ForFarmers operates in the chain that seeks to sustainably meet the growing demand for food, in particular animal proteins such as meat, egg and dairy products. This growing demand is a direct consequence of global population growth and increasing prosperity. Many of the animal proteins produced in Europe are exported to countries where production methods are less efficient, for example because of the climate. This is putting growing social pressure on the agricultural sector in Europe because of concerns about the carbon footprint of livestock farming locally and beyond. 

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There is also growing consumer interest in food quality and provenance. Livestock farmers increasingly need to comply with rules, legislation and measures which are directly or indirectly related to for example the Paris climate targets. This usually means having to make more investments. The result is that farming businesses are consolidating to create scale in order to be able to achieve healthy returns. ForFarmers provides innovative feed concepts, advice and tools to give livestock farmers an efficient way of improving their on-farm returns, with healthy animals and attention for animal welfare. This fits seamlessly with ‘For the Future of Farming’, the ForFarmers mission aimed at contributing to better continuity of the farming business, a healthy agricultural sector and a sustainable society.

Pillars of Horizon 2020 strategy

ForFarmers seeks to shape its mission and create value with its Horizon 2020 strategy, which is based on four pillars:

1. Focus on attractive segments

ForFarmers gears its nutritional knowledge and its range of products and services to the size and stage of development of its customers’ businesses. Large farming businesses with many employees and companies that use milk robots and other state-of-the-art technologies need different products and advice than small companies or companies that focus on a niche market, such as organic dairy products. To enable to provide these different groups of customers with the best possible service, customer segmentation (using a customer relationship management (CRM) system) is a prominent feature of ForFarmers’ market approach, and has been implemented in all the operating countries (except Poland), with teams that concentrate on a particular segment. The CRM system also records which products are purchased by individual customers, and for which stage of the animal’s life. This provides insight into how and with which products ForFarmers can deliver a tailored Total Feed solution to the livestock farmer and increase its ‘share of stomach’ with the customer's livestock. In 2018 ForFarmers further sharpened its focus on organic livestock farmers with the acquisition of Van Gorp Biologische Voeders and the announcement of the acquisition of a small organic feed company in the United Kingdom. 

2. Work with partners to provide a Total Feed portfolio

ForFarmers wants to create long-term value with the Total Feed approach: delivering innovative solutions to livestock farmers that meet their individual needs, specific business objectives and feed systems. The products, advice and tools used in doing so together form the Total Feed portfolio. For a number of products that it does not manufacture itself ForFarmers has chosen to form strategic partnerships with parties that are able to make a key contribution to the Total Feed approach. This is the case for example with the international partnership with Nutreco, which was formed 2014 and extended for five years in 2018. Under this partnership, micro ingredients and specialties such as calf milk replacer formulas are purchased from Nutreco wherever possible, allowing major economies of scale and quality controls to be

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realised. The company has also joined forces with Nutreco in the area of research, resulting in new feed concepts such as VIDA and NOVA for the pig sector.
In addition ForFarmers has formed more local partnerships with a number of parties with a view to expanding the Total Feed portfolio. During the year under review a new strategic partnership was formed between ForFarmers Netherlands and Baks under which ForFarmers Netherlands will handle the sales activities relating to moist feed for the pig sector (specifically whey products), while Baks Logistiek will handle the logistical activities relating to this product flow. Whey products are an example of co-products derived from residual flows from human food production. The use of residual flows is consistent with the ForFarmers sustainability policy aimed at the circular use of raw materials.

