Other disclosures
2.2.9.1 34. Operating leases
Leases as lessee
The Group has entered into operating leases on certain land and buildings, machinery and installations, cars and other transportation vehicles.
The Group has the option, under some of its leases, to lease the assets for additional periods. In these cases, the conditions of the contract are renegotiated at the end of the initial contract term. Furthermore, for certain contracts the lease payments increase periodically based on market terms.
Future minimum rentals payable under non-cancellable operating leases as at 31 December are, as follows:
| In thousands of euro | 31 December 2017 | 31 December 2016 |
| Less than 1 year | 5,398 | 6,525 |
| Between 1 and 5 years | 6,067 | 9,031 |
| More than 5 years | 4,795 | 5,389 |
| Total | 16,260 | 20,945 |
For the lease payments an amount of €8,279 thousand was recognised in 2017 (2016: €8,432 thousand) in profit or loss as part of the other operating expenses. The decrease of the lease payments has been caused by assets that were leased in the past and which are currently being purchased by the Company. This mainly concerns vehicles.
2.2.9.2 35. Commitments and contingencies
| 31 December 2017 | ||||
| In thousands of euro | < 1 year | 1 - 5 years | > 5 years | Total |
| Purchase commitments raw materials | 495,566 | 622 | - | 496,188 |
| Purchase commitments energy (gas/electricity) | - | - | - | - |
| Purchase commitments property, plant and equipment | 4,971 | - | - | 4,971 |
| Purchase commitments other | 2,505 | - | - | 2,505 |
| Total | 503,042 | 622 | - | 503,664 |
| 31 December 2016 | ||||
| In thousands of euro | < 1 year | 1 - 5 years | > 5 years | Total |
| Purchase commitments raw materials | 417,027 | 927 | - | 417,954 |
| Purchase commitments energy (gas/electricity) | 3,078 | - | - | 3,078 |
| Purchase commitments property, plant and equipment | 13,108 | - | - | 13,108 |
| Total | 433,213 | 927 | - | 434,140 |
The purchase commitments of raw materials are partly relating to existing sales contracts and the other purchase commiments mainly related to IT licenses.
A declaration of guarantee based on article 2:403 of the Dutch Civil Code has been issued by ForFarmers N.V. for the benefit of ForFarmers Nederland B.V., ForFarmers Corporate Services B.V., PoultryPlus B.V. and Reudink B.V.
For the acquisition of BOCM PAULS Ltd. (United Kingdom), guarantees have been issued amounting to €0.1 million (2016: €0.2 million).
For the credit facilities reference is made to Note 28.
2.2.9.3 36. Related parties
Beside the subsidiaries that operate within the Group (refer to the overview "List of main subsidiaries", Note 32) and the BOCM PAULS Ltd. (United Kingdom) and HST Feeds Ltd. (United Kingdom) Pension Schemes (see Note 15A) , the Group has additional related parties and transactions, which are disclosed hereafter. The related party transactions that occurred in 2017 and 2016 were done at arm’s length. Outstanding balances at the year-end are unsecured and interest free. There have been no guarantees provided or received for any related party receivables or payables. Furthermore, the Group has not recorded any impairment of receivables relating to amounts owed by related parties (2016: nil).
A. Stichting Beheer- en Administratiekantoor ForFarmers and Coöperatie FromFarmers U.A.
Stichting Beheer- en Administratiekantoor ForFarmers (until 23 May 2016 named Stichting Administratiekantoor ForFarmers) (hereinafter: 'Stichting Beheer') holds 7.7% (31 December 2016: 12.0%) of the shares in ForFarmers N.V. as per 31 December 2017 and has issued depositary receipts in exchange for these shares. Coöperatie FromFarmers U.A. (hereinafter: de coöperatie) has a direct stake of 17.4% (2016: 20.8%), and an indirect stake of 31.8% (2016: 32.4%) of the ordinary shares of ForFarmers, and one priority share as per the aforementioned date. Depositary receipts are held by members of the Coöperatie, employees of ForFarmers or others. Members of the Coöperatie and employees of ForFarmers who own depositary receipts have the right to request their voting rights from Stichting Beheer. Other depositary receipt holders cannot request voting rights. Stichting Beheer and the Coöperatie are related parties. Between the Coöperatie and a number of the members of the Coöperatie on one hand and the Group on the other hand, transactions (i.e. supply of goods and services) take place on a regular basis.
| In thousands of euro | 2017 | 2016 |
| Interest income | - | - |
| Interest expenses | - | - |
| Receivable from | 3,297 | 4,216 |
| Payable to | - | - |
The receivable from the Cooperative mainly relates to positions arising from VAT, since the Cooperative is the head of the tax group for VAT purposes. As of 1 January 2018 Coöperatie FromFarmers U.A. is no longer part of the VAT tax group and ForFarmers N.V. is the head of the VAT tax group (see Note 16F).
