The Provimi Group, a world leader in animal nutrition, saw a strong recovery in the second half of 2009.
- Recurring operating profit for 2009 stable at € 117.2 million
- Strong H2 2009 performance compared to H1 (recurring operating profit up 26.7%), reflecting both market recovery and impact of focused reorganisation improvement initiatives
- Animal Nutrition: strong continuing performance from most businesses, Poland facing challenges
- Pet Food: restructuring complete with full recovery delivering profitable growth
- Strong cash generation from operations
Group CEO Ton van der Laan commented: “Provimi has reinforced its competitive position in 2009 and has shown strong recovery in its activities in the second half of the year, fuelled by improvement initiatives and better market conditions.
“A number of new initiatives started in 2009 to improve competitiveness strengthened Provimi’s financial position. These initiatives, such as a new brand identity, new supply chain management and a new integrated marketing and innovation organisation, also provide Provimi with a strong and sustainable platform for future growth, allowing the company to fully benefit from improving market conditions in 2010 and beyond.”
Revenues are not a key driver of profitability for the Group as they are impacted by the volatility of raw material costs. Therefore, although operational performance has been strong in 2009, revenues have decreased by 21.7% to € 1,686.7 million, following the raw material prices trend. The impact of acquisitions and divestments reduced revenue by € 64.8 million. Unfavourable exchange rates had a negative effect on revenue of € 130.6 million. In addition, Provimi has reduced its activity with certain large customers to reduce its credit exposure.
Volumes in 2009 in the Animal Nutrition business have decreased by 10% in complete feed and by 11% in premix and specialties, due to market conditions in H1, the Group’s focus on the most profitable market segments, a reduction in credit exposure and divestments.
Volumes in the Pet Food business have developed very positively, increasing by 9% compared to 2008, due to more competitive sales offerings, geographic expansion and more effective operations. Production capacity in Hungary was increased, while Russia started production in November 2009.
Recurring Operating Profit1 was stable in 2009 at € 117.2 million, driven by the strong performance of the Animal Nutrition business in most regions in the second half, the recovery of Pet Food and the positive impact of restructuring programmes announced in Q1 2009. The impact of acquisitions and divestments reduced recurring operating profit by € 2.9 million. Unfavourable exchange rates had a negative impact of € 5.7 million.
Growth of recurring operating profit has accelerated with H2 2009, up 15.9% compared to H2 2008 and up 26.7% compared to H1 2009.
Unusual and non recurring income and (expenses)
Since 2008, Provimi has engaged in an ambitious programme to restructure its activities and increase its competitiveness. One-off-costs related to this programme amounted to € 28.8 million in 2009, € 11.2 million being non-cash. One-off-costs were mainly incurred in Central Europe to restructure the complete feed activities, as well as in Western Europe and North America to optimise the supply chain.
In H1, 2009 Provimi recorded an exceptional goodwill impairment amounting to € 56.7 million, primarily in Poland.
Cash from operations
A company-wide programme to optimise working capital was launched in the last quarter 2008 and has allowed Provimi to reduce its working capital in each quarter of 2009. The average working capital was reduced by € 62.1 million in 2009 (-34%), thanks to stricter credit policies, the optimisation of inventory management and lower raw material prices.
Net financial costs decreased to € 48.9 million (2008: € 85.3 million). The interest charges decreased sharply as a result of reduced interest rates. Provimi has put in place hedging strategies to enable the Group to continue to benefit from lower interest rates in the future. Fair value gains were recognised related to derivative financial instruments.
The Provimi Group is in full compliance with all its bank covenants.