Feed manufacturer ForFarmers UK has reported higher profitability and revenues for full year 2022, despite lower volumes produced.
The UK business of the Dutch co-operative has reported an EBITDA of €15.9 million on revenues of €788.8m in the year ended December 31st 2022, compared to €13.3m and €648.8m in the prior year – respective increases of 19.5% and 21.6%. Total feed volumes produced fell 3.6% to 2.33 million tonnes (2.42m tonnes in 2021).
The company notes that labour shortages affected the UK agrifood chain throughout 2022, partly as a result of Brexit but also exacerbated by the Covid-19 pandemic and the after effects. This was keenly felt in the slaughterhouse sector, with pig numbers backing up on farm. The lack of staff has also encouraged more interest in robotic milking systems on dairy farms.
Structurally, UK milk prices were higher year-on-year, with less milk produced over 2022, particularly in the first half. The unprofitable conditions saw some pig farmers exit the industry. Poultry producers were also faced with high production costs as well as the disruption of avian flu. But food cost inflation saw rising demand for chicken as a cheap and healthy alternative to other meats.
ForFarmers’ Total Feed volume in the UK declined in 2022, although sales of co-products and residual feeds fell at a slower rate than its compound feed products.
The company’s UK dairy feed sales increased over 2022, driven by an increased market share and improved milk prices which encouraged more feeding on farm. It says its dairy market share rose through a differentiated sales approach offering targeted solutions to dairy farmers.
Pig feed volumes fell in line with the prevailing market conditions, but broiler poultry feeds rose with demand for chicken, while ForFarmers grew its UK market share. But sales to the layer and turkey sectors of the poultry industry suffered from the spread of avian flu and flock culls as a control measure. The company also ended unprofitable contracts with some customers.
The ForFarmers Group reported an EBITDA of €72.5m on sales of €3.35 billion in 2022, compared to €72.9m and €2.67bn in the previous year – a respective fall of 0.7% and rise of 24.1%. The Group’s total feed volume fell 6.6% to 9.03m tonnes, with declines across all species. Within that total, compound feed volumes fell by 7.8% to 6.28m tonnes, mainly through lower pig feed sales although partially offset by higher poultry volumes.
Looking ahead, the Group expects feed material, energy, labour and transport costs to remain volatile and relatively high during 2023. It also predicts continued uncertainty surrounding macroeconomic developments and associated consumer confidence and disposable incomes.
The growing pressure on agriculture in Northwest Europe to become more sustainable, with moves towards more extensive farming system with less focus on yield, quantity and export volumes, and more emphasis on quality and animal welfare, will also continue, adds the company.
While this will be a challenge to current practice, it also presents opportunities such as further improvements to feed conversion ratios; innovations to reduce the carbon footprint of livestock farms; and providing sustainable protein feed sources to replace imported ingredients with deforestation risks. ForFarmers also believes the demand for organic feed and advice will also start to pick up again as food price inflation subsides.
“2022 was a difficult year on several fronts,” notes ForFarmers chief financial officer Roeland Tjebbes. “We are therefore especially proud that our employees have made a huge effort to continue supplying feed to our customers on time and as agreed, even when the availability of raw materials became uncertain as a result of the dreadful war in Ukraine.
“Our volumes decreased, mainly due to the decline in the pig sector as a result of the contraction in this sector. Nevertheless, we achieved solid underlying EBITDA and underlying net profit that was higher than last year.
“We see that the agricultural sector is facing an important transition. In our recently launched revised strategy 2025, we consequently put even more emphasis both on making our production processes more sustainable and on developing innovative feed concepts that reduce the impact of the sector on climate and nature. We do this through targeted sourcing of raw materials and co-products, proper utilisation of feed and appropriate advice. Our dairy customers in the Netherlands for example have already significantly reduced their greenhouse gas emissions.”
Incoming chief executive Theo Spierings adds: “There is currently a lack of a clear vision in the sector with regard to how we can make the sector more sustainable in a fitting and correct manner. That has to change, and I want to actively contribute to this with ForFarmers so that all players in the chain know where they stand and can act accordingly. I am confident that we can do this.”