Report of the Supervisory Board
The Supervisory Board (the 'Board’) supervised the steps that the Executive Board has made with the implementation of the Horizon 2020 strategy in the year under review, amongst other with respect to the developments in the agricultural sector. The initiatives taken by ForFarmers in the context of its mission “For the Future of Farming", are focused on efficient, sustainable and profitable business practices for customers, and these contribute to long-term value creation for all stakeholders.
In June 2018, the Board paid a visit to the new ForFarmers feed mill in Exeter (United Kingdom). On that occasion the Board took the opportunity to discuss the transformation and efficiency improvement of the supply chain with the local management team. The presentations made gave the Board a better insight into the improvement actions regarding the supply chain process and the points for attention for the commercial teams per specie. The implementation of the business transformation project has been delayed due to the extra attention that was needed for the improvement of the logistics services and because of the changes in the UK management team. The almost entirely new team endorses the transformation project.
In addition to the visit to United Kingdom the Board, among many other things, contemplated (the integration of) acquisitions and the further development of the organisation in various meetings held during the last year.
The most important subjects that were discussed in the year under review with the Executive Board and the other members of the Executive Committee are described below. To prepare items on the agenda, they were often discussed in advance in a meeting of one of the committees or a meeting of the Board without the presence of the Executive Board or Executive Committee.
Horizon 2020 Strategy
In 2014, the Board was closely involved in the creation of the Horizon 2020 strategy for long-term value creation and gave its approval to this strategy. During the year under review, the Board regularly discussed the implementation and execution of the strategy and the associated risks.
In every regular meeting with the Executive Committee, the Board examined the performance of ForFarmers in the various countries. In May, the Board and the Executive Committee devoted an entire day to various strategic topics. In this context, topics such as the focus on acquisitions, cost control and employee talent development were discussed. Further topics for discussion were the influence of digitalisation, virtual chains, health & safety at the ForFarmers locations, the opportunities and threats posed by Brexit, the possible consequences of animal diseases, the impact of the measures regarding phosphate reduction in the Netherlands and other factors that could potentially disrupt the implementation of the strategy.
The Board also examined the effectiveness of the set up and operation of the internal risk management and control systems. These systems were assessed by the Executive Board during the year under review. The findings, recommendations, and measures arising from the assessment were discussed with the Board. The Board endorses and supports the internal risk management system as described in the section on Risk Management. The Board also supervised the activities of the internal auditor.
The results of the various strategic and production partnerships entered into by ForFarmers in previous years have led, among other things, to the marketing of high-quality nutritional products and the bundling of purchasing power and knowledge. The decision to enter into strategic partnerships has been an effective one. In this light, the collaboration with Nutreco has been extended for five years.
The Board discussed the developments in terms of acquisitions during every meeting. The principle aim of the ForFarmers acquisition strategy continues to be to become a regional leader or second largest player in Europe+ in order to be able to optimise economies of scale. In 2018 ForFarmers took significant steps with regard to acquisitions. ForFarmers has expanded its activities into Poland with Tasomix, a company mainly active in the poultry sector. With the acquisition of 60% of Tasomix shares, ForFarmers is now active in five countries. Furthermore, ForFarmers strengthened its positions in the poultry sector and in organic feed with the acquisitions of Maatman (the Netherlands) and Van Gorp Biologische Voeders (the Netherlands/Belgium). In Belgium, Voeders Algoet was acquired, making ForFarmers the second largest feed company in Belgium. Voeders Algoet is predominantly active in the swine sector. The Board always considered the integration plan for these organisations. This meant, for example, that attention was given to the availability of qualified employees to bring about a proper integration and ensure safety in the acquired mills. The Board is of the opinion that these acquisitions are in line with the organisational culture and strategy of ForFarmers.
The Board is informed by the Executive Board on a regular basis of the organisational developments, in particular regarding the filling of senior management and other relevant positions.
Executive Board and Executive Committee
Within the context of the succession plan, the Board regularly examines the management potential available at senior management level. The Board considers it important that ForFarmers can attract and retain qualified employees at senior management level bearing in mind attention for diversity.
Jan Potijk, a member of the Executive Board, announced at the end of 2018 that he would not be re-eligible for a new term. The Board is pleased that Jan Potijk can be succeeded by Pieter Wolleswinkel and David Fousert, two appointments from within the organisation. With these appointments, the Executive Committee of ForFarmers has increased in size as of 1 January 2019, so that a smooth transition of tasks can take place. Pieter Wolleswinkel is responsible for ForFarmers Nederland and David Fousert for the business units Reudink, Pavo and ForFarmers Belgium.
As of 1 January 2019, the Executive Committee Team is made up of Yoram Knoop, Arnout Traas, Jan Potijk, Stijn Steendijk, Steven Read, Adrie van der Ven, Arthur van Och, Pieter Wolleswinkel and David Fousert.
