Feed manufacturer ForFarmers UK has posted a loss on increased revenues at the first half stage of its financial year. Increased dairy product sales couldn’t offset a decline in monogastric volumes. The wider ForFarmers Group has also reported a first half loss.
ForFarmers’ UK operations generated a pre-tax loss of €4.5 million on revenues of €394.3m in the six months to 30th June 2023, compared to a loss of €1.5m and sales of €378.1m in the prior first half. The company says profitability fell in line with volatile markets and increased competition. But operating expenses remain stable due to a focus on efficiency, lower energy costs and a reduction in the number of staff, despite higher employment costs following wage indexation.
The UK business saw a sharp increase in sales to dairy farmers, which it attributes to a successful specialised and differentiated approach to this market. Domestic dairy cow numbers and milk production remained stable in the period, which supported ForFarmers’ growth strategy.
However, pig feed volumes fell, with the company’s sales falling slightly faster than the overall market through the loss of customers to integrated operations. The UK pig population over the first half of 2023 was around 10% lower than in the same period of 2021, mainly through a smaller sow herd. At the same time, the free pig feed market is getting progressively smaller, as more pig producers join the integrators.
The company’s UK poultry feed volumes also declined, affected by avian influenza disease and price competition, with some producers increasingly opting for home-mixing. ForFarmers UK had proposed to merge with the integrated poultry business 2Agriculture to access this large section of the poultry feed market, but the merger was abandoned in early 2023 after the Competition and Markets Authority decision to carry out an in-depth investigation into the proposal.
ForFarmers’ UK sales of co-product feed increased in line with the group’s Going Circular policy.
The ForFarmers Group made a pre-tax loss of €6m on revenues of €1.61bn in the first half of 2023, from a positive EBIT of €19.1m and €1.61bn in H1 2022. Total feed volume was 4.31m tonnes in the latest period (4.53m tonnes) of which compound feeds were 3.0m tonnes (3.19m tonnes).
The Group is reorganising operations across its country markets with an emphasis on local responsibility, commercial flexibility and a differentiated approach. A structure with fewer management positions will shorten lines to the customer. A focus on feed quality and the company’s expertise in animal nutrition, together with cost saving programmes, will enable it to be competitive on price locally.
Geographically, the Group expects to complete its withdrawal from the Belgian feed market by the end of the third quarter, with associated impairment charges included in the H1 results. It says changes made in the Germany/Poland cluster are encouraging, as is the differentiated approach to the ruminant market in the UK. ForFarmers has subsequently announced is acquisition of Piast, a poultry feed maker in Poland, to increase is volume in that sector.
“The sharp decline in the result in the first six months of 2023 underlines the importance of the revised strategy, which is decisively being implemented during this transitional year,” comments ForFarmers Group chief executive Pieter Wolleswinkel. “Price competition increased amid volatile market conditions, putting further pressure on our volumes and our gross profit. This underpins our confidence that the second half-year will be better than the first half-year, barring unforeseen circumstances. With our strategy and committed employees, we can make a constructive contribution to a sound, sustainable future for our sector and our stakeholders.”