Quarterly Report • Aug 16, 2018
Quarterly Report
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Lochem, 16 August 2018
[1] Results for the first half of 2018 are compared to the results for the same period of 2017
[2] Total Feed covers the entire ForFarmers product portfolio and comprises compound feed, specialties, co-products (including DML products), seeds and other products (such as forage).
| For the six months ended 30 June 2018 2017 change in % |
||||||
|---|---|---|---|---|---|---|
| In millions of euro (unless indicated otherwise) | Currency | Acquisition (6) |
Like-for-like (7) |
|||
| Total Feed volume (x 1.000 ton) | 4,825 | 4,725 | 2.1% | 0.1% | 2.0% | |
| Compound feed(8) | 3,322 | 3,300 | 0.7% | 0.1% | 0.6% | |
| Revenue | 1,141.6 | 1,110.6 | 2.8% | -0.6% | -0.5% | 3.9% |
| Gross profit | 217.7 | 207.3 | 5.0% | -0.6% | -0.6% | 6.2% |
| Operating expenses | -177.6 | -169.1 | 5.0% | -0.7% | 0.1% | 5.6% |
| EBITDA(1) | 57.2 | 51.5 | 11.1% | -0.5% | -2.7% | 14.3% |
| Underlying EBITDA(2) | 52.3 | 51.7 | 1.2% | -0.5% | -2.7% | 4.4% |
| Operating profit | 45.2 | 38.7 | 16.8% | -0.3% | -3.6% | 20.7% |
| Underlying Operating profit(2) | 39.8 | 39.0 | 2.1% | -0.3% | -3.6% | 6.0% |
| Profit attributable to shareholders of the Company | 34.8 | 30.4 | 14.5% | |||
| Net cash from operating activities | 40.1 | 36.7 | 9.3% | |||
| Underlying EBITDA / Gross profit | 24.0% | 24.9% | ||||
| ROACE(3) | 26.3% | 23.4% | ||||
| ROACE(4) | 20.1% | 17.6% | ||||
| Basic earnings per share (x €1) | 0.35 | 0.29 | 20.7% | |||
| 30 June 2018 |
31 Dec. 2017 |
|||||
| Equity | 414.5 | 409.9 | ||||
| Solvency(5) | 52.8% | 52.1% |
(1) EBITDA is operating profit before depreciation and amortization.
(2) Underlying means excluding incidental items.
(3) ROACE means underlying EBITDA divided by 12-month average capital employed (4) ROACE underlying EBIT divided by 12-month average capital employed
(5) Solvency ratio is equity divided by total assets.
(6) Relates to the net impact of acquisitions/divestments
(7) Like for like is the change excluding acquisitions and divestments and currency impact.
(8) Prior year has been adjusted to conform to the current year presentation General remark: percentages are presented based on the rounded amounts in million euro. Additions may lead to slight differences due to roundings.
"We are satisfied with the progress we have made in the first half of 2018 with regard to all four pillars of the Horizon 2020 strategy. Our focus on improving on-farm returns was once again reflected in an improved feed efficiency for the animals of our customers. In addition it helped us win more new customers. Total Feed volume saw like-for-like growth and the relating gross profit showed even stronger growth. It is encouraging that we were able to realise a like-for-like improvement in underlying EBITDA in all the clusters, with Germany/Belgium in particular achieving a satisfactory increase.
In addition to our own product innovations we also pursue our Total Feed concept through the formation of strategic partnerships. Accordingly, our strategic partnership with Nutreco (since 2014) was recently extended for five years.
The announcement of the acquisition of a 60% stake in Tasomix, Poland, was an important milestone in terms of acquisitions, one of the four pillars of the strategy. As from early July this year we are operational in five countries and have considerably strengthened our position in the European poultry sector. Furthermore we announced our intention to acquire Voeders Algoet in Belgium and Maatman in the Netherlands – both companies that will integrate well within our local organisations.
Our Executive Committee team was recently completed with the appointment of Arthur van Och as Director Supply Chain. Steven Read, who was appointed COO of ForFarmers UK at the beginning of 2018, has made a vigorous start on the business transformation in the United Kingdom.
With respect to the topic of sustainability, we are noticing an increasing pressure in the public opinion and in (proposed) government measures on the agricultural sector to reduce their carbon footprint. We are supporting farmers with feed concepts and tools, with which farm data can be analysed and clarified. Farmers can, for instance, monitor phosphate emission and take measures to reduce this. The increase in the number of LTIs1 in the first six months of 2018 is a point of concern. It is taking longer than anticipated to translate increasing awareness of our employees into safer conduct.
As of this moment, the influence of recent developments (both political and climatological) on our volumes and result for the second half of this year is difficult to predict. We have confidence in the execution of our strategy, both by our existing operations and by the recently acquired companies. We are on track to realise our previously stated medium term guidance."
[1] LTI stands for Lost Time Incident: an injury resulting in absence from work
(compared to the first six months of 2017)
Total Feed1 volume was up 2.1% at 4.8 million tonnes with the increase being almost wholly like-for-like. In the Netherlands and Germany/Belgium clusters the increase was mainly due to higher sales of DML2 products. In the United Kingdom there was a decline in Total Feed volume.
Volume growth for Total Feed was larger than for compound feed, which reported growth of 0.7%. Like-forlike growth was 0.6% and 0.1% was due to the net effect of acquisitions and divestments. In the Netherlands compound feed volume was virtually stable. The impact on volume of the decline in the dairy herd due to the phosphate reduction measures was offset by volume growth in the poultry sector. Compound feed volume rose in the Germany/Belgium cluster, once again mainly in the poultry sector. Compound feed volume in the United Kingdom was more or less stable as a result of growth in the ruminant sector and a reduction in the swine sector. The dealer that was acquired last year also contributed to volume growth.
Revenue rose by €31.0 million (2.8%) to €1,141.6 million. Like-for-like growth equalled 3.9%. The net impact of acquisitions and divestments was a negative 0.5% and the currency translation effect was a negative 0.6%. On average prices of raw materials were higher. As is customary, changes in raw material prices were passed on to customers.
Gross profit rose by 5.0% to €10.4 million with an like-forlike increase of 6.2%. The net impact of acquisitions and divestments was a negative 0.6%.The currency translation effect was also a negative 0.6%. The increase in gross profit was the result of higher volumes, an improved product mix with more specialties and the contributions from strategic partnerships. Furthermore the increased energy prices were passed on to customers.
Total operating expenses increased by 5.0% to €177.6 million. The like-for-like increase was 5.6%, partly attributable to the growth in volumes and a slight increase in the number of FTEs. All clusters saw an increase in production and transportation expenses as a result of higher energy prices and increased use of third-party logistics. Moreover there were increased M&A advisory fees
(by €0.8 million) in connection with the planned acquisitions, as well as IT expenses related to the rollout of various (new) applications. There was a €0.4 million release from the provision for bad debts (first half year 2017: release of €1.1 million). The impact of acquisitions and divestments on total operating expenses was a positive 0.1%. The currency translation effect was a negative 0.7%.
Operating profit (EBIT) rose by €6.5 million (16.8%) to €45.2 million. The increase included an incidental gain of €5.4 million, mainly relating to the sale of the arable activities in the Netherlands.
Depreciation3 was €0.7 million lower at €12.1 million. Higher depreciation charges as a result of the increased investment programme (around €40 million per annum in 2017 and 2018) were offset by the translation effect of the Pound sterling and the reversal of a past impairment (€0.5 million) on a feed mill in 2014. This regards the (second) feed mill in Deventer, which was reopend to produce nongenetically modified (non-GMO4 ) feed.
[1] 'Total Feed' covers the entire ForFarmers product portfolio and comprises compound feed, specialties, co-products (including DML products), seeds and other products (such as forage).
[2] DML products: Dry, Moist and Liquid by-products
[3] Depreciation also includes amortisation and impairment
[4] Non-GMO stands for non-genetically modified organisms
| For the six months ended 30 June |
|||||
|---|---|---|---|---|---|
| In millions of euro |
2018 | 2017 | ∆ | ∆% | |
| EBITDA | 57.2 | 51.5 | 5.7 | 11.1% | |
| Gain on sale of investments and assets held for sale |
-4.9 | -0.1 | - 4.8 | ||
| Restructuring cost (2) |
- | 0.4 | -0.4 | ||
| Underlying EBITDA(3) |
52.3 | 51.7 | 0.6 | 1.2% | |
| FX effect | 0.2 | 0.2 | |||
| Underlying EBITDA, at constant currencies(1) |
52.5 | 51.7 | 0.8 | 1.6% |
(1) 2018: Sale of agriculture activities to CZAV (NL) and supplementary payment on sale of a subsidiary (UK)
(2) 2017: Introduction shared service center Continent Europe
(3) 'Underlying EBITDA' means EBITDA excluding incidental items General remark: percentages are presented based on the rounded amounts in million euro. Additions may lead to slight differences due to roundings.
EBITDA increased by 11.1% to €57.2 million. The sale of the arable activities in the Netherlands resulted in an incidental gain of €4.5 million. Furthermore, there was an incidental gain in the United Kingdom of €0.4 million.
€52.5 million. Like-for-like growth was 4.4% and was mainly driven by improvement in the second quarter. The net impact of acquisitions and divestments was a negative 2.7% and included M&A advisory fees in connection with the announced acquisitions.
The EBITDA/gross profit ratio fell from 24.9% to 24.0% due to the rise in energy and transport costs.
The contribution from German transshipment joint venture HaBeMa was down 42.6% at €1.1 million due to a sharp fall in the volume of trade as a result of parties in the market for raw materials being reticent.
The effective tax rate was 22.4% (first half year 2017: 24.2%). The lower tax rate was attributable to changes in the valuation of deferred tax assets in Germany and the catch-up effect of tax benefits on specific investments in the United Kingdom.
Profit (attributable to shareholders) rose by 14.5% to €34.8 million.
Basic earnings per share were up 20.7% to €0.35. The total increase was €0.06 of which €0.04 was from profit growth and €0.02 from the effect of the share buy-back programme that largely took place in the second half of 2017 and was concluded at the end of February 2018.
The number of employees as at 30 June 2018, presented in full-time equivalents (FTEs), was 2,325, unchanged from 31 December 2017. The number of employees in the Netherlands and Belgium remained virtually stable, while there was a 3% increase in the number of employees in Germany following the reinforcement of the commercial organisation. The number of FTEs in the United Kingdom was down by around 1.5% due to organisational changes in line with the transformation of the UK business. The total number of employees at ForFarmers was 2% higher than at 30 June 2017.