3. Acquisitions

ForFarmers aspires to a number one or two position in the regions where it is active. It aims to achieve this through both organic growth and acquisitions while seeking the best possible result for all stakeholders. In terms of logistics it is not only scale that is important to feed companies but also proximity: the closer the factory is to the customer the greater the efficiency thanks to lower logistical costs. The agricultural sector is furthermore characterised by great loyalty between the customer and their feed company, mainly because of the relationship between the advisers who visit the farms and the customer. Making appropriate acquisitions offers a good perspective for growth in this context.
In terms of acquisition opportunities ForFarmers focuses primarily on the five core countries (the Netherlands, Germany, Belgium, Poland and the United Kingdom) in light of the generally good synergy opportunities that present themselves here in the areas of logistics, production, purchasing, formulation and overheads. In addition ForFarmers also looks at opportunities in new markets within or adjacent to Europe (Europe+). The first condition that a market has to meet is to have enough animals. In order to get a clear picture of potential takeover candidates and ensure an effective and efficient acquisition process ForFarmers has a Mergers & Acquisitions team that works closely with the Executive Committee and the business unit managers of the clusters.

During the year under review ForFarmers acquired 60% of the shares in Polish company Tasomix. Following this transaction ForFarmers is now active in five countries and has a stronger position in the growing European poultry sector (for broiler farming in particular). The management of Tasomix has remained in place, allowing maximum leverage of both companies’ strengths. Further acquisitions in the course of the reporting year included Voeders Algoet in Belgium and Maatman and Van Gorp Biologische Voeders in the Netherlands, all of which have been integrated in the local organisations. During the year under review ForFarmers also announced the acquisition of a small organic feed company in the United Kingdom.

4. One ForFarmers: professionalisation and leveraging economies of scale

The One ForFarmers approach is aimed at professionalising processes, leveraging best practices across the group and optimising cost efficiency. This is achieved through internal knowledge sharing, further professionalisation of the organisation, clear working practices and optimum leverage of economies of scale. This approach is possible thanks to the matrix organisational structure, under which central departments provide support to the country organisations. For example ForFarmers has three dedicated marketing teams, focusing on the ruminant, pig and poultry sectors respectively, which devise marketing strategies and implementation plans which are then applied at a local level. The marketing organisations work in close cooperation with specialists from our centrally organised Nutrition Innovation Centre (NIC) and the local on-farm advisers. ForFarmers has set up specie-specific Academies (ruminants, pigs and poultry) to optimise the sharing and leveraging of internal knowledge so that it can be used for the customers’ benefit.

The following steps were taken during the year under review:

• The two ruminant sales teams in the United Kingdom were merged to create a single commercial organisation to enable a uniform approach to the market.
  
  

• As from the beginning of 2018 all employees were linked up to the Workday HR system, which was implemented in 2017. This has optimised the management and implementation of HR processes.
  
  

• The integration of activities and employees at the financial shared service centre (FSSC) in the Netherlands was completed during the year under review after the continental financial back office activities (excluding those in Poland) were centralised at the FSSC. In addition many administrative processes were harmonised.
  
  

• 2018 saw the Total Feed Support (TFS) team in the Netherlands reach full strength. The TFS team, which was set up in 2017, makes intensive use of the CRM system, which provides a clear picture of what and how much each customer purchases from ForFarmers. The TFS team provides specie-specific support to customers as well as supporting the sales teams and advisers. Customers now have a one-stop shop where they can go for advice and support by phone. The TFS department is also responsible for selling DML products as part of the Total Feed portfolio.

Horizon 2020 deliverables

ForFarmers is able to strengthen its position in the chain through the implementation of the Horizon 2020 strategy. This is done by continuously focusing on people development and delivering innovative Total Feed solutions to customers. This should lead to results belonging to the best in the industry.

Employees: personal development

ForFarmers invests in the professional and personal development of its employees, providing them with more opportunities and growth potential. In 2018 a large number of employees once again took part in both management and professional training courses. A detailed description can be found in the Human Resources section.
In May 2018 the senior management (the ForFarmers top 50) travelled to Poland to meet the new colleagues at Tasomix. The visit was considered valuable by all concerned.

