Strategy Horizon 2020
ForFarmers dedicates itself to the continuity of the farming business and a financially sound sector with its mission ‘For the Future of Farming’. ForFarmers works side by side with customers to safeguard the long-term value creation of individual farming businesses and that of the sector as a whole in a sustainable way.
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ForFarmers aims to be the go-to leader in the animal feed business in Europe and surrounding regions. It does so by offering its Total Feed solutions on-farm, which enable farmers to produce high-quality meat, milk and eggs. The cost-effective and sustainable feed solutions of ForFarmers help livestock farmers optimise their business in terms of profitability, feed safety and operational convenience. This makes ForFarmers an essential link in the food chain.
Strong starting point: on-farm access
Over the years ForFarmers has built up strong and trusted relationships with its customers. Specialists play the leading role in this, working with colleagues in marketing, nutritionists and the ForFarmers Nutrition Innovation Centre (NIC) to translate the farmer’s requirements into ever better solutions.
Sustainability: integral to how we think and operate
Given its position in the feed value chain, the feed industry has an important role to play in solving sustainability issues. Global population growth and rising prosperity are pushing up demand for animal protein. In the manufacture of these products increasing attention is being focused, in more affluent countries, on caring for the environment and for human and animal wellbeing .
And so ForFarmers considers it a matter of course that sustainability is an integral part of its business operations. This concerns the use of scarce raw materials, the impact on the environment, consideration for people and society, and respecting animal welfare. ForFarmers wants to lead the feed industry in terms of sustainability, particularly as regards the use of raw materials, production, logistics, and efficient and more animal-friendly feed concepts. ForFarmers further tightened its sustainability strategy in 2017.
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Horizon 2020 strategy
In order to realise its ‘For the Future of Farming’ mission ForFarmers has set out its strategic course for the next few years in the Horizon 2020 strategy. The main pillars of this strategy are:
- Focus on attractive segments
- Work with partners to offer a Total Feed business portfolio
- One ForFarmers: functional excellence and leveraging economies of scale
The four pillars of the Horizon 2020 strategy
1. Focus on attractive segments
ForFarmers gears its nutritional knowledge and its range of products and services to the size and stage of development of its customers’ businesses. Large agricultural businesses with many employees and companies that use milk robots and apply the very latest technologies need different products and advice than small companies or companies that focus on a niche market, such as for instance organic feed.
To enable the Company to provide these different groups of customers with the best possible service, customer segmentation is an important aspect of its market approach and this has been implemented in all its operating countries. This approach relies on an effective customer relationship management (CRM) system; implementation of the ‘One’ system started in the United Kingdom in 2016 and was put to use in the other countries during 2017.
In addition ForFarmers has set up marketing organisations dedicated to species. Three specialist teams, focusing on the ruminant, swine and poultry sectors, propose marketing strategies and implementation plans for each country, setting out the appropriate approach for each segment. The marketing organisations work closely together with the specialists of the Nutrition Innovation Centre and the advisers who actually visit the farmers. This approach is under constant development through initiatives such as the specie-specific Academies (ruminant, swine and poultry).
2. Work with partners to offer a Total Feed business portfolio
ForFarmers delivers Total Feed solutions that meet the needs of individual livestock farmers and their specific business objectives and feeding systems. In addition to compound feed products our portfolio includes specialist feed for young animals, individual raw materials, co-products, grass and maize seed, and fertilisers.
ForFarmers has a highly targeted approach: to deliver on-farm solutions to the customer. For those products which ForFarmers does not manufacture itself, the Company has chosen for strategic partnerships with parties that can make a key contribution to the Total Feed approach and therefore for the customer. A good example of this is the international partnership with Nutreco, formed in 2014. It enables the partners to share knowledge in the area of micro-ingredients and achieve major economies of scale through the joint purchasing of these products. ForFarmers and Nutreco have also joined forces in the area of research, which has resulted in new feed concepts such as VIDA and NOVA.
The strategic partnership between the ForFarmers forage department and Agrifirm – focused on the purchase of fertilisers, seeds and crop protection products for livestock farmers who wish to grow some of their own feed in the Netherlands – has improved the position on the purchasing side. ForFarmers wants to expand its forage activities as part of the Total Feed solution.