Group equity rose to €414.5 million over the first six months of 2018, up €4.5 million compared to 31 December 2017. The increase was the net effect of the addition of the 2018 half-year result (€35.1 million) minus the dividend
distribution (€30.1 million) and the amount (€6.1 million) relating to the share buy-back programme concluded in February 2018. Other comprehensive income was directly recognised in group equity and comprised a remeasurement (€7.1 million) of defined benefit liabilities (mainly in the United Kingdom) and cash flow hedges combined with currency translation differences (- €1.3 million) mainly relating to the purchase price (PLN 242 million) for the acquisition of a 60% stake in Tasomix. The purchase amount in zlotys was hedged when the acquisition was announced in February 2018.
Solvency improved from 52.1% at end-2017 to 52.8% at 30 June 2018.
The net balance of available cash and cash equivalents minus bank loans and other borrowings (long and shortterm) was €63.0 million (end-2017: €67.1 million). The net reduction in the balance was largely attributable to the fact that operating cash flow was predominantly used for the dividend payout.
The payment of around €57 million for the acquisition of 60% of the shares in Tasomix was made after the balance sheet date.
Net working capital decreased from €69.2 million at end-2017 to €67.4 million at 30 June 2018.
Inventory was virtually stable. The percentage of overdue receivables was 14.6% at 30 June 2018 compared to 14.9% at end-2017.
Capital investments in tangible and intangible fixed assets equalled €16.3 million (H1 2017: €20.8 million) with around €7 million being invested in both the Netherlands and the United Kingdom. As well as the (routine) renovation of bulk silos a number of exceptional investments were made. The decision was taken in the Netherlands, for example, to reopen the (second) feed mill in Deventer to meet the growing demand for non-GMO feed. Work also started on the construction of a biomass plant in Lochem. The plant will produce steam by using wood chips from the surrounding area, a sustainable way of meeting a large part of the entire energy requirement of the production plant. The transport fleet in the United Kingdom was further modernised. The investments in Germany and Belgium mainly concerned maintenance and other routine investments.
Net cash flow from operating activities rose from €36.7 million to €40.1 million, mainly driven by the increased profit for the period.
ROACE1 increased from 23.4% to 26.3% as a result of the annualised impact of the reduction in working capital in 2017. The ratio based on underlying EBIT rose from 17.6% to 20.1%.
[1] ROACE is underlying EBITDA divided by 12-month average capital employed
| For the six months ended 30 June | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2018 | |||||||||
| In thousands of euro | The Netherlands |
Germany/Belgium | United Kingdom |
Group / | eliminations Consolidated | ||||
| Total Feed volume (in tons) | 2,243,252 | 1,133,877 | 1,448,152 | - | 4,825,281 | ||||
| Revenue | 567,994 | 287,727 | 321,634 | -35,793 | 1,141,562 | ||||
| Gross profit | 113,140 | 40,915 | 63,688 | -38 | 217,705 | ||||
| Other operating income | 4,695 | 5 | 387 | 3 | 5,090 | ||||
| Operating expenses | -76,835 | -34,340 | -58,530 | -7,936 | -177,641 | ||||
| Operating profit | 41,000 | 6,580 | 5,545 | -7,971 | 45,154 | ||||
| Gain on sale of investments and assets held for sale(1) | -4,509 | - | -413 | - | -4,922 | ||||
| Reversal impairment(2) | -484 | - | - | - | -484 | ||||
| Incidental items | -4,993 | - | -413 | - | -5,406 | ||||
| Underlying operating profit(3) | 36,007 | 6,580 | 5,132 | -7,971 | 39,748 | ||||
| Depreciation and amortisation(4) | 3,369 | 1,736 | 5,927 | 1,520 | 12,552 | ||||
| Underlying EBITDA(3) | 39,376 | 8,316 | 11,059 | -6,451 | 52,300 | ||||
| Underlying EBITDA / Gross profit(3) | 34.8% | 20.3% | 17.4% | 24.0% | |||||
| ROACE(5) | 52.9% | 22.7% | 11.1% | -7.4% | 26.3% | ||||
| ROACE(6) | 20.1% |
(1) Sale of agriculture activities to CZAV (NL) and supplementary payment on sale of a subsidiary (UK)
(2) Reopening second mill Deventer
(3) Underlying means excluding incidental items
(4) Excluding (reversal) impairment
(5) ROACE means underlying EBITDA divided by 12-month average capital employed; see Note 27 of the financial statements 2017.
(6) ROACE underlying EBIT divided by 12-month average capital employed
| 2017 | |||||
|---|---|---|---|---|---|
| In thousands of euro | The Netherlands |
Germany/Belgium | United Kingdom |
Group / | eliminations Consolidated |
| Total Feed volume (in tons) | 2,222,209 | 1,027,308 | 1,475,064 | - | 4,724,581 |
| Segment revenue | 560,022 | 267,836 | 315,651 | -32,903 | 1,110,606 |
| Gross profit | 110,212 | 36,139 | 60,754 | 208 | 207,313 |
| Other operating income | 180 | 169 | 152 | - | 501 |
| Operating expenses | -76,068 | -31,577 | -55,403 | -6,037 | -169,085 |
| Operating profit | 34,324 | 4,731 | 5,503 | -5,829 | 38,729 |
| Gain on sale of investments and assets held for sale | -115 | - | - | - | -115 |
| Restructuring cost (1) | - | 384 | - | - | 384 |
| Incidental items | -115 | 384 | - | - | 269 |
| Underlying operating profit(2) | 34,209 | 5,115 | 5,503 | -5,829 | 38,998 |
| Depreciation and amortisation(3) | 3,708 | 1,868 | 5,544 | 1,604 | 12,724 |
| Underlying EBITDA(4) | 37,917 | 6,983 | 11,047 | -4,225 | 51,722 |
| Underlying EBITDA / Gross profit(2) | 34.4% | 19.3% | 18.2% | 24.9% | |
| ROACE(4) | 46.2% | 16.2% | 12.3% | -7.4% | 23.4% |
| ROACE(5) | 17.6% |
(1) Introduction shared service center Continent Europe
(2) Underlying means excluding incidental items
(3) Excluding (reversal) impairment
(4) ROACE means underlying EBITDA divided by 12-month average capital employed; see Note 27 of the financial statements 2017.
(5) ROACE underlying EBIT divided by 12-month average capital employed
Average milk prices in Europe were lower compared to the historically high levels seen in the first half of 2017. This was due to an increase in European milk production, especially in the second half of 2017. However, milk production in the Netherlands declined in 2018 due to the reduction of the dairy herd.
Average pig prices in Europe were lower than last year when prices were well above the longer-term average. Prices started to fall in the second half of 2017 due to an increase in the pig population and a slowdown in exports from Europe because of increased competition from the United States.
At the beginning of the year average egg prices were high owing to the tight supply of eggs in the wake of the fipronil case especially in the Netherlands. Since then prices have come down again. Prices for broilers benefited from trade restrictions imposed on Brazil, which supplied around half of European imports.
| For the six months ended 30 June | ||||||
|---|---|---|---|---|---|---|
| In thousands of euro | 2018 | 2017 | ∆% | |||
| Total Feed volume (in tons) | 2,243,252 2,222,209 | 0.9% | ||||
| Revenue | 567,994 | 560,022 | ||||
| Gross profit | 113,140 | 110,212 | 2.7% | |||
| Other operating income | 4,695 | 180 | ||||
| Operating expenses | -76,835 | -76,068 | ||||
| Operating profit | 41,000 | 34,324 | 19.4% | |||
| Gain on sale of investments and assets held for sale(1) | -4,509 | -115 | ||||
| Reversal impairment(2) | -484 | - | ||||
| Incidental items | -4,993 | -115 | ||||
| Underlying operating profit(3) | 36,007 | 34,209 | ||||
| Depreciation and amortisation(4) | 3,369 | 3,708 | ||||
| Underlying EBITDA(3) | 39,376 | 37,917 | 3.8% | |||
| Underlying EBITDA / Gross profit(3) | 34.8% | 34.4% | ||||
| ROACE(5) | 52.9% | 46.2% |
(1) 2018 Relates to the agriculture activities to CZAV
(2) 2018: Reopening second mill Deventer
(3) Underlying means excluding incidental items (4) Excluding (reversal of) impairment
(5) ROACE means underlying EBITDA divided by 12-month average capital employed; see Note 27 of the financial statements 2017.
All livestock farmers were affected by the growing pressure being put on the agricultural sector by the government to achieve environmental targets. The measures imposed have forced many dairy farmers to reduce the size of their herds in order to lower phosphate emissions and to make additional investments to purchase phosphate rights. An outline agreement for the swine sector was announced recently; this 'Warm restructuring of pig farming' is aimed at innovating and restructuring the Dutch swine sector in order to improve the living environment in the so-called livestock-rich areas. For pig farmers this will mainly mean restrictions on odour nuisance and harmful emissions. The restructuring will be on a voluntary basis and will be implemented over the coming years.
Total Feed volume grew by 0.9% to 2.2 million tonnes. Likefor-like volume growth was 1.2%, including the contribution from the recently formed strategic partnership with Baks in the area of moist feed for pigs. The sale of the arable portfolio had a minimal impact on volume. There was a small increase in Total Feed volume in the ruminant sector. This was in spite of the reduction in the dairy herd compared to last year. More feed was sold in the swine sector as a result of factors including the introduction of specialist sales teams and the contribution from the partnership with Baks. Volumes were also up in the poultry sector, for both broilers and layers. Reudink, which caters exclusively to organic farmers, once again reported nice volume growth.
Gross profit rose by 2.7% with the increase being due to volume growth, more specialties in the product mix and the positive contribution from the strategic partnerships. Increased energy costs were passed on to customers. The gross profit also included a divestment impact.
Operating expenses increased by 1.0%. The rise in production and transport costs outpaced volume growth in
percentage terms but this was largely offset by lower pension costs, a release from the provision for bad debts and the reversal of the impairment in relation to the feed mill in Deventer.
Underlying EBITDA grew by 3.8% as a result of volume growth (0.9%), enhanced gross profit (2.7%) and the limited increase in operating expenses (1.0%). The underlying EBITDA/gross profit ratio increased from 34.4% to 34.8%.
| For the six months ended 30 June | |||||||
|---|---|---|---|---|---|---|---|
| In thousands of euro | 2018 | 2017 | ∆% | ||||
| Total Feed volume (in tons) | 1,133,877 | 1,027,308 | 10.4% | ||||
| Revenue | 287,727 | 267,836 | |||||
| Gross profit | 40,915 | 36,139 | 13.2% | ||||
| Other operating income | 5 | 169 | |||||
| Operating expenses | -34,340 | -31,577 | |||||
| Operating profit | 6,580 | 4,731 | 39.1% | ||||
| Gain on sale of investments and assets held for sale | - | - | |||||
| Restructuring cost (1) | - | 384 | |||||
| Incidental items | - | 384 | |||||
| Underlying operating profit(2) | 6,580 | 5,115 | |||||
| Depreciation and amortisation(3) | 1,736 | 1,868 | |||||
| Underlying EBITDA(2) | 8,316 | 6,983 | 19.1% | ||||
| Underlying EBITDA / Gross profit(2) | 20.3% | 19.3% | |||||
| ROACE(4) | 22.7% | 16.2% |
(1) 2017: Introduction shared service center Continent Europe
(2) Underlying means excluding incidental items
(3) Excluding (reversal of) impairment
(4) ROACE means underlying EBITDA divided by 12-month average capital employed; see Note 27 of the financial statements 2017.
