A third quarter trading update from feed manufacturer ForFarmers shows product volume and profitability growth in all its country markets including the UK, with the exception of its domestic market in the Netherlands.
Although no figures are available at this stage, EBITDA rose across the company’s operations in UK, Belgium, Germany and Poland in the three months to the end of September 2018, but the Group figure showed a marked decrease due to the Netherlands performance. Feed volumes rose in line with recent acquisitions in Europe, but these have also lifted the Group’s short term costs before integration savings can be made.
ForFarmers’ total feed volume in the UK grew over the third quarter of 2018, with the increase greater than that for compound feeds alone. The company notes a particular increase in all dairy feeds during the period, as herd managers compensated for the shortage of home grown forage caused by the hot, dry summer weather. Poultry volumes also rose, but overall pig volumes in the UK showed a decline as the business focused on its strategic aim to increase its margins in this sector.
The company’s business in the Netherlands suffered from a year-on-year drop in dairy feed volumes as Dutch dairy farmers reduced cow numbers to meet regulations designed to reduce phosphate emissions by cows. This more than offset increased sales to replace forage lost to the dry summer weather. There was also an internal company effect as Dry, Moist and Liquid feed volumes moved from the Netherlands to Belgium.
In Germany, pig compound volumes dropped slightly as a result of new measures to reduce the release of phosphate and nitrate into the environment.
The marked decrease in Group EBITDA in Q3 was due to rising raw material prices as the hot weather in July and August reduced harvest estimates and saw feed material prices rise rapidly and unexpectedly. Energy prices were also rising at the same time, and it was difficult to recoup the additional costs from customers, especially in the Netherlands and Poland.
Another drought-induced problem was low water levels in Europe’s rivers, which increased feed material logistics costs, particularly in the Netherlands.
The latest period saw milk prices rise across North-West Europe as the drought conditions constrained production, but they were still lower year-on-year. Average EU pig prices were down on Q3 2017, as were average egg prices – although they had peaked in the third quarter of 2017 following the fipronil problem in the Netherlands which reduced supplies. Broilers have been stable in recent months, and are higher than in the same period of the previous year.
“ForFarmers is satisfied with its strengthened market position in the poultry sector following the acquisitions of Tasomix and Maatman,” notes Group chief executive Yoram Knoop. “In addition, the like-for-like development of gross profit particularly in Germany, Belgium and the UK was positive, but could not offset the decline in the Netherlands, particularly compared to the strong third quarter 2017.”
Mr Knoop says the recent African swine fever outbreak among the wild boar herd in Belgium is concerning for the pig sector. “We have implemented the necessary hygiene protocols and are following the developments closely,” he adds.
Since the period end, ForFarmers completed its acquisition of Voeders Algoet in Belgium, making it the second largest feed company in Belgium, and bought organic specialist Van Gorp Biologische in the Netherlands to enhance its existing organic mill Reudink.