Credit risk
The development of the financial crisis and low prices for farmer products increases the chance that third parties will not be able to fulfil their financial commitments.

Management of credit risks
Credit risk is the loss that would have to be recognised if third parties failed to perform as contracted. To reduce credit risk, Nutreco carries out ongoing credit analyses of its customers’ financial situation. Nutreco uses market intelligence and, if required and possible, credit rating agencies to determine its customers’ creditworthiness. For doubtful debts adequate provisions are in place of EUR 58.0 million (2008: EUR 58.8 million). In some cases Nutreco had to shift from receivables to loans as payment terms were extended over one year. Credit to debtors is closely monitored in business review meetings and specific indicators, such as Day Sales Outstanding and overdue debts, are reported and discussed in detail. Some customers are temporarily no longer supplied.

Low prices for farmer products such as milk, pigs, chicken or fish could also increase the credit risk. As these prices have no correlation with feed prices, a long period of low prices for farmer products could have an impact on the financial situation of some of our customers.

The international growth of premixes, special feed and fish feed for other fish species has resulted in a wider and more international spread of customers. Although this has reduced the overall credit risk, it has, at the same time, increased the credit risk for emerging markets. The risk profile of Nutreco’s customers differs per business segment. As at
31 December 2009 the total outstanding amount owed by Nutreco’s most important customers, Marine Harvest (Fish Feed) and Mercadona (Meat and Other) each represented less than 10% of the total outstanding amount.

As a consequence of the financial crisis, and to the extent possible, continuous attention is paid to the credibility of third parties such as banks, insurance companies, customers and strategic suppliers.

Nutreco has an exposure to reputable banks created by the usage of cash investments and derivative financial instruments. Due to the credit crisis, banks are carefully monitored and credit limits are (temporarily) reduced in the event of uncertainty. Cash and cash deposits and derivative financial instruments are held with banks with a credit rating of at least A+ (Standard & Poor’s). The maturity of the exposure is, except for interest rate derivatives, short term and spread over various banks to reduce the counterparty risk.

Management of foreign currency transaction risk
Most of Nutreco’s foreign currency translation risks relate to the purchase of raw materials. In the animal nutrition and fish feed business, price changes resulting from foreign currency movements can generally be passed on to customers. In addition, in some markets sales contracts include price clauses to cover foreign currency movements. The possibilities and time to pass the effects of foreign currency movements on to customers vary per market, are regularly assessed and only take place when a structural increase has occurred.

In comparison with 2008, the volatility of most of the foreign currencies in which Nutreco carried out transactions stabilised or decreased, which meant the foreign currency risk did not further increase.


Nutreco’s foreign currency transaction exposure is determined by foreign currency movements that are not likely to be passed on to customers. This foreign currency exposure is managed by means of financial derivative instruments, such as foreign currency forward contracts and swaps, as well as short-term bank balances in foreign currencies. The average pass-on period mirrors the average maturity of derivative financial instruments – three months, generally with a maximum of twelve months.

Liquidity risk
Nutreco should always be in a position to be able to meet its payment obligations.

Liquidity risk management
The primary objective of liquidity management is to ensure that Nutreco always has sufficient committed credit facilities, cash and cash equivalents to meet its payment obligations. Group Treasury monitors rolling forecasts of the Group’s liquidity reserve on the basis of expected cash flows. Nutreco’s target is to have sufficient committed credit facilities, a well spread long-term debt maturity schedule and a strong liquidity position.

On 8 April 2009 Nutreco issued USD 150 million in senior notes in a private placement in the United States of America. The notes have been used to repay the maturing USD 46 million portion of the notes issued in 2004 and to refinance existing bank debt using long-term debt. The senior notes consist of three tranches with maturities of five, seven and ten years and are placed with six institutional investors.

On 20 May 2009 Nutreco successfully refinanced its existing revolving credit facility of EUR 550 million, which would have matured in March 2010. The new facility amounts to EUR 550 million and has a maturity of three years. The facility is supported by an international group of banks.

The private loan and the new revolving credit facility mean Nutreco has extended its
debt maturity profile and ensured sufficient liquidity for the coming years. At the end of
2009 EUR 455.5 million of the total facilities of EUR 1,095.1 million had been used (2008:
EUR 595.4 million and EUR 1,038.0 million repectively). Nutreco’s core credit facilities and its use of these facilities are contracted by Group Treasury. Interest-bearing borrowings by operating companies are only allowed with the prior approval of Group Treasury. In addition to the unused credit facilities Nutreco had EUR 232.6 million in cash and cash equivalents available at the end of 2009 (2008: EUR 228.3 million).

Interest rate risk
Interest rate fluctuations affect the cost of financing of the Company.

Management of interest and currency risks

Managing the interest risk is the responsibility of Group Treasury. Interest rate hedging via fixed interest rate agreements or derivative financial instruments is carried out within the framework of Nutreco’s policy and reported quarterly.

Mainly as a consequence of the issuance of the private placement and a lower average net debt due to a very strong operating cash flow, the relative share of fixed rate interest-bearing borrowings is 81%, exceeding the objective of 70%.