In Germany the Düngeverordnung ('fertiliser ordinance') came into force, a regulation that aims to mitigate the environmental impact of phosphate and nitrate in the swine sector in particular and sets limits on how much manure farmers are allowed to disperse. This means extra costs for livestock farmers (in all sectors). Consumer demand for non-genetically modified (non-GMO) dairy products, and therefore demand for non-GMO feed, continues to increase in Germany.
In Belgium there is increasing consumer focus on both quality and provenance of foodstuffs and hence growing attention for restricting the use of antibiotics in feed. ForFarmers is actively involved in advising farmers on this topic. Moreover there is increasing demand for non-GMO
feed, at present in particular from goat and layer farmers.
In June 2018 ForFarmers announced its intention to acquire Voeders Algoet, a producer of swine and ruminant feed based in Zulte, Belgium. Completion of the transaction is expected in the next months. The acquisition will make ForFarmers the second largest feed company in Belgium and create new opportunities for achieving scale benefits.
Total Feed volume grew by 10.4% to 1.1 million tonnes with particularly strong growth in demand for DML products. This can partly be explained by the fact that the sale of DML products to Belgian customers is now accounted for in Belgium and no longer as part of the cluster the
Netherlands. In addition there were increased sales of compound feed and concentrates to existing and new clients. Low prices for cattle made for a challenging market in Belgium in particular. Despite this, volume sold to cattle farmers in this cluster increased thanks to the efforts of the reinforced sales team. Volume growth was also achieved in the slightly contracting swine sector partly as a result of the successful introduction of the NOVA concept for sows alongside the existing VIDA piglet feed range. There was also an increase in volume in the poultry sector.
Gross profit increased by €4.8 million or 13.2% to €40.9 million as a result of higher volumes, a better product mix with more specialties and the contributions from the strategic partnerships. Furthermore the increased energy prices were passed on to customers.
Total operating expenses were up by €2.8 million (8.8%). The increase in volume-related costs was smaller than volume growth (10.4%) despite the increase in energy prices. Personnel costs were higher. There was an addition to the provision for bad debts whilst the 2017 first-half results included a release from the provision.
Underlying EBITDA rose by 19.1% with the increase being the result of 10.4% growth in volume, a 13.2% rise in gross profit and an 8.8% increase in operating expenses. The underlying EBITDA/gross profit ratio rose from 19.3% to 20.3%.
| For the six months ended 30 June | ||||||
|---|---|---|---|---|---|---|
| In thousands of euro | 2018 | 2017 | ∆% | |||
| Total Feed volume (in tons) | 1,448,152 | 1,475,064 | -1.8% | |||
| Revenue | 321,634 | 315,651 | ||||
| Gross profit | 63,688 | 60,754 | 4.8% | |||
| Other operating income | 387 | 152 | ||||
| Operating expenses | -58,530 | -55,403 | ||||
| Operating profit | 5,545 | 5,503 | 0.8% | |||
| Gain on sale of investments and assets held for sale(1) | -413 | - | ||||
| Restructuring cost / Impairment non-current assets | - | - | ||||
| Incidental items | -413 | - | ||||
| Underlying operating profit(2) | 5,132 | 5,503 | ||||
| Depreciation and amortisation(3) | 5,927 | 5,544 | ||||
| Underlying EBITDA(2) | 11,059 | 11,047 | 0.1% | |||
| Underlying EBITDA / Gross profit(2) | 17.4% | 18.2% | ||||
| ROACE(4) | 11.1% | 12.3% |
(1) Supplementary payment on the sale of a subsidiary
(2) Underlying means excluding incidental items
(3) Excluding (reversal of) impairment
(4) ROACE means underlying EBITDA divided by 12-month average capital employed; see Note 27 of the financial statements 2017.
In the ruminant sector demand for performance feed increased, mainly because there was less roughage available than last year. The number of dairy farmers is declining whilst the dairy herd remains fairly stable. Milk prices were at a lower level than in the first half year of 2017.
The demand for pig meat is increasing. As a result pig
prices have started rising again. A recent large acquisition in the swine sector by one of the three largest processors is indicative of the ongoing consolidation in this sector. The poultry sector is seeing growing consumer interest in chicken meat and eggs.
Although the financial situation of livestock farmers has improved in the recent period, farmers (small and mediumsized farming businesses) remain reluctant to take investment decisions to grow their businesses, primarily because of the continuing uncertainty about the impact of Brexit.
Steady progress is being made with the business transformation in the United Kingdom. The merger of the ruminant sales teams to create a single commercial organisation has been completed and work is ongoing to build a clear market proposition. The policy in the swine sector is mainly focused on further margin improvement. The focus also remains on maintaining the reliability of the delivery service to customers at lower costs. The desired efficiency improvement has however not yet been realised. The previously announced objective of achieving cost savings of £5 million by 2020 (compared to 2016) remains in place.
Total Feed volume decreased by 1.8% to 1.4 million tonnes. The like-for-like decrease was 2.4%, mainly as a result of the decision to discontinue certain (loss-making) DML activities.
The acquisition of a dealer in May 2017 boosted volume by 0.6%.
Compound feed volume remained about stable. Volume in the ruminant sector was higher, particularly to dairy farmers. Volume was lost in the swine sector, primarily as a result of not extending contracts with low margins. Lower volumes were also sold to the poultry sector, where ForFarmers has a limited presence.
Reported gross profit rose by 4.8%; at constant currencies the increase was 7.2%. The increase was due to the implementation of the policy to enhance margins, the contribution from the strategic partners and the passing on of higher energy prices to customers.
Total operating expenses were up by 5.6%. At constant currencies the increase was 8.0%, with most of the rise being like-for-like. Production and transportation expenses rose mainly as a result of the higher energy prices. Furthermore additional costs were incurred as a result of having to use third-party logistics companies in order to be able to supply all customers at the time they requested. Depreciation increased, mainly as a result of the mill in Exeter becoming operational at the end of 2017.
Reported underlying EBITDA was virtually unchanged (+0.1%). Despite the decline in volume (-1.8%) the higher gross profit (+4.8%) was sufficient to absorb the higher operating expenses (5.6%). At constant currencies underlying EBITDA (including the acquisition impact) increased by 2.3%. The reported underlying EBITDA/gross profit ratio fell from 18.2% to 17.4%.
An amount of €0.4 million was received (earn-out) following the realisation of agreed targets in relation to the sale of a share participation in 2015. This was recognised as an incidental gain.
| For the six months ended 30 June | ||||||
|---|---|---|---|---|---|---|
| In thousands of euro | 2018 | 2017 | ∆% | |||
| Gross profit | -38 | 208 | -118.3% | |||
| Other operating income | 3 | - | ||||
| Operating expenses | -7,936 | -6,037 | ||||
| Operating profit | -7,971 | -5,829 | 36.7% | |||
| Gain on sale of investments and assets held for sale | - | - | ||||
| Restructuring cost / Impairment non-current assets | - | - | ||||
| Incidental items | - | - | ||||
| Underlying operating profit(1) | -7,971 | -5,829 | ||||
| Depreciation and amortisation(2) | 1,520 | 1,604 | ||||
| Underlying EBITDA(1) | -6,451 | -4,225 | 52.7% | |||
| ROACE(3) | -7.4% | -7.4% |
(1) Underlying means excluding incidental items
(2) Excluding (reversal of) impairment
(3) ROACE means underlying EBITDA divided by 12-month average capital employed; see Note 27 of the financial statements 2017.
Operating expenses are exclusive of overhead costs passed on to the operational clusters. The €1.9 million increase in central operating expenses was partly due to increased M&A advisory fees (€0.8 million) in connection with the planned acquisitions. IT expenses increased due to the further rollout of (new) applications to support various business processes.
ForFarmers formulated five sustainability objectives for three themes (Environment, People & Society, Animal health & Animal welfare) in conjunction with its stakeholders. KPIs are set for the objectives to 1) reduce phosphate emissions, 2) reduce green house gas emissions, 3) minimise the use of land, water and energy, 4) ensure safe and fair working conditions and 5) improve feed safety. Improving animal health and welfare is considered to be an integral part of Total Feed solutions.
The pressure on (dairy) farmers to reduce phosphate emissions is particularly large in the Netherlands. ForFarmers aims to improve the phosphate efficiency on farm through the supply of specific feed that leads to lower phosphate emissions and tools, such as calculator modules, with which farmers can measure the impact of business decisions on margin over purchased feed and phosphate efficiency and consequently on the carbon footprint.
Fitting the second objective, ForFarmers recently started a test with a special bulk truck that is fitted out with an electric pump to unload compoud feed ( in stead of using diesel) and as such is emission free. It is expected that up to 25% diesel usage per bulk truck can be saved daily. The decision to construct a biomass plant in Lochem fits both the second and third sustainability target. This installation will make it possible to produce steam by using wood chips from local sources and deploying the steam to largely meet the energy requirement of the mill in a sustainable manner.
With respect to the fourth objective: the focus on safe and good working conditions with the objective of reducing the number of LTIs (lost time incidents) remains undiminished. Safety training sessions again took place in the first half of 2018. Continuous attention was devoted to the health & safety policy by means of communication campaigns on the company intranet, as well as instructions which took place on the shop floor. Despite all this, the number of LTIs was 19% higher. In order to reduce the number of LTIs, all employees will need to adopt a safety-focused mentality and safety-first working practices.
The Nutrition Innovation Centre focuses on developing and improving feed concepts that improve the health of animals and consequently their performance. At the end of April 2018 Apollo was launched, a feed concept specially developed for healthy broilers to grow efficiently. A good start in life is a precondition for healthy and efficient growth of broilers and helps the farmer to improve his return. The Apollo concept is characterised by smart diet changes, which reduce the risk of stress or diseases for the birds and leads to an easier start and better feed conversion.
In early July 2018 ForFarmers announced that the acquisition of 60% of the shares of Polish company Tasomix had been completed. As a result ForFarmers is now operational in five countries. Tasomix is part of the cluster Germany/Belgium/Poland and new regions. ForFarmers made an initial cash payment of PLN 242 million (around €57.1 million). The second payment (for this 60% stake) will be made in 2021, with the amount (earn-out) being fully dependent on achieving specified operational targets with the new feed mill.
