At the end of 2016, Agrifirm reoriented the German feed strategy. This recently resulted in a far-reaching strategic partnership with the leading German player DTC and the sale of the plant in Neuss. The Specialties Division (Nuscience) made an important contribution to profit. The Plant Division once again saw a rise in market share in the Netherlands. In 2016, the Royal Agrifirm Group managed to further reduce operating expenses by focusing on process and efficiency improvements. In addition, Agrifirm expanded its market share in Latin America with the purchase of the Uruguay premix producer Nutral and acquired the Polish compound feed producer Paszmark. With the sale of the remaining interest in Plukon and the sale of the remaining 51% of the shares in Agrimec and BayWa, the last steps, for the time being, were taken last year in relation to shifting the focus to core activities.
Dick Hordijk, CEO Royal Agrifirm Group: "Royal Agrifirm Group closed off the year 2016 on a positive note. We are a strong cooperative that is ready for the next step as a large international player. We are unique due to our combination of passionate employees and high-quality knowledge across the full breadth of the agricultural sector. The company is financially perfectly sound and is well-positioned. By accelerating the payment of part of the Member Dividend, we are making an extra contribution this year to the financial strength of our members. As befits a modern cooperative, each day we assess whether things can be improved upon. We are observing consolidation in the market, increasing complexity and further professionalisation as persistent trends in our markets. At the beginning of 2017, we consequently launched our strategy 'Better Together'. In this respect we focus on realising synergy effects among all of our companies throughout the world. This way we accelerate improvements in the field of R&D, innovation, sustainability, commercial & operational excellence and digital solutions. This is how, together with our members, we contribute to a sustainable food chain for future generations. Livestock farmers and growers play a crucial role in this respect and are faced with significant challenges. Together with them and our strategic partners we work on solutions that add measurable, sustainable and relevant value to the agricultural sector."
Market trends
Low milk prices, an extremely cautious recovery of pig meat prices that have been low for years, exceptional weather conditions that had a strong impact on various crops, and the bird flu at the end of the year put a high demand on the entrepreneurship of livestock farmers and growers in Europe. For dairy and beef cattle farmers in the Netherlands, this was further exacerbated by the phosphate issue.
Globally, the raw material markets entered calmer waters causing feed prices to drop. Royal Agrifirm Group's various global sales markets showed highly varied trends. For example, the pig market in China recovered from the moderate situation of the previous years. The economic situation in Brazil deteriorated due to the major political unrest, and the associated economic uncertainty, in that country. The unrest and uncertainty, linked to declining purchasing power, directly affect the food production sector. The low demand and the high local raw material prices (for example, corn) are resulting in lower economic returns for the livestock farmer. The Brazilian agricultural sector in 2016 and at the beginning of 2017 is in recession.
Member Companies
Agrifirm Plant had an excellent year in which it once again acquired new customers in the Cooperative's key product groups. This further reinforces Agrifirm Plant's position. The company achieved conspicuous growth in the crop protection product segment. The late start of the growing season and the exceptional weather conditions (for example, major precipitation volumes in short periods of time) made for a challenging year.
Agrifirm Plant last year completely phased out its Plant operations in Germany because of their small scale and low returns.
In terms of the sale of products, Agrifirm Plant managed to realise good prices in various markets for its customers. The pool system for the sale of arable farming products provides room for closing transactions at the right time and consequently is bearing fruit for growers. The cereals harvest itself was disappointing in terms of volume; the fundamental reason for this was the declining cereal acreage in favour of beets and onions, combined with an extremely wet cereal harvesting period.
At the end of November 2016, Agrifirm Plant signed a declaration of intent for a partnership with the Chinese Beidahuang Blacksoil Potato Industry (BBPI). BBPI is part of the Beidahuang Group in the province Heilongjiang, one of the largest agricultural farms in China. As such Agrifirm Plant has taken initial steps in marketing its high-quality crop improvement consulting services internationally. In the Netherlands, further efforts were made to expand precision agriculture-related services.
