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Less profit and lower volumes for Nutreco

Dutch feed maker Nutreco has reported operating results of €94.1 million for the first 6 months of 2013. A profit of 9.5 million, which is lower than in the same period last year, mainly due to lower salmon feed demand in Norway, but remains well above an earlier published guidance figure of 90 million. The company expects full year Ebita to be “at least” in line with 2012 (€262.1 million).

Revenues increased by 1.9% to €2.39 billion, this was due to higher prices and acquisitions, as volumes dropped by 5%. The decline was driven by the divisions making fish feed and compound feed. The contribution of acquisitions, which includes specialist in premixes for ruminants Bellman Nutriçao Animal in Brazil and shrimp feed maker Gisis S.A in Ecuador, was 0.7%.

CEO Knut Nesse said he is pleased with the continuing margin improvement within the premix and feed specialties segment. Margins are now above 7%, mainly due to improved sales in Europe and a “solid contribution from our portfolio of globally branded specialty products”. Revenue from premixes and feed specialties declined 1.5% to €609.3 million. Gross profit improved 16.8% to €45.2 million.

Nutreco’s strategy is focussed on feed products with more added value and fish feed. The company considers options for the compound and feed activities it has in Spain. Nesse didn’t want to give any direction yet, but analysts expect Nutreco to sell the division. Nutreco sold the Dutch compound feed maker Hendrix to ForFarmers, a cooperative in the East of the Netherlands. The compound feed and meat divisions are solid, according to Nesse, but yield smaller margins.

In the first half of 2013 the meat division saw revenue increase by 4.5% to €478.5 million while Ebita declined 36% to €8.9 million. Higher feed prices could only partly be offset by raising prices for poultry. Sales for the compound feed division were 0.7% lower at €284.4 million while Ebita was down 28% to €6.6 million.

The separate Canadian division saw revenues increase 2.7% to 255.6 million and Ebita decrease 11.5% to 10 million. “Animal Nutrition Canada” suffered slight margin pressure and lower feed volumes. Whether a possible sale of Iberian activities will affect Nutreco’s Canadian position in compound feed is unclear. Mr Nesse didn’t wish to speculate but emphasised that keeping the activities is still a possibility.

SNS Securities analyst Richard Withagen believes the Canadian proposition to farmers is inherently different from the way business is conducted in Europa. He deems it unlikely that the Canadian compound feed activities will be sold as a result of the sale of Nutreco’s Spanish brands including Nanta and Sada.

Ebita in fish feed was 20% lower at €35.1 million. In Europe, exceptionally cold water temperatures depressed salmon production. Besides lower demand for salmon feed in Norway, Nutreco reports an increased focus on improving debtor quality in China which also leads to lower sales. Despite lagging volumes in the first half the company expects marginal organic growth in the full year, resulting in part from increased market share.

Nutreco claims the balance sheet allows for about €500 million to be spent on acquisitions. Chief financial officer Gosse Boon stresses Nutreco “is not in a hurry” and is looking for targets in emerging economies in Southeast-Asia and South-America, Europe being particularly a market where positions are to be defended. Nutreco wants to realize about half of its growth organically and the other half by takeovers.

Jan Cees Bron

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