ForFarmers will fully consolidate the Tasomix results in its consolidated financial statements as of 1 July 2018. The Tasomix management remains in place so that the strengths of both companies can be optimally used. The purchase agreement includes call and put options on the remaining 40% of the shares.
In 2017 Tasomix produced 402kT of feed (2016: 395kT). Normalised revenues in 2017 were PLN 451 million (€105.9 million1 ) (2016: PLN 429 million, €98.3 million). Normalised EBITDA in 2017 was PLN 33 million (€7.8 million) (2016: PLN 34 million, €7.8 million). Results in the first half year of 2017 were impacted by a change in product mix due to the outbreak of bird flu.
The new feed mill in Pionki, with maximum capacity of 350kT, is currently producing its first compound feed concepts.
[1] All euro amounts are calculated based on the average exchange rates of the relating year (PLN versus euro)
In early July 2018 ForFarmers announced it was acquiring the compound feed activities of Maatman veevoeders. Through the transaction ForFarmers will gain a customer portfolio as well as a sales team with specific knowledge and experience primarily in the poultry sector but also in the ruminant sector in the Netherlands and Germany.
In 2017 Maatman sold 114kT of feed and fertiliser. The production of feed is outsourced to multiple parties, including ForFarmers (approximately 60% of total volume). The transport activities (15 bulk tankers) of Maatman are included in the transaction.
The transaction was recently approved by the German competition authorities. The activities of Maatman will be integrated into ForFarmers the Netherlands with effect from 3 September 2018.
The global tensions with respect to import tariffs could possibly have a positive impact on the European export of pig meat to China, Mexico, Japan and Canada. The unusual warm and dry summer could negatively impact the crop yields of some raw materials and that could lead to rising raw material and feed prices. This could have a negative influence on the liquidity of farmers. Ruminant farmers could possibly need more compound feed given the shortage of roughage on farm.
Like-for-like volume development in the Netherlands will most likely be impacted somewhat by the measures to reduce phophate emissions in the dairy sector. It is not yet clear what the exact impact will be of the measures that were recently announced for the swine sector in the Netherlands, as implementation is on voluntary basis.
In order to continue to support the strong growth for the mid-term in Germany, ForFarmers intends to construct a new feed mill (capacity of approximately 300kT) in Wesel, West Germany. ForFarmers will also continue to look for appropriate acquisition targets in Germany.
Market circumstances in the United Kingdom appear to be improving. In some cases, however, the UK business transformation leads to non renewal of low margin business contracts with customers, which could impact volumes. ForFarmers strives for a healthy price/quality ratio as well as a sustainable return for the products and services that the company delivers to its customers.
Furthermore, the announced acquisitions (Tasomix, Voeders Algoet and Maatman) are consolidated at closing, in the second half of this year.
ForFarmers reiterates its guidance for the medium term of an average annual increase in underlying EBITDA in the mid-single digits at constant currencies, excluding the impact of significant Acquisitions (i.e Tasomix) and barring unforeseen circumstances.
Pursuant to section 5:25d, paragraph 2(c), of the Dutch Financial Supervision Act (Wet op het financieel toezicht (Wft)), the Executive Board states that to the best of its knowledge the 2018 Interim financial statements, which comprise the Company and its subsidiaries (jointly 'the Group' or 'ForFarmers') and the Group's interest in its joint venture, give a true and fair view of the condensed consolidated statement of financial position, the condensed consolidated statement of profit or loss, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flows and the notes to the condensed consolidated financial statements.
This press release contains information that qualifies as inside information in the sense of Article 7 paragraph 1 of the EU Market Abuse Regulation.
Lochem, 16 August 2018
Executive Board ForFarmers N.V. Yoram Knoop, CEO Arnout Traas, CFO Jan Potijk, COO
Messrs Yoram Knoop (CEO), Arnout Traas (CFO) and Jan Potijk (COO) will present the ForFarmers 2018 half-year results today from 08.30 – 09.30 am. This can be followed via an audio webcast (in Dutch). To listen to the live audio webcast, you can log on via the corporate website www.forfarmersgroup.eu. The slides used during the presentation can be found on the corporate website. The audio webcast will be available on the website afterwards.
Messrs Yoram Knoop (CEO), Arnout Traas (CFO) and Jan Potijk (COO) will present the ForFarmers 2018 half-year results today from 10.00 – 11.00 am. This can be followed via an audio webcast (in English). To listen to the live audio webcast, you can log on via the corporate website www.forfarmersgroup.eu. The slides used during the presentation can be found on the corporate website. The audio webcast will be available on the website afterwards.
Caroline Vogelzang Director Investor Relations and Communications T: +31 6 10 94 91 61 E: [email protected]
ForFarmers N.V. ('ForFarmers', Lochem, the Netherlands) is an internationally operating feed company that offers total feed solutions for conventional and organic livestock farming. ForFarmers gives its very best "For the Future of Farming": for the continuity of farming and for a financially secure sector that will continue to serve society for generations to come in a sustainable way. By working sideby-side with farmers ForFarmers delivers real benefits: better returns, healthier livestock and greater efficiency. This is achieved by offering tailored and Total Feed solutions and a targeted approach with specialist and expert support.
ForFarmers is active in the Netherlands, Belgium, Germany and the United Kingdom and as of July 2018 also in Poland. With sales of approximately 9.6 million tonnes of feed annually, ForFarmers is market leader in Europe. In 2017 ForFarmers had 2,325 employees and revenues amounted to over €2.2 billion.
ForFarmers will be publishing its Q3 Trading Update on 1 November 2018.
ForFarmers N.V., Postbus 91, 7240 AB Lochem, T: +31 (0)573 28 88 00 , F: +31 (0)573 28 88 99 [email protected]/en/, www.forfarmersgroup.eu/en/
Enclosures: Half-year report 2018
REPORTING STANDARDS
The 2018 half-year report (incl. interim financial statements) will be available from 16 August 2018 on the ForFarmers website (www.forfarmersgroup.eu).
The results in this press release are derived from the ForFarmers 2018 half-year financial statements, which have not been audited by the external auditor, and have been drawn up in accordance with the International Financial Reporting Standards as adopted by the EU (IFRS).
General remark: presented percentages are calculated on the rounded amounts in million euro with one decimal.
In view of the fact that shares can be freely traded on EURONEXT Amsterdam, ForFarmers operates under the supervision of the Financial Markets Authority (AFM) and the company acts in accordance with the prevailing regulations for share-issuing companies.
| 01-11-2018 | Q3 2018 Trading Update |
|---|---|
| 13-03-2019 | Publication annual results 2018 |
| 26-04-2019 | Annual General Meeting of Shareholders |
| 02-05-2019 | Q1 2019 Trading update |
| 15-08-2019 | Publication first half-year 2019 results |
| 31-10-2019 | Q3 2019 Trading Update |
This press release contains forward-looking statements, including those relating to ForFarmers legal obligations in terms of capital and liquidity positions in certain specified scenarios. In addition, forward-looking statements, without limitation, may include such phrases as "intends to", "expects", "takes into account", "is aimed at", ''plans to", "estimated" and words with a similar meaning. These statements pertain to or may affect matters in the future, such as ForFarmers future financial results, business plans and current strategies. Forward-looking statements are subject to a number of risks and uncertainties, which may mean that there could be material differences between actual results and performance and expected future results or performances that are implicitly or explicitly included in the forward-looking statements. Factors that may result in variations on the current expectations or may contribute to the same include but are not limited to: developments in
legislation, technology, jurisprudence and regulations, share price fluctuations, legal procedures, investigations by regulatory bodies, the competitive landscape and general economic conditions. These and other factors, risks and uncertainties that may affect any forward-looking statements or the actual results of ForFarmers, are discussed in the last published annual report. The forwardlooking statements in this press release are only statements as of the date of this document and ForFarmers accepts no obligation or responsibility with respect to any changes made to the forward-looking statements contained in this document, regardless of whether these pertain to new information, future events or otherwise, unless ForFarmers is legally obliged to do so.
