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Article Excerpt
Original Source: FD (FAIR DISCLOSURE) WIRE
WOUT DEKKER, CEO, NUTRECO HOLDING NV: Ladies and gentlemen, welcome. The full year presentation 2007. If we look back at 2007, as part of rebalancing for growth, we think that the rebalancing part is clear now, and we are focusing on the growth.
We would like to come back, not only on 2007, but also put 2007 a little bit in historic perspective. And, if you look at our environment, and a lot of you have participated in AgriVision and AquaVision conferences, then I think that the proof of the trends that we have described, in terms of scarcity of raw materials, fish meal, fish oil, increasing food prices, agflation going on, like always we know the issues, but we are always surprised with the speed that they are occurring.
In general, you can say that there has been a renaissance of the primary production sector and the food and [agri] business.
The highlights 2007, I will come back on global market developments. Our previous statement, on the doubling of the EBITA in 2010, we will address. Especially, Cees van Rijn will talk about results in 2007 and our strategic agenda in 2008. We are also very pleased that, next to Cees van Rijn, is our COO, Juergen Steinemann, for the Q&A session.
2007, I think an excellent result in absolute terms, but also the quality of the results, with the sale of EUR4 billion, it is EUR1 billion up on 2006. Our EBIT increased by 32%. The acquisition of MLAN and the eight premix factories of BASF, have absolutely strengthened our portfolio. NSI, the Nutreco Sourcing Initiative, we discussed it already twice with you, but we are now really fully implementing it, but we are also seeing the benefits of doing the sourcing in a different way.
The capital structure has been optimized by the -- and in addition, we did our acquisitions. And we are confirming our long-term objective on the 2010 doubling of the EBITA results.
On page six, we are describing once again the dilemma that we are confronted with. The world population will increase from 6 billion to 9 billion. Half of all the people are already living in cities and depend on farmers to produce their food. Tremendous increase in demand coming out of Asia. If people have the famous EUR200 to spend per month, they also like to include meat and fish in their diets. Biodiversity, it is on many front pages, that biodiversity is really at risk.
Climate changes, the drought in Australia, that triggered an additional increase in a lot of the dairy prices. Sustainability is the new buzzword for the next decade. And the feed, food, fuel also addressed at the AgriVision conferences.
If we look at all the concerns, on the left side, and we combine it with the eating habits of the happy few in the west, and if we then try to imagine what it means, if there are 9 billion people on the planet who want to have a comparable eating pattern. Then in our statement, if you combine it then also with the demands and the wishes from a couple of very loud minorities so far who are willing to pay for the way their food is produced, then we see that tremendous mismatch occurring, in this moment. And that is why, also, the title of our AgriVision conference was Balance the Challenge.
The combination of the two sides is absolutely impossible to realize it on one planet. If you fully use technology, and (inaudible) a professor, has calculated that the planet can supply food for 40 billion people. But then, of course, the issues mentioned on the left are not taken into account.
Global demand for agri and aqua raw materials is higher than the supply. We have seen that stocks have diminished, almost on all raw materials. Record high raw material prices, and especially with fish meal and fish oil, we are seeing full scarcity, especially on the fish oil side, in this moment.
On sheet eight, you have -- just a couple of examples, on the price increases. Here, we have the averages on 2007, versus 2006, on soy, on wheat and on corn.
Fish meal, fish oil. Of course, the trend is up, but that does not mean that there is no volatility. On the fish meal graph, at a certain moment, two years' ago, one third of all the fish meal went to China, to be used -- included in the diets for the pork industry. There was a -- this is issue with the swine in China, and China decided not to buy fish meals. And we saw, against all expectations, a decline in fish meal prices.
On the other side, look at the development of fish oil. Close to one third of the good oils, the Omega 3 oils, are already used now directly by the human and the pharma industry. So, it is not only a high price, but it is very clearly, an issue of not being available any more.
Fish farming. Norway, in 2007, had an [upper] year of profitability. And, of course, on average, the prices were lower than the record year 2006. But Norway had a tremendous volume growth and decent prices.
Contrary, Chile was confronted with a fish disease and that means, especially on the cost side, that Chile had quite some issues.
Further development on marine fish feed in Asia, and especially on the Omnivore species, like the Pangasius and the Tilapia we are seeing a tremendous growth. And especially in Europe, a lot of consumers are now recognizing Pangasius as a fresh product, available every day, and hardly anybody knew that fish five years ago. So, total output of -- out of Vietnam will be above 1 million tons. That's fast -- that agriculture industry is developing.
Salmon feed is still the bulk of our fish feed. And our company, Skretting in Stavanger, could celebrate at the end of the year that it produced and sold more than 1 million tons. And here, you see that tremendous organic growth that this industry is still realizing, and that also our Skretting company is realizing.
Doubling the EBITA in 2010. If you look where Nutreco was coming from, the building blocks, a lot of times, are family companies. We had our period in BP, with BP Nutrition, and it is very interesting to note that during the '70s, BP as an energy company, an oil company, wanted to make the link between energy and protein by the production of single cell protein. Now we are seeing that Statoil in Norway is taking up the same project.
