April 6, 2011
Agrifirm posts US$35.3 million in profit
Agrifirm kept sales up to par in the 2010 merger year, with revenues approaching EUR2 billion (US$2.9 billion) and net profits in the amount of EUR24.7 million (US$35.3 million).
The equity capital percentage, which rose slightly to over 48, provides Agrifirmwith a solid financial basis.
"A good financial result in a year of change" is how Kees Sijssens, Chairman of the Executive Board, puts it in a nutshell.
"Indeed, we achieved this result after deducting almost EUR9 million in customer discounts and a considerable merger cost item. Of the total one-off merger costs amounting to over EUR25 million (US$36 million), more than EUR22 million (US$31 million) was recognised in 2010," said Sijssens.
The benefits of the merger between Agrifirm and Cehave Landbouwbelang appear to be greater than the initially announced EUR20 million (US$29 million) per year. The amount has risen to over EUR21 million (US$30 million) per year. In addition to purchasing advantages, for example, for various raw materials, this also involves efficiency. Cost benefits can be achieved by optimally organising production. For example, Agrifirm recently announced that it will invest in various branches, while others will be closed. Finally, the merger results in the pooling of knowledge and experience. Examples include the rollout of successful innovative concepts, such as Air Line？？ feeds (pig farming), the 100-day approach (dairy farming) and the kernel concept in the broiler sector.
Developments in the cattle farming sector were positive, particularly because the price of milk recovered in 2010 from the very low level of the year before. Dairy farmers are increasingly more consciously focusing on the cost of milk per kilogram due to the fluctuations in the price of milk. Agrifirm supports them in this by putting the emphasis on the result achieved at the farm level.
The results of entrepreneurs in the pig farming sector were under pressure due to the relatively high feed prices in proportion to the selling prices. The developments that are essential to the operation of this sector at times encounter limits in terms of what society is willing to accept.
In the poultry farming sector, the kernel concept is producing significant growth in terms of the broiler sector. Price pressures in the layer sector resulted in a slight decline in revenues in that sector.
In the plant sectors, the sale of crop protection products is declining in the Netherlands. Agrifirm Plant managed to keep sales in this segment up to par, resulting in an increase in market share. Another trend, particularly in the arable farming sector, is the reduction in the use of artificial fertilisers and the increased application of organic fertilisers. The application of precision agriculture makes it possible to achieve maximum yield from the minerals used.
Of the total revenues of almost EUR2 billion (US$2.9 billion), 42% is generated by feeds and mixed feeds (Agrifirm Feed) in the livestock farming sector in the Netherlands. The plant sector, which is serviced by the Agrifirm Plant subsidiary, generates 17% of revenues in the Netherlands.
In the first year following the merger, the sales of Agrifirm Feed as well as Agrifirm Plant rose. Agrifirm Feed''s sales expressed in euros were somewhat higher than the previous year, in part as a result of the higher price of raw materials and feeds. Agrifirm Plant''s revenues declined somewhat in comparison to 2009. In addition to the price effects, the reduced sales of cereal seeds due to the unfavourable weather conditions in the autumn of 2010 played a role, among other things. Furthermore, the market for artificial fertilisers has been shrinking for several years. This is offset by the significant growth in the sale of organic fertilisers by cattle farmers to arable farmers.
Almost all other subsidiaries in the Agrifirm Group had a good year. The sales of feeds by the subsidiaries in Poland and Hungary exhibited a positive trend. Projections call for further growth there. Pre-Mervo and Vitamex achieved excellent results in the Specialties Division. Both companies serve different domestic and foreign markets and constitute an excellent example of synergy within the merged organisation. The investments of Vitamex in four Chinese production sites are producing excellent returns.
In 2010 Vitamex and Pro-Mervo became 100% participating interests of Agrifirm. In addition, the premix producer Preconex became an 80% participating interest via Vitamex.
The results of the companies in the Services and Co-products divisions, such as Abemec, Winkel B.V and Bonda also exhibited a positive trend. The consulting firm Exlan (technical and legal advice) now operates nationally.
Only in Belgium (Van den Berghe) and Germany (Kofu and Strahmann) results were lower than expected. The difficult market conditions in both countries are the root cause of this.
Agrifirm in 2010 granted EUR8.8 million (US$12.6 million) in customer discounts. This amount was paid to customers in advance in February 2011, on a one-off basis, in connection with the low selling prices, particularly in the pig farming sector. Payment of the customer discount normally takes place in April.
In addition, the members will receive a Members Profit in the amount of EUR11 million (US$16 million) in January 2012. This amount concerns the return on capital invested in subsidiaries (excl. the member companies Agrifirm Plant and Agrifirm Feed) and participating interests. "Our task is to achieve the cooperative mission: to generate sustainable value for the members. This is why we pay over half of our profits to our members," said Sijssens.
During the current financial year, Agrifirm expects to be able to expand its market position in the Netherlands on the basis of innovative concepts and competitive prices in the livestock farming, as well as the arable farming and market gardening sectors. Prospects outside the Netherlands are also positive, albeit also dependent on price fluctuations in markets for raw materials and agricultural end-products. ''We will in any event continue to pursue innovation that in sustainable ways leads to improvement in the results of our customers,'' said Sijssens.