| 30 June | 31 December |
||
|---|---|---|---|
| In thousands of euro (before profit appropriation) | Note | 2018 | 2017 |
| Assets | |||
| Property, plant and equipment | 13 | 212,391 | 205,904 |
| Intangible assets and goodwill | 14 | 93,731 | 96,229 |
| Investment property | 830 | 830 | |
| Trade and other receivables | 22 | 8,354 | 9,298 |
| Equity-accounted investees | 15 | 23,205 | 24,018 |
| Deferred tax assets | 3,048 | 2,998 | |
| Non-current assets | 341,559 | 339,277 | |
| Inventories | 16 | 72,303 | 72,010 |
| Biological assets | 4,801 | 4,714 | |
| Trade and other receivables | 22 | 214,498 | 208,170 |
| Current tax assets | 1,370 | 86 | |
| Cash and cash equivalents | 22 | 149,978 | 161,297 |
| Assets held for sale | 17 | - | 1,737 |
| Current assets | 442,950 | 448,014 | |
| Total assets | 784,509 | 787,291 | |
| Equity | |||
| Share capital | 18 | 1,063 | 1,063 |
| Share premium | 143,554 | 143,554 | |
| Treasury share reserve | -61 | -55 | |
| Translation reserve | -6,469 | -5,692 | |
| Hedging reserve | -566 | - | |
| Other reserves and retained earnings | 237,165 | 207,878 | |
| Unappropriated result | 34,796 | 58,554 | |
| Equity attributable to shareholders of the Company | 409,482 | 405,302 | |
| Non-controlling interests | 4,976 | 4,629 | |
| Total equity | 414,458 | 409,931 | |
| Liabilities | |||
| Loans and borrowings | 22 | 39,152 | 44,508 |
| Employee benefits | 20 | 36,150 | 46,910 |
| Provisions | 1,567 | 2,249 | |
| Trade and other payables | 8,063 | 8,255 | |
| Deferred tax liabilities | 11,753 | 9,939 | |
| Non-current liabilities | 96,685 | 111,861 | |
| Bank overdrafts | 22 | 47,824 | 49,690 |
| Loans and borrowings | 22 | 27 | 28 |
| Provisions | 1,235 | 1,132 | |
| Trade and other payables | 22 | 221,038 | 206,982 |
| Current tax liability | 3,242 | 7,667 | |
| Current liabilities | 273,366 | 265,499 | |
| Total liabilities | 370,051 | 377,360 | |
| Total equity and liabilities | 784,509 | 787,291 | |
| For the six months ended 30 June |
||
|---|---|---|
| In thousands of euro Note |
2018 | 2017 |
| Revenue | 1,141,562 | 1,110,606 |
| Cost of raw materials and consumables | -923,857 | -903,293 |
| Gross profit 8 |
217,705 | 207,313 |
| Other operating income 9 |
5,090 | 501 |
| Operating income | 222,795 | 207,814 |
| Employee benefit expenses | -76,589 | -75,410 |
| Depreciation, amortisation and impairment 13 , 14 |
-12,068 | -12,724 |
| Other operating expenses | -88,984 | -80,951 |
| Operating expenses 10 |
-177,641 | -169,085 |
| Operating profit | 45,154 | 38,729 |
| Finance income | 500 | 863 |
| Finance costs | -1,728 | -1,666 |
| Net finance costs | -1,228 | -803 |
| Share of profit of equity-accounted investees, net of tax 15 |
1,062 | 1,849 |
| Profit before tax | 44,988 | 39,775 |
| Income tax expense 12 |
-9,845 | -9,178 |
| Profit for the year | 35,143 | 30,597 |
| Profit attributable to: | ||
| Shareholders of the Company | 34,796 | 30,423 |
| Non-controlling interests | 347 | 174 |
| Profit for the year | 35,143 | 30,597 |
| Earnings per share in euro(1) | ||
| Basic earnings per share | 0.35 | 0.29 |
| Diluted earnings per share | 0.35 | 0.29 |
| Underlying EBITDA 11 |
52,300 | 51,722 |
(1) Earnings per share attributable to ordinary equity holders of the parent
| For the six months ended 30 June |
||
|---|---|---|
| In thousands of euro Note |
2018 | 2017 |
| Profit for the year | 35,143 | 30,597 |
| Other comprehensive income | ||
| Items that will never be reclassified to profit or loss | ||
| Remeasurement of defined benefit liabilities | 20 8,511 |
174 |
| Equity-accounted investees - share of other comprehensive income | - | - |
| Related tax | -1,449 | -148 |
| 7,062 | 26 | |
| Items that are or may be reclassified to profit or loss | ||
| Foreign operations - foreign currency translation differences | -1,024 | -1,761 |
| Cash flow hedges - effective portion of changes in fair value | -754 | -12 |
| Cash flow hedges - reclassified to statement of profit or loss / statement of financial position | - | - |
| Related tax | 435 | 221 |
| -1,343 | -1,552 | |
| Other comprehensive income, net of tax | 5,719 | -1,526 |
| Total comprehensive income | 40,862 | 29,071 |
| Total comprehensive income attributable to: | ||
| Shareholders of the Company | 40,515 | 28,897 |
| Non-controlling interests | 347 | 174 |
| Total comprehensive income | 40,862 | 29,071 |
Attributable to shareholders of the Company
| In thousands of euro | Note | Share Capital |
Share premium |
Treasury share reserve |
Translation reserve |
Hedging reserve |
Other reserves and retained earnings |
Unap propriated result |
Total | Non controlling |
interest Total equity |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance as at 31 December 2017 |
1,063 | 143,554 | -55 | -5,692 | - | 207,878 | 58,554 | 405,302 | 4,629 | 409,931 | |
| IFRS 9 adjustment | 2 | - | - | - | - | - | -97 | - | -97 | - | -97 |
| Balance as at 1 January 2018 |
1,063 | 143,554 | -55 | -5,692 | - | 207,781 | 58,554 | 405,205 | 4,629 | 409,834 | |
| Addition from unappropriated result |
- | - | - | - | - | 58,554 | -58,554 | - | - | - | |
| Total comprehensive income | |||||||||||
| Profit | - | - | - | - | - | - | 34,796 | 34,796 | 347 | 35,143 | |
| Other comprehensive income |
- | - | - | -777 | -566 | 7,062 | - | 5,719 | - | 5,719 | |
| Total comprehensive income |
- | - | - | -777 | -566 | 7,062 | 34,796 | 40,515 | 347 | 40,862 |
Contributions and distributions
| Dividends | 18 | - | - | - | - | - -30,053 |
- | -30,053 | - | -30,053 |
|---|---|---|---|---|---|---|---|---|---|---|
| Purchase of own shares |
- | - | -6 | - | - -5,873 |
- | -5,879 | - | -5,879 | |
| Equity-settled share based payments |
- | - | - | - | - -306 |
- | -306 | - | -306 | |
| Total transactions with shareholders of the Company |
- | - | -6 | - | - -36,232 |
- | -36,238 | - | -36,238 | |
| Balance as at 30 June 2018 |
1,063 143,554 | -61 | -6,469 | -566 237,165 | 34,796 | 409,482 | 4,976 | 414,458 |
| Attributable to shareholders of the Company | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| In thousands of euro | Note | Share Capital |
Share premium |
Treasury share reserve |
Translation reserve |
Hedging reserve |
Other reserves and retained earnings |
Unap propriated result |
Total | Non controlling |
interest Total equity |
| Balance as at 1 January 2017 |
1,063 | 143,554 | -1 | -3,609 | 27 | 229,816 | 53,260 | 424,110 | 4,880 | 428,990 | |
| Addition from unappropriated result |
- | - | - | - | - | 53,260 | -53,260 | - | - | - | |
| Total comprehensive income | |||||||||||
| Profit | - | - | - | - | - | - | 30,423 | 30,423 | 174 | 30,597 | |
| Other comprehensive income |
- | - | - | -1,543 | -9 | 26 | - | -1,526 | - | -1,526 | |
| Total comprehensive income |
- | - | - | -1,543 | -9 | 26 | 30,423 | 28,897 | 174 | 29,071 | |
| Transactions with shareholders of the Company, recognised directly in equity Contributions and distributions |
|||||||||||
| Dividends | - | - | - | - | - | -25,716 | - | -25,716 | -1,000 | -26,716 | |
| Purchase of own shares |
- | - | -25 | - | - | -23,545 | - | -23,570 | - | -23,570 | |
| Adaptation par value shares |
- | - | - | - | - | - | - | - | - | - | |
| Equity-settled share based payments |
- | - | - | - | - | 61 | - | 61 | - | 61 | |
| Total transactions with shareholders of the Company |
- | - | -25 | - | - | -49,200 | - | -49,225 | -1,000 | -50,225 | |
| Balance as at 30 June 2017 |
1,063 143,554 | -26 | -5,152 | 18 233,902 | 30,423 | 403,782 | 4,054 | 407,836 |
| For the six months ended 30 June |
||
|---|---|---|
| In thousands of euro Note |
2018 | 2017 |
| Cash flows from operating activities | ||
| Profit for the year | 35,143 | 30,597 |
| Adjustments for: | ||
| Depreciation 13 |
9,698 | 9,542 |
| Amortisation 14 |
2,854 | 3,182 |
| Reversal of impairment losses on plant and equipment 13 |
-484 | - |
| Change in fair value of biological assets (unrealised) | - | 137 |
| Net (reversal of) impairment loss on trade receivables | -447 | -1,148 |
| Net finance costs | 1,228 | 803 |
| Share of profit of equity-accounted investees, net of tax | -1,062 | -1,849 |
| Gain on sale of property, plant and equipment / investment property | -327 | -342 |
| Gain on sale of participating interests 9 |
-413 | - |
| Gain on sale of assets held for sale 9 |
-4,509 | - |
| Equity-settled share-based payment expenses | 80 | 255 |
| Expenses related to post-employment defined benefit plans | 546 | 399 |
| Expenses related to long term incentive plans | 73 | 1,070 |
| Income taxes expense | 9,845 | 9,178 |
| 52,225 | 51,824 | |
| Changes in: | ||
| Inventories & biological assets | -357 | 3,324 |
| Trade and other receivables | -5,827 | -6,189 |
| Trade and other payables | 14,056 | 19,269 |
| Provisions and employee benefits | -3,912 | -15,722 |
| Cash generated from operating activities | 56,185 | 52,506 |
| Interest paid | -704 | -1,020 |
| Income taxes paid | -15,412 | -14,740 |
| Net cash from operating activities | 40,069 | 36,746 |
| Cash flows from investing activities | ||
| Interest received | 460 | 863 |
| Dividends received from equity-accounted investees | 2,123 | 2,426 |
| Proceeds from sale of property, plant and equipment / investment property | 1,311 | 1,128 |
| Proceeds from sale of participating interests, net of cash disposed 9 |
413 | - |
| Proceeds from sale of assets held for sale | 5,650 | - |
| Acquisition of subsidiary, net of cash acquired | - | -184 |
| Acquisition of property, plant and equipment 13 Acquisition of intangible assets 14 |
-15,881 -382 |
-20,182 -628 |
| Net cash used in investing activities | -6,306 | -16,577 |
| Cash flows from financing activities | ||
| Proceeds from purchase and sale of treasury shares | -5,879 | -20,031 |
| Proceeds from sale of treasury shares relating to employee participation plan | 1,503 | 2,335 |
| Repurchase of treasury shares relating to employee participation plan | -2,192 | -3,151 |
| Payment of financial lease | -17 | -158 |
| Redemption bank loan | -5,683 | - |
| Dividend paid 18 |
-29,077 | -25,716 |
| Net cash used in financing activities | -41,345 | -46,721 |
| Net increase/decrease in cash and cash equivalents | -7,582 | -26,552 |
| Cash and cash equivalents at 1 January(1) | 111,607 | 107,319 |
| Effect of movements in exchange rates on cash held | -1,871 | 454 |
| Cash and cash equivalents as at 30 June(1) | 102,154 | 81,221 |
(1) Net of bank overdrafts
ForFarmers N.V. (the 'Company') is a public limited company domiciled in the Netherlands. The Company's registered office is at Kwinkweerd 12, 7241 CW Lochem. The condensed consolidated interim financial statements ('interim financial statements') for the six months ended 30 June 2018 comprise ForFarmers N.V. and its subsidiaries (jointly the 'Group' or 'ForFarmers') and the Group's interest in its joint venture.
ForFarmers N.V. is an international organisation that offers nutritional solutions for both conventional and organic livestock farms. ForFarmers gives its very best 'For the Future of Farming': for the continuity of farming and for a financially secure sector.
The interim financial statements were authorised for issuance by the Executive Board and Supervisory Board on 16 August 2018.
The interim financial statements in this report have not been audited.
These interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting, and should be read in conjunction with the Group's last annual consolidated financial statements as at and for the year ended 31 December 2017 ('last annual financial statements'), which were prepared in accordance with International Financial Reporting Standards as adopted by the European Union (EUIFRSs, hereafter stated as IFRS) and section 2:362 sub 9 of the Netherlands Civil Code.