Customers: Total Feed solutions

ForFarmers uses the Total Feed approach to provide integrated solutions comprising feed and other products, along with advice and tools to define customers’ business objectives and monitor their results. This approach allows ForFarmers to coordinate products and advice throughout the on-farm production cycle. This provides the customer with an all-round solution appropriate to their feed system and business situation. ForFarmers maintains an ongoing dialogue with its customers both on-farm and via for example sounding board groups and conferences to understand their changing needs and requirements.

These insights are used to develop new concepts and tools. The following are examples of all-round and other solutions:

• In 2018 ForFarmers introduced the Agroscoop data management system in the swine sector in the United Kingdom. Agroscoop gives livestock farmers insight into the key technical and economic figures relating to their business. Pig farmers, assisted by the ForFarmers advisers, can use the system to optimise their business. In the Netherlands it is commonplace for farmers to make data available for advisory purposes and many ForFarmers customers here already use Agroscoop. The knowledge and experience already gained in this field, mainly in the Netherlands but also in Germany and Belgium, will also be used to work with partners to build a data system for the sector in the United Kingdom.
  
  

• Apollo, a new feed concept for broilers, was introduced in the poultry sector in the Netherlands, Germany and the United Kingdom. The pre-start concept, aimed at healthy and efficient growth of broilers, is designed for the first 100 hours of the broiler’s life and also ensures a better feed conversion. This approach is consistent with the ForFarmers mission to increase livestock farmers’ returns as well as with its sustainability target to improve feed conversion to limit the use of scarce raw materials. The Apollo concept was ready for launch after an intensive R&D process by the ForFarmers Nutrition Innovation Centre, along with extensive testing at broiler farms in Northwest Europe.
  
  

• In a pilot conducted in the Netherlands ForFarmers installed 12 feeding stations with built-in scales to collect data such as feed intake combined with the weight of finishing pigs. This will provide an insight into the feed conversion of both the individual animals and per sty. ForFarmers will use this information in its advice to pig farmers. The feeding station recognises the individual pigs by their ear tags with built-in chips.
  
  

• ForFarmers also introduced Pens Stimulator+, a new product that stimulates the health of both the rumen and the intestine of dairy cows, resulting in healthier animals that process forage more efficiently. This means more milk from forage and hence a higher milk production, enabling additional feed profits of an average of €45 per cow per year to be realised. The product also results in healthier cows and better use of forage and is consistent with the sustainability topic Animal health and welfare. The ForFarmers NIC conducted tests with Pens Stimulator+ at practice firms in 2018.
  
  

• In the Netherlands ForFarmers started working on a blockchain pilot project with agritech company AgOS in the Frievar pig chain. A blockchain is a digital chain that enables partners to share real-time information, in this case about the production process and transactions, in order to provide a picture of the entire pig chain and improve the process across the chain. Ultimately this will help safeguard higher quality and better food safety.

Profitability among the best in the sector

Underlying EBITDA in 2018 equalled €100.1 million, 1.3% lower than in 2017. At constant currencies the decline was 1.0%. Gross profit rose by 5.6% to €443.4 million. As a result the underlying EBITDA/gross profit ratio in 2018 decreased to 22.6% from 24.2% in 2017. The underlying profit per share was €0.58, equal to in 2017. The dividend proposal over 2018 is €0.283 per ordinary share (based on 100.2 million shares outstanding) and a special dividend of €0.017 per ordinary share. This would put the total dividend per share at €0.30 (2017: €0.30).
Based on the closing share price of €8.05 at year end 2018, this equates to a dividend yield of 3.7%.

Horizon 2020 in perspective: an analysis of ForFarmers and its markets

ForFarmers’ Horizon 2020 strategy focuses on long-term value creation, primarily for livestock farmers, employees, shareholders and other stakeholders. ForFarmers considers it important to be able to respond to market developments in a timely and appropriate way. Stakeholder dialogue is crucial in this respect. Internal analyses are also important, to identify our organisation’s strengths and weaknesses as well as opportunities and threats in the market (SWOT analysis).

The SWOT analysis is shown below:

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