Jan Potijk will resign as a member of the Executive Board and the Executive Committee Team after the AGM on 26 April 2019.
In 2018, the Board held performance reviews with all members of the Executive Committee, in which two members of the Board always spoke with one member of the Executive Committee. The performance of the Executive Board as a whole was also reviewed. The conclusions from these meetings were discussed in the plenary meeting of the Board. The conclusions were then fed back to the CEO and to the member of the Executive Committee concerned. The Board is of the opinion that the Executive Committee functions well under the leadership of Yoram Knoop as CEO.
The Board has established that none of the members of the Executive Board have more than two commissionerships nor does a member chair a supervisory board of another entity or company as referred to in article 2:132a of the Dutch Civil Code. The Board is not aware of any potentially significant conflicts of interest with the Company among members of the Executive Board.
Safety and employees
During each meeting, the Executive Board informed the Board on the developments of the LTIs. The Board supports the initiatives which are undertaken to improve the safety of the employees. In 2016, ForFarmers conducted an employee engagement survey. As a result of this survey, actions were formulated and in 2017 the progress hereof was assessed. The Executive Board has formulated actions for improvement with regard to how the strategy should be implemented by the employees, workload, attraction and retention of talent, career opportunities, and giving and receiving feedback. Some of the improvement actions have already been implemented. The Executive Board has agreed with the Board that a new limited employee engagement survey will be prepared in 2019, with a focus on development plans for employees and traineeships. The Board continues to stimulate ForFarmers' efforts to achieve a better balance in the male/female ratio within the organisation.
The two-tier board structure was set up in 2014 at the level of ForFarmers Corporate Services B.V. (holding of the Dutch ForFarmers companies). Mr Hajé Nordbeck is a board member of ForFarmers Corporate Services B.V. at the recommendation of the Dutch Works Council. ForFarmers N.V. has a European Employees Council that met once in the year under review. This meeting was not attended by the members of the Board because no request for consultation was made by the ForFarmers European Employees Council, as specified in the regulations of the Board.
ForFarmers held conferences for senior management in May and December. The conference in May took place in Poland, so that senior management could get acquainted with Tasomix. The conference participants visited both the existing mill in Biskupice and the mill under construction in Pionki. Furthermore, Tasomix employees gave presentations about market developments in Poland. The meetings also looked at the progress and implementation of the Horizon 2020 strategy. The November meeting was attended by several members of the Board.
The Executive Board clarified the internal financial reports during the meetings of the Board. Matters discussed there included the state of affairs and market developments, strategic and financial developments and risks, as well as performance compared to budget and the previous year, for both the Group as a whole and for the individual units. The Board has approved the 2017 financial statements and reviewed the 2018 half-yearly report and the trading updates. Furthermore, the work plan of the internal auditor was approved. In addition, the dividend policy and the dividend proposal for 2017, corporate governance, and the financial reporting process of ForFarmers were discussed. The Board discussed the findings in the management letter from the external auditor with the Executive Board. The findings of the external auditor can be found in the Audit Committee report. The Board approved the budget for 2019. Attention was also paid to the scenario analysis of the five-year plan, ForFarmers' management and control system and compliance with all relevant legislation and regulations.
The Board discussed the 2018 financial statements with the Executive Board and the external auditor (KPMG Accountants N.V.) and approved them at the meeting of 12 March 2019. KPMG issued an unqualified audit opinion and shall attend the AGM to provide further clarification as needed. On 26 April 2019 the financial statements as well as the proposal for dividend for 2018 shall be submitted to the AGM for adoption.
Governance and culture
Partly in view of the Dutch Corporate Governance Code 2016 (hereinafter the ‘Code’), the Board hasdiscussed the company’s corporate governance with the Executive Board. In this regard, a culture focused on long-term value creation was emphasized. The core values that contribute to this culture are part of the ‘For the Future of Farming’ mission. The Executive Board sets an example and steers on the basis of the core values and standards in the organisation. The Board supports the initiative of the Executive Board to strengthen the focus on safety when investing in mills. Furthermore, the Board shared thoughts about this with the UK local management during its visit to the UK. ForFarmers endorses most of the best practice provisions of the Code. The chapter on corporate governance substantiates from which provisions ForFarmers deviates.
The Board is kept informed by the Executive Board about the discussions with the Sustainability Advisory Board. ForFarmers continuously takes initiatives with regard to sustainability. The Board supports these initiatives and believes that they contribute to long-term value creation for stakeholders.
In the year under review, the Board also discussed with the Executive Board on the further preparation of the annual report so as to comply with non-financial information requirements and to make further steps towards Integrated Reporting. The Board is pleased to be able to report that the external auditor has provided a 2018 assurance reportregarding the sustainability KPIs.