The interim financial statements do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to understand the changes in the Group's financial position and performance since the last annual financial statements. The accounting policies applied in these interim financial statements are the same as those applied in the last annual financial statements, except for the adoption of IFRS 9 (financial instruments) and IFRS 15 (revenue from contracts with customers) as of 1 January 2018.
IFRS 9 introduces new requirements for classification and measurement, impairment and hedge accounting of financial instruments. The transition to IFRS 9 resulted in an impact of €97 thousand (net of taxes), which has been recorded in retained earnings at 1 January 2018. Refer to the condensed consolidated statement of changes in equity.
IFRS 15 establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15 revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The Group has adopted IFRS 15 using the socalled cumulative effect method.
For explanatory notes on the standards issued but not yet effective reference is made to Note 26.
The interim financial statements were prepared in accordance with the going concern principle.
When necessary prior year amounts have been adjusted to conform to the current year presentation.
These interim financial statements are presented in euro, which is the Company's functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated. The subsidiaries' functional currencies are mainly the euro and Pound sterling. Most of their transactions, and resulting balance occur in their local and functional currency.
The following exchange rates have been applied:
| €1,00 = |
|---|
| £0.8562 |
| £0.8793 |
| £0.8872 |
| £0.8861 |
| PLN4.3732 |
| €1,00 = |
| £0.8606 |
| £0.8798 |
In preparing these interim financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.
The significant judgements made by management in applying the Group's accounting policies and the key sources of uncertainties with respect to estimates were the same as those applied to the last annual financial statements.
A number of the Group's accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.
'Fair value' is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.
When one is available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.
If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants
would take into account in pricing a transaction.
If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and long positions at a bid price and liabilities and short positions at an ask price.
The best evidence of the fair value of a financial instrument on initial recognition is normally the transaction price – i.e. the fair value of the consideration paid or received. If the Group determines that the fair value on initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique for which any unobservable inputs are judged to be insignificant in relation to the measurement, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value on initial recognition and the transaction price. Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.
The Group has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the CFO.
The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which the valuations should be classified.
Significant valuation issues are reported to the Group's Audit Committee.
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.
● Level 1: quoted prices (unadjusted) in active market to identical assets or liabilities. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing
information on an ongoing basis.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
A. Basis for segmentation
The Group has the following three strategic clusters, which are its operating and reportable segments:
The Group's products include, amongst other things, compound feed and blends, feed for young animals and specialities, raw materials and coproducts, seeds and fertilisers. Core activities are feed production, logistics and providing Total Feed solutions based on nutritional expertise.
The clusters offer similar products and services and have comparable production processes and methods to distribute products. However, as the clusters are managed separately and are also subject to different currencies (i.e. UK cluster versus the remaining clusters), the operating segments are not aggregated.
This allocation is consistent with the organisation structure and internal management reporting and also represents the geographical regions in which the Group operates. The corporate headquarters of the Group is in Lochem, The Netherlands.
The Group's Executive Committee reviews internal
management reports of each cluster on a monthly basis, and its members are jointly considered as the chief operating decision making body.
There are various levels of integration between the segments. This integration also includes transfers of inventories and shared distribution services, respectively. Inter-segment pricing is determined on an arm's length basis.
B. Information of reportable segments Information related to each reportable segment is set out below. The segment operating result represents the earnings before interest and income tax, and is used to
measure performance. Management believes that this measure is the most relevant in evaluating the results of the respective segments relative to other entities that operate in the same industries.
For the six months ended 30 June 2018
| In thousands of euro | The | Netherlands Germany/Belgium | United Kingdom |
Group / | eliminations Consolidated |
|---|---|---|---|---|---|
| External revenues | 533,416 | 286,512 | 321,634 | - | 1,141,562 |
| Inter-segment revenues | 34,578 | 1,215 | - | -35,793 | - |
| Revenue | 567,994 | 287,727 | 321,634 | -35,793 | 1,141,562 |
| Gross profit | 113,140 | 40,915 | 63,688 | -38 | 217,705 |
| Other operating income | 4,695 | 5 | 387 | 3 | 5,090 |
| Operating expenses | -76,835 | -34,340 | -58,530 | -7,936 | -177,641 |
| Operating profit | 41,000 | 6,580 | 5,545 | -7,971 | 45,154 |
| Depreciation, amortisation and impairment | 2,885 | 1,736 | 5,927 | 1,520 | 12,068 |
| EBITDA | 43,885 | 8,316 | 11,472 | -6,451 | 57,222 |
| Property, plant and equipment | 86,599 | 36,353 | 85,431 | 4,008 | 212,391 |
| Intangible assets and goodwill | 42,751 | 4,797 | 41,968 | 4,215 | 93,731 |
| Equity-accounted investees | - | 23,205 | - | - | 23,205 |
| Other non-current assets | 2,023 | 7,299 | 2,315 | 595 | 12,232 |
| Non-current assets | 131,373 | 71,654 | 129,714 | 8,818 | 341,559 |
| Current assets | 221,866 | 141,900 | 114,481 | -35,297 | 442,950 |
| Total assets | 353,239 | 213,554 | 244,195 | -26,479 | 784,509 |
| Equity | -210,532 | -85,162 | -49,194 | -69,570 | -414,458 |
| Liabilities | -142,707 | -128,392 | -195,001 | 96,049 | -370,051 |
| Total equity and liabilities | -353,239 | -213,554 | -244,195 | 26,479 | -784,509 |
| Capital expenditure(1) | 6,125 | 2,092 | 7,283 | 763 | 16,263 |
| Working Capital | 10,399 | 26,792 | 33,635 | -3,396 | 67,430 |
| Underlying EBITDA(2) | 39,376 | 8,316 | 11,059 | -6,451 | 52,300 |
| Underlying EBITDA / Gross profit | 34.8% | 20.3% | 17.4% | 24.0% |
For the six months ended 30 June 2017
| In thousands of euro | The | Netherlands Germany/Belgium | United Kingdom |
Group / | eliminations Consolidated |
|---|---|---|---|---|---|
| External revenues | 528,219 | 266,716 | 315,651 | 20 | 1,110,606 |
| Inter-segment revenues | 31,803 | 1,120 | - | -32,923 | - |
| Revenue | 560,022 | 267,836 | 315,651 | -32,903 | 1,110,606 |
| Gross profit | 110,212 | 36,139 | 60,754 | 208 | 207,313 |
| Other operating income | 180 | 169 | 152 | - | 501 |
| Operating expenses | -76,068 | -31,577 | -55,403 | -6,037 | -169,085 |
| Operating profit | 34,324 | 4,731 | 5,503 | -5,829 | 38,729 |
| Depreciation, amortisation and impairment | 3,708 | 1,868 | 5,544 | 1,604 | 12,724 |
| EBITDA | 38,032 | 6,599 | 11,047 | -4,225 | 51,453 |
| At 31 December 2017 | |||||
| Property, plant and equipment | 82,860 | 36,288 | 82,572 | 4,184 | 205,904 |
| Intangible assets and goodwill | 43,309 | 4,772 | 43,351 | 4,797 | 96,229 |
| Equity-accounted investees | - | 24,018 | - | - | 24,018 |
| Other non-current assets | 2,378 | 7,424 | 98 | 3,226 | 13,126 |
| Non-current assets | 128,547 | 72,502 | 126,021 | 12,207 | 339,277 |
| Current assets | 191,384 | 167,072 | 101,787 | -12,229 | 448,014 |
| Total assets | 319,931 | 239,574 | 227,808 | -22 | 787,291 |
| Equity | -180,419 | -78,753 | -38,226 | -112,533 | -409,931 |
| Liabilities | -139,512 | -160,821 | -189,582 | 112,555 | -377,360 |
| Total equity and liabilities | -319,931 | -239,574 | -227,808 | 22 | -787,291 |
| Working Capital | 14,403 | 24,131 | 41,270 | -10,635 | 69,169 |
| For the six months ended 30 June 2017 | |||||
| Capital expenditure(1) | 6,934 | 2,332 | 10,341 | 1,203 | 20,810 |
| Underlying EBITDA(2) | 37,918 | 6,983 | 11,047 | -4,226 | 51,722 |
| Underlying EBITDA / Gross profit | 34.4% | 19.3% | 18.2% | 24.9% |
(1) Relating to Intangible assets and property, plant and equipment (2) Underlying EBITDA' is EBITDA excluding incidental items.
The reconciliation between the clusters' operating results and the Group's profit before tax is as follows:
| For the six months ended 30 June |
||||
|---|---|---|---|---|
| In thousands of euro | Note | 2018 | 2017 | |
| Segment operating profit | 45,154 | 38,729 | ||
| Finance income | 500 | 863 | ||
| Finance costs | -1,728 | -1,666 | ||
| Share of profit of equity accounted investees, net of tax |
1,062 | 1,849 | ||
| Profit before tax | 44,988 | 39,775 |
The column Group / eliminations represents and includes amounts as a result of Group activities and eliminations in the context of the consolidation.
Other non-current assets include investment property, non-current trade and other receivables and deferred tax assets.
Working capital consists of inventories, biological assets, current trade and other receivables less current liabilities.
The Group is not reliant on any individual major customers.
There is no significant seasonal pattern when comparing the first with the second half of a year.
There were no significant acquisitions in the six months ended 30 June 2018. Refer to Note 25 for the (announced) acquisitions of the second half year.
On 25 May 2017 the Group acquired full control of Wilde Agriculture Ltd. The purchase consideration amounts to €2.0 million of which €0.5 million is a contingent consideration. The provisional fair values of the acquired assets has been determined at €2.1 million, including €0.9 million cash and cash equivalents. The provisional fair values of the assumed liabilities amount to €0.6 million. The related goodwill of €0.5 million is mainly attributable to the anticipated synergy benefits with the integration of Wilde Agriculture Ltd within the United Kingdom cluster.
The goodwill has, therefore, been allocated to this cluster. This acquisition does not have a material effect on the Group in the context of the disclosure requirements of IFRS 3 Business Combinations. The fair values of the identifiable assets and liabilities of Wilde Agriculture Ltd. as at the date of acquisition did not change and have become final.
In the six months ended 30 June 2018 ForFarmers disposed its agriculture activities to CZAV. This concerns nonlivestock feed related products (e.g. fertilizers, crop protection products and seeds) that ForFarmers supplies to Dutch farmers. CZAV acquired these activities and the associated storage facility on 5 February 2018. ForFarmers received €5.7 million on the completion date of the transaction, which resulted in a gain of €4.5 million.
There were no disposals in the six months ended 30 June 2017.
Gross profit increased compared to the six months ended 30 June 2017. Excluding the negative foreign currency effect (€1.3 million) and net acquisition/divestment effect (€1.2 million negative) gross profit increased by €12.9 million.