The Total Feed Support desk was set up as a one-stop-shop for all Total Feed products and applications to make things easier for customers. It involves ForFarmers Customer Service in the Netherlands and the commercial teams of ForFarmers DML (single feeds and co-products) working together as a single team. The result is better service for customers and improved internal efficiency. Total Feed Support was initiated in the Netherlands in 2016. The overall implementation in terms of systems and processes is on track and is expected to take another year or so. Preparations for implementation are now also underway in the other clusters.
The focus on attractive segments, strategic partnerships and the Total Feed business are the pillars that support organic growth at ForFarmers. ForFarmers aims for a number 1 or number 2 position in all regions where it is active, both through organic growth and through acquisitions. This allows the best leverage of economies of scale.
In terms of acquisition opportunities ForFarmers focuses on the four core countries and on new regions within or bordering Europe (Europe+). Takeovers in the existing core countries allow operational efficiencies to be realised where the acquired companies are located in the same region.
Where acquisitions are made in new regions, the quality of the management is considered, as well as the company’s market position and reputation. To get a picture of potential acquisition candidates and to ensure an effective and efficient takeover process, ForFarmers has a Mergers & Acquisitions team, which works closely with the Executive Committee and the cluster managers.
It is very important to ForFarmers that acquired companies are rapidly integrated into the organisation. Consequently, the acquisitions of HST Feeds Ltd. (2014), Wheyfeed Ltd. (2014), and the feed & forage activities of Countrywide Farmers (2015) are already fully integrated into ForFarmers UK. The integration of Dutch company Vleuten-Steijn Voeders, acquired in October 2016, was completed by May 2017. In light of Vleuten-Steijn’s strong position in a niche market, the brand is retained for the time being and linked to the ForFarmers brand. In 2017, Wilde Agriculture was acquired in the United Kingdom, a small dealer with which ForFarmers already did business. Furthermore, the sale of the arable activities (not being related to animal feed) to CZAV in the Netherlands was announced, as was the strategic cooperation with Baks. The partnership with Baks relates to moist feeds for the swine sector particularly. ForFarmers acquires the customer portfolio from Baks and, vice versa, Baks takes over the relating logistical activities from ForFarmers. Both transactions (CZAV and Baks) have been effectuated in February 2018.
4. One ForFarmers: professionalisation and leveraging economies of scale
The One ForFarmers approach is aimed at sharing and utilising internal knowledge, further professionalisation of the organisation, a uniform way of working and optimum leverage of economies of scale. This approach is made possible through the matrix organisational structure, whereby central departments provide services and support to the country organisations. The impact of this is noticeable in all layers of the organisation. The main results are:
The ‘One’ customer relationship management (CRM) system was rolled out in the Netherlands, Germany and Belgium in 2017, having already been implemented in the United Kingdom in 2016.
The purchasing organisation has been adapted: from 1 January 2017 it is managed across the countries by category specialists to allow even better leveraging of the economies of scale as a single organisation.
In the United Kingdom a new central office was completed in Bury St. Edmunds, in which a number of regional sites have been brought together. This involved an investment of £4 million. Various support departments have been relocated to the new office, enabling them to work together more efficiently.
The Continental financial back office activities were centralised in 2017, to allow for more efficient (co-)operation.
ForFarmers develops tools that customers can use to set their business objectives and monitor their results, for example the ‘manage@farm’ tools, which include the Agroscoop monitoring program. The success of programs such as these partly depends on the availability and disclosure of data relating to the farming business. In the Netherlands it is common practice for livestock farmers to disclose data for consultancy purposes and many ForFarmers customers use Agroscoop. In the United Kingdom the chain made an important step in terms of data disclosure during the year under review. By leveraging the knowledge and experience gained in the Netherlands, but also in Germany and Belgium, progress has also been made in developing Agroscoop in the United Kingdom. This development is done with partners.