The formation of Nutreco, between 1994 and 1997, that was a period of portfolio choices. And with the rebalancing for growth in 2004, we went through a second, active period of making clear choices about the strategic direction. We divested our farming -- fish farming operations, and the Dutch meat businesses, and we will come back what we did with the revenues, with the two acquisitions of BASF and MLAN are absolutely milestones.
For the divestments, we received EUR1.2 billion. And if we look at the period 2005 to 2007, by super dividends and capital remittance, we addressed the efficiency of our capital structure like promised before the end of 2007. 48% of the EUR1.1 billion, we used for acquisition, and 7% was used for a share buyback. And we did it in the most tax efficient way for most of our investors.
On the two big acquisitions, from a strategic point, both are important. With the eight factories in eight countries of BASF, we are now the number two premix company in the world, with a 12% market share. Number one is DSM, with the old Hoffman La Roche vitamin activity that they bought. DSM is still twice the size of Nutreco; Nutreco is now number two.
Most of the big meat integrators in the world, and the animal nutrition industry, is using two premix suppliers. So roughly the 12% global market share of Nutreco is bringing us into daily, weekly contact with 25% of the animal nutrition industry. And this is of course a strength that we like to explore in the future, because we are an ideal vehicle to market, not only for our own innovations, but also for innovations from others supplying this industry.
Acquisition of Nutreco Canada. We bought a number one animal nutrition company in Canada, a big organization, with a very strong R&D. And a couple of you did pay a visit there. There, you really see the influence of a well organized, innovative animal nutrition company driven by R&D, but with a lot of modeling in place, selling nutrition. They are not selling compound feed, premixes, or concentrate. No, it is the concept that is sold and marketed.
We did also a couple of smaller acquisition in 2007 and you have seen already the first press releases in 2008. We bought the Silver Cup company, a freshwater, fish feed producer in the US. It will also help us very much to sell into the salmon enhancement program in Alaska. You know a lot of what we call wild salmon is first produced in the hatcheries and then released to the oceans. Now, although we talk about North America, it is important that it is produced and sold by a US company and so far we were regarded very much as a Canadian company. So, this is also one of the reasons why we bought that company.
We also bought our [toll miller] in Japan and it is the single biggest extruded fish feed plant in Japan and this is after having built up our marketing and sales organization for ten years. We bought the Copaga cooperative in Spain. It will give us a feed mill of 300,000 tons and we were already renting their chicken slaughtering facilities and we had an option to buy it and we exercised that option.
To put 2007 a little bit into historic perspective, we went to the Amsterdam stock market in June 1997. And on page 18 you see in historic perspective the EUR4 billion sales is the highest top line figure that we could have reported in our history. If you then look at the EBITA, the EUR155 million is the second best year after 2001. But please bear in mind in 2001 we had a year of good salmon prices and good poultry prices, so from a protein perspective the best year and of course our portfolio now is much smaller than it was in 2001. And we combined it with super dividends and capital remittance.
If you then look at Nutreco's net results over that total period that EUR113 million, EUR119 million net profit that is the highest in the history of Nutreco and once again please bear in mind that we also handed back quite some value to shareholders over this whole period. If you look at those ten years here you also see the effects of course on the actions in the bookkeeping with the fair value on the fish farms followed by a big book profit that we could report in 2006.
Over this whole period we got some figures if you discuss shareholder value expressed in TSR. Over this long period the TSR of Nutreco was 250%. And the figures we received yesterday showed that only Danone with 300% was from the visible European food multinationals and the Dutch food companies Nutreco was with 250% on a very clear second place. So we created quite some shareholder value over this long period.
We are on the business side already now number five in the world in tons with our 8 million tons of animal feed. If you look who is above us, Cargill is, of course, a complete different league and is not a specific animal nutrition company. CP, the Thai company, is fully integrated. Land O'Lakes, the big North American dairy cooperative and Tyson, the number one poultry company in the world. So in the global top five is Nutreco is now a very visible animal nutrition company.
So if we discuss the strengths of our premix business for Chinese vitamin producers they are regarding BASF and DSM as their competitors and they are defining Nutreco as the potential biggest customer in the world. That is what the acquisitions of MLAN and the eight premix factories of BASF have given Nutreco as a very, very visible player in that industry.
With our compound feed activities mainly in the Benelux and Spain we are in the EU the number one but only based on two geographies. We are the clear number one in Canada with the brand name Shur-Gain. The number two position in premixes on a global basis and in fish feed with Skretting we are the number one in salmon feed and we are growing in the feeds for other species.
Our values from the past based on transparency on the new taste, the feed and food quality systems, the knowledge of the value chain and our global position, those are still the values that are driving Nutreco. Over the next years, sustainability and food safety are not going away.
2007 was a disastrous year for North American food producers including pet food producers with the biggest recall that happened on the pet food side but unfortunately for Nutreco we were also involved with that contaminated (inaudible) product out of China.
On the NuTrace and the food safety, we are now setting up our own purchasing organization in Shanghai. And it is not so much to negotiate the best deal, of course we are always interested in it,...
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