Europe’s largest feed supplier, ForFarmers, has unveiled its strategy for the next five years. It envisages consolidating business in its existing country markets while expanding into new ones – possibly outside the EU for the first time.
The Dutch multinational’s Build to Grow 2025 strategy builds on the previous five-year Horizon 2020 plan, with both blueprints focused on lifting livestock business customer profitability. Build to Grow targets an underlying group EBITDA of €125 – €135 million by 2025 at constant currencies through organic growth and acquisitions (the group reported an EBITDA of €88.5m in full year 2019 and €48.2m for the latest half year). This would include like-for-like underlying EBITDA growth of between 0%-3% from the 2020 base in the ‘challenging’ home country markets including the UK.
At the same time, the company would seek to reduce operating costs by at least €10m in the 2020-2025 period and increase dividend distribution from the current 40%-50% to 40%-60% of underlying net profit after tax.
The livestock industry in North West Europe is under pressure from environmentalism at both the production and consumption stages of the food chain, warns ForFarmers chief executive Yoram Knoop. For example, farmers are increasingly faced with extensive measures to reduce livestock phosphate and ammonia emissions. This is most acute in the Netherlands, but government reduction measures are not as easy as they might appear – the supply chain there is trying to help, but success will need time, innovation and investment.
At the consumer end, there is a lot of noise about meatless proteins. Mr Knoop points out that these are not without concerns over their environmental footprint, price and healthiness as they are often highly processed. While he believes there is room in the market for such products, he predicts they will remain a niche category for the foreseeable future and will become an additional consumer choice rather than a replacement for animal proteins.
Tighter environmental regulation will constrain ruminant and pig herd sizes in the Netherlands – the Dutch pig herd is set to fall, but not by as much as the 10% forecast by some analysts.
Meanwhile, Brexit could see the UK increasing its meat self-sufficiency from the current 60% – with the 40% shortfall currently supplied from the EU. Mr Knoop believes increasing UK livestock output is a clear opportunity for UK feed manufacturers. The Polish market, which ForFarmers entered through acquisition in 2018, has the potential for long term growth in the ruminant, pig and poultry sectors.
The mature NW Europe feed market will be challenging, but it is still a strong sector, advises Mr Knoop. Therefore, the ForFarmers strategy is to strengthen its position there, not to move away from it. The group will seek to consolidate its position through organic growth and acquisition. It will enhance its business with existing customers through feed and advice packages tailored to individual enterprises in the ruminant, pig and poultry sectors. This offer will be underpinned by investment in operational excellence; digital tools and data analysis; R&D; and continuous innovation.
But ForFarmers will look to new country markets – not just in Europe – to achieve its five-year growth objectives. It intends to establish new platforms to drive future growth, possibly including joint ventures. The objective is to be operating in seven country markets by 2025 with a more balanced portfolio between developing and mature markets.
“Ambition, sustainability and partnership are crucial to the new strategy,” concludes Mr Knoop. “It is a circular economy approach to converting low value materials and co-products to high quality protein with a low environmental impact. The use of responsible sourcing and feed materials that are not competing with human consumption markets will help reduce the carbon footprint of feed and animal protein production.