Horizon 2020 result fields
Implementing Horizon 2020 will enable ForFarmers to actively strengthen its position in the feed chain through closer cooperation with customers and strategic partners in the supply industries as well as a greater share of the total (feed) portfolio used by customers. This translates into concrete results for customers and farmers, and greater added value for ForFarmers.
Employees: personal development
The implementation of Horizon 2020 increases the opportunities and growth potential for ForFarmers employees. ForFarmers structurally invests in the professional and personal development of its employees. In 2017 many employees once again took part in management and professional training courses; you can read about this in greater detail in the Human Resources chapter. Furthermore, the Management Conference XL took place in July 2017. The conference, which brings together 250 ForFarmers managers, is held once every three years. Its interactive nature encourages participants to take part actively as much as possible rather than just listen. Over 95% of those who attended said their participation had been a valuable investment of their time.
Customers: total animal feed solutions
With its Total Feed approach ForFarmers provides integrated solutions comprising feed and other products, associated advisory services and tools to help set customers’ business objectives and monitor their results. This approach enables ForFarmers to coordinate products and advice across the on-farm production cycle, providing customers with all-round solutions to suit their feeding system and business circumstances. ForFarmers maintains a constant dialogue with its customers, both on-farm and for example through sounding board groups and conferences. In this way the Company ensures that it keeps up with the changing needs and requirements of customers at all times.
Examples of all-round and other feed solutions include:
In November 2017, a new concept for sows was launched named NOVA. The NOVA products provide a higher milk production per sow, more piglets per litter, a higher weaning weight per piglet and a longer lifespan for sows. The concept was tested successfully on thousands of sows and piglets at the same time at around 40 selected pig farmers in the various countries where ForFarmers operates. The development and rollout of NOVA showcases the One ForFarmers approach: the sharing of knowledge for better returns both on-farm and for ForFarmers.
Beginning 2017, a strategic partnership was formed with Chr. Hansen, resulting in the introduction of the silage additive SiloSolve©FC in the Netherlands, as part of the forage concept Terra+. By using SiloSolve©FC, losses due to conservation and heat are diminished by 40% to 60%, leading to a substantial feed profit for the farmer.
Feed2Milk, the ForFarmers approach to dairy cattle feed, combines knowledge gained in various countries. The effectiveness of the feed and the animal's nutrient requirement are used to calculate the optimum ration. The concept was extended to the United Kingdom in 2017, with initial results at dairy farms being more than encouraging.
The Vitality score was introduced in the Netherlands as part of the VITA approach for dairy cows. This score indicates the resistance of calves and presents a plan of approach for improving their vitality.
Split feeding enables laying hens to be fed according to their need. This results in a higher feed efficiency and optimises the quality of the egg (shell).
Forza Neonatal has been developed especially for very young chicks. For the first 24 to 36 hours after hatching, in systems in which chicks have direct access to feed, water and light. In this period of their life, chicks need specific energy to stay warm. Forza Neonatal improves the correct balance and levels of amino acids, in combination with the use of specifically selected well digestible sources of proteins and fats. This, among others, stimulates a healthy development of the gastrointestinal tract.
Profitability among the best in the sector
In 2017 underlying EBITDA increased 8.3% to €101.4 million. At constant exchange rates underlying EBITDA rose 10.1%. The underlying EBITDA/gross profit ratio improved from 23.0% in 2016 to 24.2% in 2017. Earnings per share rose from €0.50 in 2016 to €0.56 in 2017 (+12.0%).
The proposed dividend for 2017 is €0.30 per ordinary share (based on 100.8 million outstanding shares) which is 25% higher than the dividend (€0.24) in 2016. Based on the closing share price at 31 December 2017 of €10.44 this equates to a dividend yield of 2.9%.
Horizon 2020 in perspective: an analysis of ForFarmers and its markets
ForFarmers’ Horizon 2020 strategy focuses on long-term value creation especially for farmers and shareholders. The Company deems it important to be able to timely and adequately respond to market developments. In this light, stakeholder dialogues are significant. Internal analyses are also important, in order to identify strengths and weaknesses of the organisation as well as signifying the opportunities and threats in and from the market (the ‘SWOT’ analysis).
The SWOT-analysis is presented below:
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