Compliance and integrity
The Board sees the Code of Conduct as a means of promoting integrity. The overview of incidents notifications and the follow-up thereof is discussed periodically with the Audit Committee and the Board. New employees receive the Code of Conduct and follow an online learning module. The Board supports the initiatives of the Executive Board to stimulate a culture of compliance and integrity.
Meetings, attendance and main topics
In 2018, the Board met eight times in regular meetings, each time in the presence of the
Executive Board. The members of the Executive Committee were present (or represented with the consent of the CEO in case of inability to attend) at the meetings of the Board insofar as the topics concerned the strategy and/or the budget. Furthermore, during the meetings of the Board, presentations were made, at the Board’s request, by members of the Executive Committee and other employees about topics for which they have specific responsibility. The Board and the Executive Board also discussed developments in the agricultural sector such as the influences of the fluctuating raw material prices, the dry summer, low water levels and the fluctuating prices for agricultural products. The Board has taken note of the vision document from the Ministry of Agriculture, Nature and Food Quality. Regular attention was also given to developments in the field of health and safety. There were also four teleconferences.
Three of these concerned the approval of the financial statements on the eve of their publication and the review of the trading update of May and November 2018. In the fourth teleconference, approval was given for the acquisition of Van Gorp Biologische Voeders in the Netherlands. In addition, the Board met three times without the presence of (representatives of) the Executive Board. Items then discussed included: the structure of the internal organisation, the method of working and remuneration (including the variable part thereof) of the Executive Board and the other members of the Executive Committee, the performance of the Executive Committee as a team and that of the individual directors, the associated conclusions arising therefrom, and the succession planning with respect to directors and Board members. The Board also prepared the regular meetings during these meetings. The Board also discussed its own performance, the performance of its individual committees and that of the individual Board members, and the associated conclusions arising therefrom. Finally, the respective members met in the three committees of the Board. The committees reported to the Board on their meetings and findings.
The attendance percentage of each Board member at the eight regular meetings of the Board and at the regular meetings of the key committees is shown in the overview below.
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The used abbreviations mean: AC = Audit Committee, RC = Remuneration Committee, S&AC= Selection and Appointment Committee
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Other subjects that were discussed in the Board meetings included the preparation and evaluation of the AGM held by ForFarmers on 26 April 2018 and the employee participation plans for 2018. The Chairman stayed in regular contact on various topics, outside of the regular meetings, with the other members of the Board and the Executive Board. The Chairman has also been in contact with the chairman of the board of Coöperatie FromFarmers U.A. ('FromFarmers') and attended one meeting of the membership council of FromFarmers. FromFarmers holds the priority share in ForFarmers.
Self-assessment and composition
Once every three years, the Board discusses its performance with an external advisor. Given that the latest assessment under the guidance of an external advisor took place in the fourth quarter of 2016, the Board conducted the assessment in 2018 without an advisor. In this context, the Board discussed its performance, both as regards the Board as a whole and as regards its individual members, as well as that of the individual committees. Items that came up for discussion included substantive aspects, internal interaction and interaction with the Executive Board, lessons learned from matters that occurred in practice, and the desired profile, composition, skills and abilities of the Board. Assessments of individual Board members were conducted in one-on-one sessions. The Board concluded that, both as a whole and with regard to its individual members, it performs satisfactorily. In addition, the Board assessed its meetings in the past year and discussed the development and strategy of the Company and the role of the Board herein. The Selection and Appointment committee of the Board prepared the self-assessment and the resulting conclusions were used for the further improvement of the Board’s performance. One of these improvements concerns the relevant knowledge of the Board with regard to digitisation and its impact on the business of ForFarmers. The Board shall address this issue within the context of its education programme.
The composition of the Board changed during the year under review. Mr Roger Gerritzen was appointed as a member of the Supervisory Board during the AGM of 26 April 2018. The diversity policy and the execution thereof in the year under review, is explained in the corporate governance 2018 statement.
Education and introduction programme
Within the context of the continuous education of the entire Board, various members of the Board follow relevant courses at various organisations. An introduction programme was prepared for Roger Gerritzen, who joined the Board as a new member. In that context, he visited various companies, discussed the implementation of the Horizon 2020 strategy and met employees within the organisation. Several of the other Board members also participated in the company visits.
Under the leadership of the Executive Committee, other managers and with the commitment, knowledge and dedication of all employees, ForFarmers was able to take further steps in 2018 with the implementation of the Horizon 2020 strategy. We would like to thank the Executive Committee, the employees and the works councils for the efforts they have made in the past year. We also thank the other stakeholders, including customers and shareholders, for the trust they have placed in us.
Lochem, 12 March 2019
The Supervisory Board