The other operating income in the six months ended 30 June 2018 mainly relates to the sale of the agriculture activities to CZAV. ForFarmers received €5.7 million on the completion date of the transaction, which resulted in a gain of €4.5 million. Furthermore, Forfarmers received a supplementary payment of €0.4 million for the sale of a subsidiary (2015) in the United Kingdom.
The increase in total operating expenses amounting to €8.6 million contains a negative foreign currency effect (€1.2 million) and net acquisition/divestment effect (€0.2 million). Without these effects the operating expenses increased by €9.6 million, due to higher energy costs, diesel and freight costs and an increase in costs for IT licenses. The annual increase in personnel costs is partly compensated by lower pension costs.
For the six months ended 30 June 2017 the operating expenses include an incidental item of €0.4 million, which relates to restructuring costs recognised under employee benefit expenses due to a project to centralise back office activities.
The Executive Committee presented the 'Underlying EBITDA' as a performance measure, as they follow this performance measure on a consolidated level and they believe that this measurement is relevant to understand the Group's financial performance. The definition of Underlying EBITDA is similar to the annual report 2017. Underlying EBITDA is not a performance measurement under IFRS. The Group's definition of underlying EBITDA may not be compared to similarly titled performance measures and disclosures of other entities. The increase of Underlying EBITDA is caused by a higher increase in the margin than the costs.
Income tax expense is recognised based on management's best estimate of the weighted-average annual income tax rate expected for the full financial year multiplied by the pre-tax income (excluding the share of the result participation accounted for based on the equity method, after taxes) of the interim reporting period.
The Group's consolidated effective tax rate for the six months ended 30 June 2018 is 22.4% (six months ended 30 June 2017: 24.2%). The lower effective tax rate is the result of an adjusted valuation of deferred tax assets in Germany and an acceleration effect on tax benefits regarding specific investments in the United Kingdom.
Movements on property, plant and equipment during the six months ended 30 June 2018 are specified as follows:
| In thousands of euro | Total |
|---|---|
| Cost | |
| Balance as at 1 January 2018 | 443,886 |
| Acquisitions through business combinations | - |
| Divestments | - |
| Additions | 15,881 |
| Reclassification from intangible assets | 107 |
| Disposals | -1,255 |
| Other movement | 1,235 |
| Effect of movements in exchange rates | 74 |
| Balance as at 30 June 2018 | 459,928 |
| Balance as at 30 June 2018 | -247,537 |
|---|---|
| Effect of movements in exchange rates | 43 |
| Other movement | -1,235 |
| Disposals | 867 |
| Reclassification from intangible assets | -16 |
| (Reversal of) impairment losses on plant and equipment |
484 |
| Depreciation | -9,698 |
| Divestments | - |
| Balance as at 1 January 2018 | -237,982 |
| At 1 January 2018 | 205,904 |
|---|---|
| At 30 June 2018 | 212,391 |
The investments mainly consist of trucks (€3.1 million), investments in the new production facility Exeter (€1.9 million), a new process control system (€1.4 million) and the reopening of the second feed mill in Deventer (€0.8 million). Depreciation contains a reversal of impairment of €0.5 million in relation to the reopening of a second mill in Deventer (Netherlands).
The other movement relates to the reversal of the impairment of the reopened mill in Deventer. This other movement has no impact on the originial book value of the tangible fixed assets.
Movements on intangible assets and goodwill during the six months ended 30 June 2018 are specified as follows:
| Intangible | |||
|---|---|---|---|
| In thousands of euro | Goodwill | assets | Total |
| Cost | |||
| Balance as at 1 January 2018 |
63,929 | 32,300 | 96,229 |
| Acquisitions through business combinations |
- | - | - |
| Divestments | - | - | - |
| Additions | - | 382 | 382 |
| Reclassification to property, plant and equipment |
- | -107 | -107 |
| Disposals | - | -107 | -107 |
| Effect of movements in exchange rates |
29 | 50 | 79 |
| Balance as at 30 June 2018 |
63,958 | 32,518 | 96,476 |
| Balance as at 1 January 2018 |
- | - | - |
|---|---|---|---|
| Divestments | - | - | - |
| Amortisation | - | -2,854 | -2,854 |
| Reclassification to property, plant and equipment |
- | 16 | 16 |
| Disposals | - | 107 | 107 |
| Effect of movements in exchange rates |
- | -14 | -14 |
| Balance as at 30 June 2018 |
- | -2,745 | -2,745 |
| Carrying amounts | |||
| At 1 January 2018 | 63,929 | 32,300 | 96,229 |
| At 30 June 2018 | 63,958 | 29,773 | 93,731 |
Goodwill acquired through business combinations with indefinite lives is allocated to the Netherlands, Germany / Belgium and United Kingdom, which are also operating and reportable segments, for impairment testing. The Group performed its annual impairment test in the third quarter of 2017 for 2017. For the six months ended 30 June 2018 no indicators for potential impairment were identified for goodwill nor for other intangible assets.
The amounts under equity-accounted investees (€23,205 thousand as per 30 June 2018, respectively €24,018 thousand as per 31 December 2017) fully relate to HaBeMa Futtermittel Produktions- und Umschlagsgesellschaft GmbH & Co. KG (HaBeMa), the only joint venture in which the Group participates. HaBeMa is one of the Group's
suppliers and is principally engaged in trading of raw materials, storage and transhipment, production and delivery of compound feeds in Hamburg, Germany.
HaBeMa is structured as a separate vehicle and the Group has a residual interest in the net assets of the entity. Accordingly and consistent with the last annual financial statements, the Group has classified its interest in HaBeMa as a joint venture. The Group does not have any commitments or contingent liabilities relating to HaBeMa, except for the purchase commitments of goods as part of the normal course of business.
At 30 June 2018 the total amount of inventories increased slightly compared to 31 December 2017. During the six months ended 30 June 2018 there were no material inventory write-downs recognised in the statement of profit or loss (six months ended 30 June 2017: idem).
At the end of 2017 a number of transportation vehicles were classified as assets held for sale due to the announced strategic partnership between ForFarmers and Baks. Furthermore, a storage facility, customer relationships and goodwill were classified as assets held for sale based on the announced sale of the agriculture activities to CZAV. During the six months ended 30 June 2018 these assets have been sold. Refer to Note 7 and 9 for more details.
At 30 June 2018, the authorised share capital comprised 106,261,040 ordinary shares and 1 priority share of €0.01 each. At the balance sheet date all shares were issued and fully paid.
At the General Meeting of 26 April 2018 the dividend was approved at €0.30 per share, which resulted in a total dividend of €30.1 million (including dividend taxes to be paid to the tax authorities).
In accordance with the dividend policy the payable dividend is offset with outstanding Group trade receivables and the receivable from the Coöperatie FromFarmers U.A. This results in an actual payment of dividend (including dividend tax to be paid to the tax authorities) in 2018 of €29.1 million.
The treasury shares are not entitled to dividend.
During the six months ended 30 June 2018 the Group has completed the share buy-back programme, which has been disclosed in the notes of the last annual financial statements. At 30 June 2018 the treasury shares amounted to €60.0 million (including purchasing costs).
On 26 April 2018, the Group launched two employee participation plans. One plan relates to members of the Executive Committee and senior management, the other plan relates to other employees. For both plans the participants are required to remain in service for 36 consecutive months to be entitled to the discount on the depositary receipts being purchased. The employee is entitled to buy depositary receipts at a discount between 13.5% and 20% on the fair value of the depositary receipt at the grant date, for which additional depositary receipts are provided. The conditions of both plans are consistent with the participation plans applicable for 2017 which have been disclosed in the notes of the last annual financial statements.
During the six months ended 30 June 2018, 46 employees (of which 11 foreign employees) participated in the participation plan for the Executive Committee and senior management and 583 employees (of which 143 foreign employees) participated in the participation plan for other employees.
The value of the depositary receipts of the Company, for which the employee could buy their depositary receipts, was determined as the average closing price in the 5 trading days during the period 2 May - 8 May 2018 and amounted to €11.72. The foreign employee tax obligations is based on the fair value of the depositary receipts on settlement date.
The total number of participants of all active employee participation plans comprises 26.7% of the total number of the Group's employees.
Consistent with the last annual financial statements, separate employee benefit plans are applicable in the various countries where the Group operates.
| In thousands of euro | 30 June 2018 |
31 December 2017 |
|---|---|---|
| Liability for net defined benefit obligations |
31,105 | 41,686 |
| Liability for other long-term service plans |
5,045 | 5,224 |
| Total | 36,150 | 46,910 |
The following table shows a reconciliation from the opening balance to the closing balances for the net defined benefit liability and its components.
| In thousands of euro | Total net defined benefit liability |
|---|---|
| Balance at 1 January 2018 | 41,686 |
| 1,007 | |
|---|---|
| Interest cost (income) | 461 |
| Administrative expenses | 342 |
| Current service cost | 204 |
| Remeasurement gain | -8,511 |
|---|---|
| Effect of movements in exchange rates | 106 |
| -8,405 | |
| Other | |
| Employer contributions (to plan assets) | -3,183 |
| -3,183 | |
| Balance as at 30 June 2018 | 31,105 |
Gains as results of remeasurements of €8.5 million is mostly caused by actuarial gains due to the increased interest rate in the United Kingdom for the six months ended 30 June 2018.
The decrease of the provisions is mainy due to the release of the provision for onerous contracts on a rent agreement as a result of the decision to use the warehouse till the end of the rent contract.
