Interim results from European feed manufacturer ForFarmers show a 34% fall in profitability and 7% in revenues at the UK operation, which the company attributes to Brexit uncertainty delaying herd size recovery. But Group results are up as EU farmers benefit from rising dairy and meat prices.
ForFarmers’ UK arm made an operating profit of €5.50 million on revenues of €315.65m in the six months to June 30th 2017, compared to €8.38m and €339.1m in H1 2016. Domestic volumes manufactured, at 1.48m tonnes, were also down on the prior period’s 1.54m tonnes.
The company says UK profitability was affected by currency, with a negative exchange rate of 9.1%, in addition to competition for sales in the pig sector as ongoing consolidation leads to fewer but larger accounts buying bigger volumes on longer contracts. But a new dairy product range, based on the Dutch Feed2Milk concept, was positively received by customers and helped lift margins.
Lower ruminant and pig numbers contributed to the 3.9% fall in feed volumes, as did the divestment of the Leafield former feedstuffs operation to SugaRich at the end of the prior first half. But poultry volumes were up.
“There is great uncertainty about the consequences of Brexit for the agricultural sector in the UK,” notes the company. “This is why ruminant and swine farmers are reticent, among others, to recover their herd sizes, which were reduced last year. Despite this, the market appears to be recovering slowly.” It adds that UK farmers also tended to opt for cheaper, lower margin feed products.
UK operating expenses were 15.4% lower in the period. First half 2016 included a €1.6m restructuring charge, while a lower headcount, reduced vehicle leasing costs and the lower manufactured volume all helped savings in the latest period. The half saw the business centralise its UK administration at a new HQ building in Bury St Edmunds.
In May, ForFarmers UK acquired Wilde Agriculture, the Wigton, Cumbria-based livestock consultancy business that includes the John Peel feed buying group. It paid €2m including a €0.5m contingent consideration. The business is also on track to bring its new £10m feed mill near Exeter on-stream by the end of the year.
The ForFarmers Group, which covers Holland, Belgium and parts of Germany as well as the UK, has posted an 18% rise in profitability on 3.7% higher revenues. It made an operating profit of €38.7m on sales of €1.11 billion in H1 2017, up from the €32.8m and €1.07bn from the previous first half. The business says the devaluation of sterling since the end of June 2016 cost it €6.0m or 3.4% in the latest six months.
Total feed volumes were up 3.6% to 4.73m tonnes, with compound sales growing by 6.2% to 3.3m tonnes, largely through last year’s purchase of the Dutch Vleuten-Steijn pig feed operation.
“Volume growth in the Netherlands and Germany/Belgium was higher than the volume decrease in the UK,” notes the company. “As of mid-2016 the financial situation for farmers in Europe has significantly improved due to enhanced milk and swine prices, which partly explains the volume growth in compound feed within total feed.”
“The first half-year results show that our Total Feed approach is gaining more and more momentum,” notes ForFarmers Group chief executive Yoram Knoop. “In our innovative Total Feed solutions we are combining feed products, advice and tools. Products and advice are aligned with one another to lead to a better return on the farm.
But Mr Knoop warns that the rate of growth is unlikely to persist into the second half, due to factors including the slow UK recovery; the impact on phosphate limiting regulations on dairy farmers in Holland and the as yet unknown effects of the fipronil-contaminated eggs issue in Holland and Belgium.
“Our customers are currently in better financial shape than a year ago, when milk and pig prices were under pressure. Farmers, especially in the Netherlands and Germany/Belgium, are buying more high quality feeds again to increase their production. There is large uncertainty in the UK about the consequences of Brexit, but in spite of this, the market there appears to be recovering slowly,” Mr Knoop concludes.