In the fall, Agrifirm together with the Ministry of Economic Affairs and the Ministry of Infrastructure and the Environment, and the provinces of Groningen, Friesland and Drenthe signed the 'Green Deal Soy in the Netherlands' with the ambition of cultivating a significant area of soy within a few years.
Agrifirm Feed observed at the beginning of the year in the pig farming sector a great deal of pressure on accounts receivables and the effects of very low price competition. This resulted in a loss of customers. The adjustments in the plant in Veghel put some pressure on service levels, but the plant is well on its way to supplying top quality pig feed. The expectation is that this will have a positive effect on the relationship with existing customers and will result in growth at new customers. The investment in Veghel will be completed in July 2017.
In recent years, the dairy herd grew significantly following the elimination of the milk quota. Agrifirm Feed profited from this because of higher sales volumes. In 2016, the growth of the herd impacted the price of milk and resulted in additional environmental measures. Dairy farmers were confronted with significantly declining milk prices. For 2017, Agrifirm Feed is taking a decrease in the dairy herd throughout the year into account.
Agrifirm Feed expanded its market share in the goat farming segment thus further reinforcing its leadership in this fast-growing segment.
In August 2015, Agrifirm Feed introduced the net phosphor feed value system (nP system) together with NP feeds to encourage dairy farmers to become acquainted with this safe method of lowering the P content in rations. DairyStart®, the young livestock concept introduced in March 2016, which enables dairy farmers to reduce the calving age in four phases from an average of 26 months to 22 months, makes a positive contribution to increasing the phosphate margin and provides additional liquidity for the farmer. In 2017, Agrifirm Feed will further intensify its custom consulting services for dairy and beef cattle farmers.
In the poultry farming sector a great deal of attention was devoted to switching over to a livestock farming system that is better appreciated by consumers. Agrifirm Feed proactively anticipated this development by introducing the Slowfeed feed programme so that farmers can comply with the demand for new concepts, such as Goed Nest Kip. Agrifirm and its members were front runners in this development. The result was that fewer animals were deployed, resulting in a reduced feed sales volume. The acquisition of new customers enabled the company to limit the reduction in sales volume.
European Agrifirm companies
Agrifirm Co-products (Bonda), given the difficult market conditions and in part due to its international spread, managed to achieve a sufficiently satisfactory result. The organisation changes are bearing fruit, while the innovative plant in Den Bosch provides for plenty of opportunities to deploy more products for the animal farming sector. Higher sales volumes were achieved in cooperation with Agrifirm Feed.
By the end of 2016, Agrifirm Belgium had recovered from the disappointing results it experienced at the beginning of the year. The difficult situation experienced by pig farmers was an issue here as well. Furthermore, poultry farmers did not initiate any new broods due to the low egg prices. The number of egg contracts Agrifirm has in Belgium is now rapidly declining. The company is now once again able to acquire new customers in the laying hen poultry farming sector.
At the end of 2016, Agrifirm reoriented the German feed strategy due to increasing complexity and consolidation. The strategic alliance negotiated with DTC at the beginning of 2017 is a key milestone in this respect and a confirmation that the reorientation of the German feed strategy is the right course of action. Agrifirm will be focusing more on the sale of livestock feed in the border regions with Germany that are easily accessible from the Dutch plants in Zwolle, Drachten and Meppel. The focus will be shifted to those market segments where there is a demand for high added value.
In addition, in Germany, Agrifirm will focus on the sale of animal feed for broiler poultry. The sale of the Neuss production site to DTC is subject to approval by the competition authorities. An active search for partners for the Drentwede and Losten production sites is currently underway. The Works Council and employees have been informed of this.
Agrifirm Polska experienced an excellent year in terms of turnover growth, particularly in the poultry sector, and positive results. This is the third year in a row that Agrifirm Polska succeeded in growing faster than the market. With the acquisition of Paszmark combined with the spread of the other three Agrifirm Polish compound feed factories in Szamotuły, Margonin and Topola, Agrifirm Polska took an important step towards achieving full national coverage of the Polish market. This provides Agrifirm Polska with an excellent basis from which to further increase its market share in Poland.