The following table shows the carrying amounts and fair
values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
| Carrying amount | Fair value | |||||||
|---|---|---|---|---|---|---|---|---|
| In thousands of euro | Mandatory at FVTPL - others(1) |
Fair value - hedging instruments |
Amortized costs |
Total | Level 1 | Level 2 | Level 3 | Total |
| Financial assets measured at fair value | ||||||||
| Forward exchange contracts used for hedging (derivatives) |
- | - | - | - | ||||
| Fuel swaps used for hedging (derivatives) |
- | - | - | - | ||||
| - | - | - | - | - | - | |||
| Financial assets not measured at fair value | ||||||||
| Equity securities (other investments) |
- | - | 28 | 28 | ||||
| Trade and other receivables(2) | - | - | 222,824 | 222,824 | ||||
| Cash and cash equivalents | - | - | 149,978 | 149,978 | ||||
| - | - | 372,830 | 372,830 | |||||
| Financial liabilities measured at fair value | ||||||||
| Contingent consideration | -8,063 | - | - | -8,063 | -8,063 | -8,063 | ||
| Financial liabilities not measured at fair value | ||||||||
| Bank overdrafts | - | - | -47,824 | -47,824 | ||||
| Unsecured bank loans | - | - | -39,089 | -39,089 | ||||
| Finance lease liabilities | - | - | -90 | -90 | ||||
| Trade and other payables(3) | - | - | -221,038 | -221,038 | ||||
| - | - | -308,041 | -308,041 | -8,063 | -8,063 |
(1) Fair value through profit and loss
(2) Excluding derivatives and other investments
(3) Excluding contingent consideration
The following table show the valuation technique used in measuring Level 2 fair values, as well as the significant unobservable inputs used.
| Type | Valuation technique | Significant unobservable inputs |
|---|---|---|
| Forward exchange contracts |
Forward pricing: The fair value is determined using quoted forward exchange rates at the reporting date and present value calculations based on high credit quality yield curves in the respective currencies. |
Not applicable. |
| Interest rate swaps and fuel swaps |
The Group enters into derivative financial instruments with financial institutions with investment grade credit ratings. Derivative financial instruments are valued using valuation techniques, which employs the use of market observable inputs. The most frequently applied valuation techniques include swap models, using present value calculations. |
Not applicable. |
| Contingent consideration | Discounted cash flows: The valuation model considers the present value of expected payment, discounted using a risk-adjusted discount rate. The expected payment is determined by considering the possible scenarios of forecast sales volume, the amount to be paid under each scenario and the probability of each scenario. |
• Forecast annual sales volume growth rate. • Forecast receipts gross trade receivables. • Risk-adjusted discount rate. The estimated fair value would increase (decrease) if: • the annual sales volume growth rate were higher (lower); • the receipts of the gross trade receivables vary positive (negative) from the standard payment terms; or • the risk-adjusted discount rate were lower (higher). |
| Type | Valuation technique | Significant unobservable inputs |
|---|---|---|
| Equity securities (non current) |
For investments in equity instruments that do not have a quoted market price in an active market for an identical instrument (i.e. a Level 1 input) disclosures of fair value are not required. |
Not applicable. |
| Loans and receivables (non-current) |
Discounted cash flows. | Not applicable. |
| Cash, trade and other receivables and other financial liabilities (current) |
Given the short term of these instruments, the carrying value is close to the market value. |
Not applicable. |
| Other financial liabilities (non-current) |
Discounted cash flows. The fair value of the long-term debts is equal to the carrying value as floating market-based interest rates are applicable consistent with the financing agreement. |
Not applicable. |
The decrease of the cash and cash equivalents to €150.0 million (31 December 2017: €161.3) is mainly due to the dividend payment of €29.1 million, redemption of the external loans of the United Kingdom (€5.7 million) and the redemption of the bank overdrafts of ForFarmers International of €24.0 million. As a result the bank overdrafts decreased accordingly.
During the six months ended 30 June 2018 the Group has entered into derivatives to hedge the risks associated with the acquisition of Tasomix (refer to Note 25). In the frame of these cash flow hedges, maturities relate to realisation dates of hedged items and therefore cash flow hedge accounting is applied. The remaining contractual maturities of these derivatives were settled at 28 June 2018 and the payment to Tasomix has been made on 2 July 2018.
The total future minimum rentals payable under noncancellable operating leases increased to €25.0 million (31 December 2017: €16.3 million). The increase is mainly due to increases in lease payments and extensions of rent periods of factory locations in the United Kingdom.
The other commitments and contingencies, as disclosed in the last annual financial statements, did not change materially during the six months ended 30 June 2018.
During the six months ended 30 June 2018 there were no material changes in respect of the nature and size of the related parties compared with the last annual financial statements.
Following the announcement on 20 February last, ForFarmers ('ForFarmers') announces that it is operational in Poland through Tasomix, as of 3 July 2018, as all conditions for closing the earlier announced 60% share purchase transaction have been fulfilled including approval by the competition authorities. Through this transaction ForFarmers is operational in five countries and has taken another step in strengthening its position as the leading feed company in Europe.
ForFarmers has paid PLN 242 million (currently approximately €57.1 million) in cash and has received 60% of the shares. This first payment comprises two operational mills, a new head office and an initial payment for the new feed mill under construction. A second payment ('earnout') for this transaction (i.e. the 60% stake in Tasomix) will be made in 2021, the amount of which fully depends on specified operational targets to be delivered by the new feed mill and will be measured at fair value. ForFarmers will fully consolidate the Tasomix results in its consolidated financial statements as of 1 July 2018, but shall run the company as a true joint venture cross leveraging the strengths of both companies. The agreement includes a call and put option for the remaining 40% shares.
Tasomix, mainly active in the poultry sector, has strong management and some 250 employees. The company operates two production facilities (in Biskupice and Kaboro) with a joint capacity of approximately 450kT and is currently manufacturing its first quantities of feed in its new facility in Pionki. In 2017, Tasomix produced 402kT feed, mainly for poultry farmers, but also for ruminant and pig farmers. The head office of Tasomix is located next to the largest mill in Biskupice (south west of Warsaw). The new feed mill in Pionki (south of Warsaw) has a maximum capacity of approximately 350kT. This mill will manufacture feed for a dedicated poultry integrator, which is linked to the owners of Tasomix. The agreement has been signed. The mill will also serve non-integrated poultry farmers and pig farmers.
Tasomix provides ForFarmers access to a European market with an above average growth rate in the attractive poultry sector. In recent years, Poland has become the largest broiler producing country in Europe, serving the local market and exporting to mostly EU countries. ForFarmers sees opportunities to benefit from the expertise within Tasomix and to leverage its capabilities in Poland. This transaction is in line with ForFarmers' Horizon 2020 strategy to grow both organically and through acquisitions in Europe and surrounding regions and strengthens ForFarmers' poultry proposition.
ForFarmers is acquiring Voeders Algoet, a feed company established in Zulte, close to the Belgian ForFarmers sites. As a result, ForFarmers strengthens its position as feed company in Belgium with the offer of Total Feed solutions.
Voeders Algoet sells around 150,000 tonnes of compound feed to swine and ruminant farmers. In the split financial year (1 July to 30 June) 2016/2017, the company generated sales of approximately €40 million with an operating result before amortisation and depreciation (EBITDA) of approximately €2 million.
ForFarmers will pay approximately 7 times Voeders Algoet's EBITDA. Closing of the transaction is expected to take place in the second half year of 2018, pending, amongst others, approval from the Belgian competition authorities. Voeders Algoet's results will be consolidated in the results of ForFarmers as of closing date. Voeders Algoet's current management and 22 staff form part of the transaction. In addition, 12 bulk trailers are included in the acquisition. As a result, ForFarmers is starting its own transport activities in Belgium. Voeders Algoet will be integrated into ForFarmers Belgium. Over time, Voeders Algoet's feed production will probably be transferred to the current ForFarmers factories in Izegem and Ingelmunster.
ForFarmers acquires the compound feed activities of Maatman veevoeders en kunstmest VOF ('Maatman'), which is primarily active in the poultry sector but also in the ruminant sector in the Netherlands and Germany. Through this transaction, ForFarmers acquires a customer portfolio and a sales team with specific knowledge and experience.
Maatman has 16 staff members, including the current two managers who are also owners of the company. In 2017, Maatman sold 114,000 tonnes feed and fertilizer to poultry and ruminant farmers. The production of feed is outsourced to multiple parties, amongst which ForFarmers (approximately 60% of total volume). The transport activities (15 bulk tankers) of Maatman are part of the transaction.
ForFarmers is paying Maatman a price for the assets/liabilities transaction based on an enterprise value of €7 million, which amounts to an EBITDA multiple of approximately 7. Payment will largely take place at closing of the transaction and the remainder after meeting certain targets ('earn-out'). The transactions was recently approved by the German competition authorities. The activities of Maatman will be integrated into ForFarmers the Netherlands with effect from 3 September 2018.
New standards and amendments to standards issued but not yet effective as of the date of publication of these Group's interim financial statements are set out below. The listing of standards and interpretations issued are those that the Group reasonably expects to have an impact on disclosures, financial position or performance when applied at a future date. The Group shall adopt these standards and interpretations when they become effective and are endorsed by the European Union (EU).
For lessees, IFRS 16 (issued on 13 January 2016) requires most leases to be recognised on-balance, eliminating the distinction between operating and finance leases. IFRS 16 supersedes IAS 17 Leases and related interpretations. Under IFRS 16 a lessee recognises a right-of-use asset and lease liability. The right-of-use asset is treated similarly to other non-financial assets and is depreciated accordingly. The lease liability is initially measured at the present value of the lease payments payable over the lease term, discounted at the rate implicit in the lease if that can be readily determined. In addition this liability accrues interest.
The group does not intend to apply IFRS 16 to short-term leases and leases for which the underlying asset is of low value. Furthermore, the group does not intend to apply IFRS 16 to leases of intangible assets.
The Group intends to apply the modified retrospective transition approach and as a consequence only apply the IFRS 16 lease definition to the lease contracts which at transition date comply with the IAS 17 lease definition and does not restate comparative information. The cumulative effect of initially applying IFRS 16 will be recorded as an adjustment to equity. Furthermore, the Group considers to classify on transition date all leases with a remaining lease term shorter than 1 year as a short term lease, and use the same discount rate for all leases with the same characteristics, In addition, initial direct costs will most likely not be taken into account in the measurement of the right of use asset.
The Group has completed a preliminary assessment of the potential impact on its consolidated financial statements but has not yet completed its final assessment. The actual impact of applying IFRS 16 on the financial statements in the period of initial application will depend on future economic conditions, including the Group's borrowing rate at 1 January 2019, currency developments, the composition of the Group's lease portfolio at that date, acquisition effects, the Group's latest assessment of whether it will exercise any lease renewal options and the extent to which the Group chooses to use practical expedients and recognition exemptions.
Thus far, the most significant impact identified is that the Group will recognise new assets and liabilities for its
operating leases of land, buildings, factory facilities, company cars and trucks.
The current assessment indicates that IFRS 16 could lead to the recognition of 'Right of use' assets and lease liabilities between €18.0 million and €28.0 million.
Based on the preliminary assessment the decrease of operating expenses could be between €3.5 million and €6.0 million, which could be offset by an increase of depreciation and interest between €4.0 million and €6.5 million.
As a result key performance measures such as (underlying) EBITDA and ROACE will change, with an expected decrease of ROACE (based on underlying EBITDA) between 0.0% and 1.0% and an expected decrease of ROACE (based on underlying EBIT) between 0.5% and 1.5%.
The main impact on the statement of cash flows is higher cash flows from operating activities, since cash payments for the principal part of the lease liability are classified as cash flow from financing activities.
The Group has performed an assesment on the possible effects of the amendments of IAS 12 (income taxes), IFRS 2 (Share-based payments) and IAS 40 (investment property). The Group does not expect any impact on the current financial position and results and will apply these amended standards when endorsed by the EU.
Lochem, 16 August 2018
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