Nutreco has reported a good first half and has made an acquisition of an aquaculture feed company in Vietnam. They have the cash and technology to keep growing in markets that are expanding. Analyst Garry Drimmer
questions if they have picked the right targets.
“Netherlands based Nutreco last month reported some very solid results for their first half with some key operating profits doubling as the animal feed sector comes out of the deep recession. Following the purchase of an aquaculture feedmill last month Chief executive Wout Dekker commented in announcing the first quarter results that they want to continue their growth.
“The company has some major brands around the world as the second largest producer of pre-mixes. Their brands, which are familiar in many countries around the world, include Trouw Nutrition, Skretting, Hendrix, Shur-Gain and their poultry operations in Spain under the Sada brand.”
“They compete with other well named companies in the sector including Provimi, Cargill Animal Nutrition, Land O’Lakes, DSM and Danisco. None of these are real targets, but with Nutreco focusing on the growing markets in Brazil, Russia, China, and Vietnam, there are many smaller regional players that could be acquired.
“Cargill sold its feed mills in Spain and Portugal to Nutreco’s Nanta last year and this there might be pieces of other large companies that would come for sale, though I would doubt it with the exception of Russia that is going through some difficult times as a result of the loss of over one third of this year’s summer crops.
“There is a surplus of capacity in China, but there is still room for quality feed and pre-mix producers as the market continues to grow. Brazil is continuing to grow in overall animal and aquaculture feed production. Poultry and hog operators are fairly integrated, but there is room to expand pre-mix and aquaculture feed production.”
Integrated feed production
“As the world moves away from commercial feed producers and continually to integrated feeds, the growth will come from pre-mixes and specialty feeds.
Nutreco will continue to compete globally in the pre-mix market, while the fish feed market is more open.
“Provimi exited the complete fish feed market while continuing to supply pre-mixes in major regions of the world and while becoming a major private label pet food producer in Europe.
“Clearly there is room for further growth and consolidation in the industry, a full merger of Nutreco and Provimi would be a difficult one to consummate, but there are a lot of other fish still in this global market that would be easier catches.”