Agrifirm Magyarország (Hungary) experienced a difficult year due to the difficult financial positions of slaughterhouses and consequently a number of customers. The accounts receivable policy was adjusted accordingly and the road to growth was once again resumed.
Specialties
The successful start-up of the new plants in Drongen (Belgium) and in Tianjin (China) has a positive effect on the results. With the new plant in Drongen, the Specialties Division (Nuscience) managed to tap into new markets in North Europe and North Africa. The construction of the new plant in Belgium allows for future market expansion. In China, the sales volume of specialised feed for young animals rose again, strengthened by improvements in the pig market in particular, and the acquisition of new accounts.
With the acquisition of Nutral (Uruguay), the Specialities Division (Nuscience) managed to further develop its strength in this area. Nutral's operating area borders on that of Nuscience in Brazil. This facilitates cooperation. Nutral made a positive contribution to the result.
In Brazil, the Specialties Division (Nuscience) was affected by high raw material prices, the recession, which also affected the agricultural sector, and declining purchasing power. This was only partially offset by export business, and consequently had an inhibiting effect on the development of the livestock farming sector.
Knowledge & innovation cluster
The contributions made by NutriControl and Agrifirm Exlan are in line with expectations. Agrifirm Exlan has a very good reputation among members in terms of advising livestock farmers on minerals and stable systems. The company has since become a valued and recognised knowledge partner. In accordance with the new strategy 'Better Together', NutriControl and Agrifirm Exlan are continuing to work on developing and sharing knowledge within other Agrifirm companies.
Retail
Retail operations (Welkoop Retail and Welkoop Winkel) experienced an very good year. This is an excellent accomplishment in a difficult retail market. The timely anticipation of trends and the excellent relationship customers have with the Welkoop brand, and previously initiated cost reduction measures are at the root of this success.
Welkoop, as a retail chain, was nominated three times for the public prize awards Beste Winkelketen van Nederland 2016 - 2017 [Best Retail Chain in the Netherlands] and the Webshop Awards 2016 - 2017, and in all three categories (Garden, Animal Specialty Shops, and the Webshop Awards' Garden category) Welkoop came out on top.
Reconfirmation of Cooperative Values
In 2016, the Executive Board together with the Supervisory Board met with the Members Council to discuss the Cooperative's cooperative values and financial structure. The cooperative strength and unity were reconfirmed by the Members Council and embraced by the Board. The entrepreneurship of the Agrifirm Cooperative originates from the entrepreneurship of its farmer members: clear focus on the short-term and at the same time focused on the long-term in order to safeguard a sustainable food chain for future generations together. The companies of the Royal Agrifirm Group consequently focus their efforts on achieving measurable, relevant and sustainable value creation for livestock farmers and growers. Furthermore, Royal Agrifirm Group aims for a top three market position in its selected markets so that it can have an actual impact on a sustainable food chain.
Changes in board Royal Agrifirm Group
Dick Hordijk (48) joined the statutory Executive Board on 1 June 2016. On 20 September, he was appointed Chairman of the Executive Board. He succeeded Ton Loman who, after more than 30 years, left Agrifirm. Dick Hordijk, together with Jaap Vessies, Chief Financial Officer, constitutes the Executive Board of the Royal Agrifirm Group.
Effective 1 September, Ronald van de Ven (55) was appointed Division Director of Agrifirm Feed Northwest Europe (NWE) by the Executive Board of the Royal Agrifirm Group. In this capacity he also joined the Executive Committee. Effective 1 October, John Dortmans (36), General Manager Feed cluster CEE became a member of the Executive Committee of the Royal Agrifirm Group.
As such the Executive Committee of the Royal Agrifirm Group consists of Dick Hordijk (CEO), Jaap Vessies (CFO), Johan de Schepper (Specialties Division/Nuscience), Ronald van de Ven (NWE Feed Division), John Smit (Plant Division) and John Dortmans (Cluster Feed CEE).
