The Provimi Group, one of the world leaders in the animal nutrition business, has announced its results for 2008 and reported a solid year for its Premix and Speciality businesses in Europe, strong performance in the Americas and Russia, but high volatility of raw material prices negatively affected operating margins in the last quarter.
Group CEO Ton van der Laan commented: “2008 showed strong turnover and profit from operations growth, driven by a strong performance of animal nutrition across most markets, while pet food activities had a difficult year. The last quarter of the year showed some slow down, especially in Poland”.
Sales increased by 12.3% to EUR 2,154.1 million, which was mainly a result of higher raw material costs, as well as a positive pricing and mix effect. On a like-for-like1 basis, sales growth was 14.5%.
Profit from operations before other income/(expense) increased by 22.6 % to € 111.7 million, despite margin pressure in the last quarter. Exchange rates had a negative effect of € 1.4 million. Change in scope positively impacted profit from operations with € 2.8 million.
On a like-for-like basis profit from operations before other income/(expense) increased by 20.9% over the period. Other income and expense amount to € -19.8 million (2007: € -21.7 million).
Included are items of a particularly significant and unusual nature. These include expenses regarding the closure of the Group’s aqua feed activities in Greece (€ -9.0 million) as well as costs related to the Group’s strategic reorganisation of feed activities in Europe to adapt to changing markets (€ -10.8 million).
Performance by country
In France, animal nutrition results improved mainly in the ruminant business, poultry nutrition developed in line with previous years and swine nutrition activities were negatively impacted by low meat prices.
In Poland, sales and results in the second half of 2008 suffered from the low grain and soy prices, which caused farmers to produce their own feed.
Consequently volume and revenue of Provimi’s Polish business sharply declined, and despite the Group’s structural expense reduction programme, profitability decreased.
In the Rest of Europe, the animal nutrition business globally improved, notably in Russia, which contributed significantly to growth in sales and profit, as did to a lesser extent Romania and Portugal.
On the other hand Provimi’s animal nutrition activities in Central Europe had lower volumes, and suffered from lower raw material prices and weakening currencies in the last quarter.
A complete feed plant in Hungary was closed at the end of 2008.
In North America, profits improved due to favourable ingredient positions in the first half of the year, solid performance in the California businesses, and strong contributions from the other US companies.
The Californian businesses were disposed of due to a lack of strategic fit.
Further improvements in the manufacturing footprint and distribution channels were initiated in the second half of 2008.
In the Rest of the world, most countries reported a strong increase in sales and results, notably in Latin America, where Brazil more than doubled its results.
Pet food market difficult
In Pet food market conditions were difficult, especially in Western Europe. Even though sales increased in the first half year of 2008, particularly in Central Europe, sales and profit decreased in the second half.
This was also linked to the fact that an expansion of the production plant in Hungary was held up and the reorganisation of pet food operations in the Netherlands took longer than anticipated.
A new divisional CEO has been brought in and a growth and a cost reduction initiative will be embarked upon.
Provimi has divested its Aqua feed activities in Chile, Denmark and Spain. The aqua feed operations in Greece were not part of this divestment. Provimi ended its activities in Greece in the autumn of 2008.
Ongoing raw material price volatility may continue to impact market conditions. The Group will continue its restructuring activities to improve efficiency and to adapt the organisation to the changing market conditions.