2.2.9.3.1
B. Executive Committee
In the financial year remuneration for the Executive Committee including pension expenses that were charged to the Company and its subsidiaries amounts of €6.3 million (2016: €6.1 million), which can be broken down as follows:
2.2.9.3.2
The following table includes the ownership of the (depositary receipts for) shares.
(Depositary receipts of) shares
In numbers
2017
2016
Y.M. Knoop
284,001
222,967
A.E. Traas
109,329
100,235
J.N. Potijk
602,593
876,545
Non statutory board members
178,501
859,065
Total
1,174,424
2,058,812
C. Supervisory board
In the financial year remuneration for members of the Supervisory Board, and former members of the Supervisory Board within the meaning of section 383 sub 1 of Book 2 of the Dutch Civil Code were charged to the Company and its subsidiaries for an amount of €338 thousand (2016: €271 thousand), which can be broken down as follows:
In the regular course of business the Group enters into sales transactions with members of the Supervisory Board. The related party transactions were carried out at arm’s length.
The following table provides the total amount of transactions.
| In thousands of euro | 2017 | 2016 |
| Sales to | 525 | 468 |
| Purchases from | 497 | - |
The following table provides the total balances of receivables from and payables to the members of the Supervisory Board.
| In thousands of euro | 31 December 2017 | 31 December 2016 |
| Amounts owed by | 26 | 10 |
| Amounts owed to | - | - |
The following table includes the ownership of the (depositary receipts of) shares and the number of participation accounts issued by the cooperative and which can be converted into depositary receipts.
The members of Supervisory Board did not experience any impediment in the performance of their duties during the past year as a result of transactions that they conducted.
Followed by the appointment of Mr. C. de Jong as member of the Supervisory Board, Chr. Hansen Holding A/S including the activities of its subsidiaries (hereafter mentioned together as: Chr. Hansen), is a related party of the Group as from 26 April 2017, since Mr. C. de Jong holds the position of CEO at this company. The Group has, as of 31 December 2017, no contractual obligations with Chr. Hansen and has bought goods for an amount of €0.5 million in the period from 26 April 2017 to 31 December 2017. The related party transactions were carried out at arm’s length.
D. Executive Committee Coöperatie FromFarmers U.A.
In the regular course of business the Group enters into sales transactions with members of the executive Committee Coöperatie FromFarmers U.A.. The related party transactions were carried out at arm’s length.
The following table provides the total amount of transactions.
| In thousands of euro | 2017 | 2016 |
| Sales to | 805 | 319 |
| Purchases from | - | - |
The following table provides the total balances of receivables from and payables to the members of the executive Committee Coöperatie FromFarmers U.A..
| In thousands of euro | 31 December 2017 | 31 December 2016 |
| Amounts owed by | 33 | 10 |
| Amounts owed to | - | - |
The transactions with, the receivables from and payables to the members of the executive Committee of the Coöperatie FromFarmers U.A. include the transactions with and position to the members who are part of the Supervisory Board of ForFarmers N.V..
E. Joint venture
The following table provides the total amount of transactions that have been entered into with the joint venture HaBeMa:
| In thousands of euro | 2017 | 2016 |
| Sales of goods and services | ||
| Sales to | 5 | 0 |
| Purchases from | 45,075 | 39,800 |
The following table provides the total balances with the joint venture HaBeMa:
| In thousands of euro | 31 December 2017 | 31 December 2016 |
| Amounts owed by | - | - |
| Amounts owed to | 1,893 | 2,123 |
2.2.9.4 37. Events after the reporting period
Baks
Effective per 1 Februari 2018, ForFarmers the Netherlands and Baks started a strategic partnership. To this end, both parties have signed an agreement. As part of the partnership, ForFarmers the Netherlands will acquire the sales activities of moist feed solutions for swine (in particular whey products) together with the relevant customer portfolio from Baks Agri Foods.
