25 July 2017 | Online since 2003

12 June 2017

ForFarmers says market confidence in UK ‘Challenging’


Feed company ForFarmers says that Brexit has caused uncertainty in the United agricultural industry, although this has not affected the egg sector.

ForFarmers, which bought BOCM Pauls in the United Kingdom in 2012, says it is the number one total feed company in Europe. It is influential in the egg sector, producing a range of feeds for poultry farmers and organising the annual conference of the British Free Range Egg Producers' Association (BFREPA). Based in the Netherlands, and with production facilities in Belgium and Germany as well as the UK, the company sells 9.3 million tonnes of feed each year, generating annual revenue to €2.1 billion. But it says that the market in the UK following the referendum vote to leave the European Union is challenging.

"The market circumstances in the United Kingdom remain challenging in the short term," said ForFarmers chief executive Yoram Knoop in a trading update for the first quarter of 2017. "The uncertainty with respect to the consequences of the Brexit for our customers in the United Kingdom makes them cautious in making longer term decisions," he said.

According to the trading update, volume feed sales were up in the Netherlands, Belgium and Germany during the first three months of this year compared with the same period in 2016, whilst they declined in the UK. However, the company said that this was affected by the departure of Wheyfeed transport and Leafield, which were sold in the second quarter of 2016. However, ForFarmers nevertheless reported that there was uncertainty in the UK following the Brexit vote.

In its report on the UK, it said, "In the first quarter 2017 less volume total feed has been sold. Farmers are uncertain about the (financial) consequences of the Brexit for the agricultural sector. They are, therefore, cautious in taking investment decisions with respect to possibly increasing of their herd size or expanding or improving their farm businesses," said the report. The update suggests that the dairy sector was particularly affected. "As a result of the very low milk prices in the first half of 2016, dairy farmers started to reduce their herds. Milk prices have improved as of the second half of last year. Recovery of the herd size is taking longer than expected. The smaller dairy herd and increased competition in this sector have resulted in clearly lower volumes in the ruminant sector in the first quarter of 2017."

It would appear that the picture is a little better for the company in the poultry sector. The Ranger asked ForFarmers whether the egg sector had been affected by Brexit uncertainty. "We do not see the same in the layer sector. We are pleased with our developments in the poultry sector in the United Kingdom in Q1 2017," said a spokeswoman. "We are pleased with the developments in the poultry sector in the United Kingdom, in which we saw positive volume development. Some of our customers have sadly been impacted by AI but the impact of AI on our consolidated group results has been small," she said.

In its annual report for 2016, which was published in March this year, ForFarmers said that volume sales had fallen by 3.3 per cent in the UK, "mainly due to the ruminant sector as a result of low milk prices." A reduction in the UK pig sow herd in the first half of 2016 had also resulted in a decline in volume. In its update for the first quarter of 2017, the company said, "Based on the volume development to swine farmers in the first quarter of this year, it appears that prolonged volume decline has been brought to an end. An increase of the pig herd is, however, not yet evident. The impact of the strongly devaluated Pound sterling (first quarter 2017 compared to first quarter 2016) has led to a translation loss in ForFarmers' consolidated result."

The spokeswoman for ForFarmers told the Ranger that figures in the first quarter had been affected by the fall in the value of Sterling since the UK had voted to withdraw from the European Union. "Given the devaluation of the Pound Sterling and the fact that our consolidated results are presented in Euro, we are impacted by the translation of the Pound Sterling to the Euro of the UK activities. As an example, where for instance GBP 100 translated into say Euro 120 in the past, this same GBP 100 now translates into Euro 105."

Since taking over BOCM Pauls, ForFarmers has invested in the construction of a new factory in Exeter and the new central office in Bury St. Edmunds. In the first quarter update for this year the company said that a reorganisation of the UK business had already led to a decrease in operational costs. However, they were not sufficient to compensate for a decline in margin, it said. "The new central office in Bury St. Edmunds, where several administrative departments have been brought together to improve operational efficiency, has recently been opened. The supply chain optimisation plans in the United Kingdom, as announced in the annual results release, are currently being finalised in detail and various projects have started. The benefits of this are planned to be evident in the results as of 2018," said the company in the update.

The company said that "market circumstances" in the United Kingdom remained challenging in the short term.

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