talents.
There were a number of changes to our Executive Committee team in 2018, with our colleague Steven Read taking office as COO of ForFarmers in the United Kingdom at the beginning of the year and Arthur van Och joining our Executive Committee team as the new Supply Chain Director. The broad knowledge and experience he gained at other companies are key to our supply chain optimisation plans.
At the end of 2018 our colleague Jan Potijk announced that after 36 very enjoyable years of working at ForFarmers he will step down during the Annual General Meeting of Shareholders in April 2019. Jan has been hugely important to ForFarmers. He was involved in the early stages of many strategic decisions, whereby he always put the farmer’s interests first. On behalf of the entire Executive Committee team I want to take this opportunity to express thanks to Jan for his exceptionally great contribution to the development of ForFarmers. I am proud that Pieter Wolleswinkel and David Fousert, both from our own organisation, joined the Executive Committee team with effect from 1 January 2019, as COO of ForFarmers Nederland and COO of Reudink, Pavo and ForFarmers Belgium, respectively.
Besides changes in our Executive Committee team there were also changes to the composition of the Supervisory Board. Following the resignation of Jan Eggink, Roger Gerritzen was appointed as a member and Cees de Jong as Chairman of the Supervisory Board.
The Executive Committee and Supervisory Board once again cooperated well in 2018, working together to discuss both the current and future course of our organisation.

Results show a mixed picture

As stated previously our results for 2018 show a mixed picture. We took some strategic steps, for example with the acquisition of four companies and by extending our collaboration with Nutreco. However, the exceptionally hot and dry summer months led to greater volatility in the raw materials markets, additional logistical and other challenges and higher costs. Moreover the Dutch dairy herd shrank as a result of the national phosphate measures, putting pressure on volume and margin growth in the Netherlands. Also, energy and transport costs rose in 2018. The like-for-like improvements of the results in Germany, Belgium and the United Kingdom could not compensate the decline of the results in the Netherlands. All in all this resulted in an underlying EBITDA of €100.1 million, slightly lower than the figure in the record year 2017 (€101.4 million).

Taking into consideration the 2018 results and mindful of the challenging market circumstances, we consider it wise to reduce the organisation’s cost base over the next two years by implementing extra group-wide efficiency plans. This will involve closing a number of factories and reducing our headcount.
At the same time we will continue to invest in further efficiency efforts in our supply chain and in the introduction of innovative (digital) concepts and processes to bring our customer service to an even higher level.

Looking back on 2018 we proved that we provide great concepts and advice for our customers by attracting new customers amid difficult market conditions. Our employees are dedicating a lot of effort and commitment to this every day. In addition the integration of four acquisitions and a divestment required a great deal of effort. I want to thank them for this, on behalf of myself and my fellow Executive Committee members. I would also like to express my appreciation to our customers, shareholders, suppliers and other stakeholders for putting their trust in us. Together with all the colleagues at ForFarmers we work hard every day to deliver on that trust.

Lochem, 12 March 2019

Yoram Knoop
CEO of ForFarmers N.V.