On the other hand, Baks Logistics will acquire the logistics activities (including the associated transportation vehicles and drivers) for this product segment from FF Logistics.
More specifically, this implies that, as per 1 February 2018 about 160.000 tonnes of moist feed solutions for swine from Baks Agri Foods will start to be managed by the sales organization of ForFarmers the Netherlands. The sale of Vitagos, an exclusive product of Baks Agri Foods and other moist feed solutions that are not intended for swine, remain outside the strategic partnership. Baks Logistics acquired the logistic activities of Vitagos from FF Logistics.
ForFarmers the Netherlands sells arable activities (non-livestock feed related) to CZAV
ForFarmers the Netherlands has signed an agreement to dispose its agriculture activities to CZAV. This concerns non-livestock feed related products (e.g. fertilizers, crop protection products and seeds) that ForFarmers supplies to Dutch farmers. CZAV acquired these activities and the associated storage facility on 5 February 2018. Annual revenues involved amount to €13 million. ForFarmers will receive €5.65 million on the completion date of the transaction.
The sale of these (non-livestock feed related) agriculture activities is fully in line with ForFarmers’ strategy, that focuses specifically on the Total Feed approach for livestock farmers. ForFarmers will continue to sell seeds, fertilizers and crop protection products to its customers relating to forage production on farms. These forage related products represent an important part of the Total Feed approach and are therefore not included in the sale.
Reopening of second feed mill in Deventer
In 2018 ForFarmers will reopen the feed mill in Deventer (the Netherlands), which was closed on 1 January 2015. This production facility, located next to the operational mill, will immediately undergo intensive renovation. The decision to put the mill to use again fits in with growing feed sales and increasing demand for non-GMO feed (with non-Genetically Modified Organisms). The renovated plant, with a maximum production capacity of 250 thousand tonnes, can therefore be fully deployed for the production of non-GMO and VLOG-certified (Verband Lebensmittel ohne Gentechnik) compound feed. As of 31 December 2017 the mill was classified as investment property (refer to Note 19). As a result of the reopening the mill will be reclassified to tangible assets during 2018.
ForFarmers plans to reopen this plant in 2018, taking into account a renovation period of 9 months. The renovation, with an investment of over €3 million, has already started.
Tasomix
On 20 February 2018, ForFarmers announced that it had signed a share purchase agreement with the owners of the Polish company Tasomix to acquire 60% of their shares. Tasomix is a large and innovative feed company, mainly active in the poultry sector. Through this transaction, ForFarmers adds its fifth country of operation and takes another step in strengthening its position as the leading feed company in Europe. This step is in line with ForFarmers’ Horizon 2020-strategy to grow both organically and through acquisitions in Europe and surrounding regions. Tasomix provides access to a European market with an above average growth rate in the attractive poultry sector. In recent years, Poland has become the largest broiler producing country in Europe, servicing the local market and exporting to mostly EU countries.
Through this transaction, ForFarmers acquires 60% of a business with two operational production facilities, with a joint capacity is approximately 450 thousand tonnes, and one new facility, which is under construction and has a maximum capacity of approximately 350 thousand tonnes. Tasomix mainly produces feed for poultry farmers, but also serves the ruminant and swine farmers. The feed mill being constructed in Pionki (approx. 110 km south of Warsaw) is scheduled to open later this year. This mill is destined to manufacture feed for a dedicated poultry integrator, which is linked to the owners of Tasomix. A supply agreement has been put in place with this integrator. The mill will also serve non-integrated poultry, ruminant and swine farmers.
In 2016, Tasomix sold 395 thousand tonnes of feed, manufactured in its two operational mills, with a revenue of PLN 429 million (currently approximately €103 million) and a normalised EBITDA of approximately PLN 34 million (currently approximately €8 million). Tasomix has 180 employees. Based on these results, Tasomix currently ranks number 4 in the Polish feed market. At closing of the transaction, ForFarmers will make a first payment of PLN 234 million (currently approximately €56 million) in cash and will receive 60% of the shares. The second payment will be made in 2021 and is dependent on achieving specified targets, relating to future operational results of Pionki. The agreement includes the possibility for ForFarmers to over time obtain the remaining shares.
Closing of the agreement is expected to take place within approximately three months, subject to obtaining the required approval of the Polish Competition Authorities.
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