ForFarmers has reported a significant increase in UK profitability in the first half of 2015, with feed volumes lifted 5% through acquisition. Group profitability was also up, but revenues and product volumes both declined. The co-operative is to replace its Exeter feed mill with a larger plant.
The UK business has made a gross profit of €83.6 million on sales of €386m in the six months ended June 30th 2015, compared to €70.5m and €371m at the same stage of 2014. Just €0.2m of the profitability increase is due to organic growth - €4.6m is from acquisitions and the rest due to currency effects.
Like for like feed volumes fell by 4% in the UK, largely due to a fall in demand for Dry, Moist and Liquid (DML) feeds in line with the plentiful supplies of forage and low milk prices in the period. However, overall UK feed volumes rose 5.3% to 1.52m tonnes due to acquisitions. The HST Feeds business is now fully integrated into ForFarmers, while progress with the Wheyfeed co-products operation is slightly behind schedule. The Countrywide feed operation- the purchase of which was completed in May - is already fully integrated at a cost of €500,000 and is expected to contribute to earnings by 2016. As ForFarmers was Countrywide’s largest bulk feed supplier (and still supplies its country stores), there will only be a modest lift in volumes.
“The UK ruminant market was challenging as a result of falling milk prices,” notes the company. “However, compound volumes and margins remained stable due to a stronger focus on efficient feed solutions and better application of our nutritional knowledge. Good progress was also made in the swine sector.”
ForFarmers is to replace its existing 150,000 tonnes capacity Exeter feed mill with a new 300,000 tonne plant. The £10m project is expected to take 18 months to complete, but will “strengthen the company’s strategic position in one of the key regions of the UK, improve customer service and also reduce cost”.
“Our customers will benefit from a state of the art production facility second to none in the UK, which will produce products with superior product quality and with a new level of efficiency within the UK industry,” claims Iain Gardner, chief operating officer of ForFarmers UK. “We intend to combine the current Exeter blend plant and compound mill to create a high-capacity multi-species production facility with the capability to manufacture up to 300,000 tonnes per annum. Having introduced tanker delivery vehicles to the UK - allowing safer, quieter, and more product friendly delivery - this investment will allow their increased use. We will also be expanding this fleet of vehicles.”
The ForFarmers Group, comprising feed and related activities in Belgium, Holland, Germany and the UK, made a gross profit of €220.1m on revenues of €1.16 billion, from the €199.8 and €1.17bn in H1 2014. Group feed volumes were up 3% to 4.53m tonnes, largely through the acquisition of ruminant and poultry business. The fall in revenues is due to commodity price deflation – the cost of raw materials and consumables in the six month period fell to €939.5m from the €973.7m a year earlier.
The rebranding of all legacy businesses under ForFarmers colours across all four countries was completed on June 1st, and the Group is now rolling out the Horizon 2020 strategy to support product sales with nutritional advice, backed by expertise acquired through industry alliances and partnerships – for instance with Nutreco on R&D and Agrifirm in sourcing crop inputs.
At group level, the business has set up single marketing teams per livestock species to oversee activities for each sector across all country markets. It is also rolling out a new SAP customer relationship management system across the group by the end of next year. ForFarmers is proceeding with a Dutch stock market listing, scheduled for 2016, and is currently recruiting the necessary advisors to implement the move.
Looking ahead, ForFarmers expects feed market conditions to remain challenging for the rest of the year. Ruminant and pig product volumes will remain under pressure, and more farmers - especially from smaller units – will exit the industry. It notes that stringent credit control management will continue to be important. Raw material values will continue to fluctuate, driven by political tensions, currency movements and uncertain weather and harvest forecasts.
“The market conditions in the agricultural sector remain challenging and the income of farmers is under pressure,” notes ForFarmers chief executive Yoram Knoop. “In these challenging times for our customers, our focus on Total Feed has become even more important. We use our nutritional knowledge and solutions to help customers to achieve better technical and financial results on their farm. Our product mix consequently changes and we sell more specialties. Partly because of this we were able to realise a solid result in the first half of this year.
“Since June 1 all business units in all countries have been operating under the name ForFarmers. This One ForFarmers approach results in better branding in the market; it also stands for a uniform way of working, better use of available knowledge, and consequently a more efficient organisation. The introduction of measurable objectives (KPI’s) for several departments has meanwhile resulted in savings.”