Financial result

In an economically challenging year, Nutreco businesses successfully applied several financial measures at the same time as balancing market constraints with good performance. The outcome was an excellent second half with Nutreco entering 2010 well positioned to implement a strategy of organic growth coupled with targeted acquisitions.

Nutreco implemented in 2009 a company-wide programme to control the development of working capital with significantly better cash flows as a result. The net debt decreased by EUR 144.2 million from EUR 367.1 million to EUR 222.9 million at 31 December 2009. Together with the refinancing of Nutreco, through a private placement in the US and a syndicated loan, these actions gave Nutreco a lot of room for acquisitions, enabling the Company to go ahead with acquisitions like those in Spain and Brazil.

In 2010 Nutreco will continue to pursue acquisition opportunities, for example looking to expand fish feed and feed specialities in its target areas of Latin America, Southeast Asia – notably China and Vietnam, and in Russia. At the same time Nutreco will support organic growth in these activities and look for opportunities to participate in the consolidation in markets in North America, the Netherlands and Spain.

Revenues

Revenue from Nutreco’s continuing operations amounted to EUR 4,511.7 million, a decrease of EUR 431.4 million or 8.7% compared with 2008. This decrease was due to price effects (-4.5%), mostly related to passing on lower raw material prices in compound feed prices. The volume development in 2009 was -3.7% compared with 2008, but in comparison with the decline in the first half year (-7.1%) we see a recovery of the volume of 3.4% in the second half year. Acquisitions contributed 0.9% and the foreign exchange effect was -1.4% mainly related to the US dollar.

Acquisitions

Revenue increased by 0.9% due to acquisitions. In 2009 we have strengthened our compound feed business in Spain and Portugal with the acquisition of the animal nutrition business from Cargill, which was approved by the antitrust authorities in November. The acquisition includes Cargill’s 12 Spanish and Portuguese compound feed production facilities, with a production volume of around 700,000 metric tonnes and annual revenue of approximately EUR 240 million.

After integration and transformation, the acquired business is expected to contribute a similar operating margin in two years’ time as Nutreco’s existing compound feed business in Iberia. Combining these businesses will create cost savings due to optimisation of production and logistics and it will bring potential for plant specialisation.
In November we announced the acquisition of a 51% shareholding in Fri-Ribe, a Brazilian animal nutrition and fish feed company, bringing Nutreco a platform to facilitate its further expansion in Brazil. The company has five production plants and six sales offices across the central and northeast of Brazil and had annual revenues of EUR 47 million in 2008.

EBITA

In the full year, EBITA before exceptional items decreased by 3.8% to EUR 175.2 million (2008: EUR 182.1 million). In the second half year of 2009 EBITA before exceptional items increased by 33.9% versus 2008 to EUR 133.6 million.  

The Premix and Feed Specialties business had a strong performance in 2009 due to a focus on higher value-added products. EBITA decreased by -16.3% to EUR 70.4 million (2008: EUR 84.1 million). However, EBITA in 2008 includes EUR 20 million benefits related to favourable raw material positions in a market with increased prices.

Fish Feed reported a 1.9% lower EBITA of EUR 66.4 million compared with EUR 67.7 million in 2008. A strong volume growth in Norway has largely balanced the decline in volumes in Chile, where there is a reduced demand for fish feed due to lower salmon fish volumes as a consequence of the disease situation caused by the ISA virus. Fish feed for other farmed fish species reported results in line with the previous year.

EBITA from Compound Feed Europe amounted to EUR 1.6 million compared with EUR 29.4 million in 2008. The decline in EBITA relates mainly to a one-off loss of approximately EUR 20 million in the Dutch business in the first half year of 2009. Measures have been implemented to restore profitability in the Netherlands. These measures have contributed to an EBITA of EUR 14.5 million in the second half year and a small profit for the full year.

Animal Nutrition Canada’s EBITA increased by 4.3% to EUR 21.8 million (2008: EUR 20.9 million). Cost savings after restructuring have resulted in a slightly increased EBITA margin.

Meat and other activities showed an increased EBITA of EUR 34.3 million compared with a small loss of EUR 0.4 million in 2008. Poultry and pork meat business in Spain were the main contributors, showing a strong recovery. The return to profitability for the poultry business was due to lower feed prices and a stable demand. Also the Spanish pig business benefited from lower feed prices than in 2008 and returned to a profit in 2009. The poultry hatchery business in Canada has performed well driven by high demand for eggs used for vaccine production for the pharmaceutical industry.

Exceptional items are items which are non-operational income and/or gains and expenses and/or losses, which in general are not related to the normal course of the business. These are in general restructuring cost, impairment and badwill. Part of the restructuring cost for 2009 is related to the acquisition of the animal nutrition business of Cargill in Spain and Portugal. The negative goodwill occurred only from the acquired business of the animal nutrition business of Cargill in Spain and Portugal. The impairment charges are mainly related to the acquired assets of Maple Leaf Animal Nutrition (2007) in Canada and of Cargill (2009) in Spain.

The restructuring costs for 2008 are mainly related to the
acquisition of Copaga and Marine Feed and the negative
goodwill occurred from the acquisitions of Marine Feed,
Copaga and Biofactory.

Net financing costs in line with 2008

Net financing costs from continuing operations amounted to EUR 31.6 million (2008: EUR 31.2 million).
 
Financial income decreased to EUR 5.9 million (2008: EUR 6.3 million), for the larger part due to lower short-term interest rates.

Financial expenses were in line with EUR 38.3 million (2008: EUR 38.1 million); higher long-term interest rates compensated an on average lower debt. The increased expenses are a consequence of the refinancing in 2009. Financial expenses include the dividend of EUR 3.6 million (2008: EUR 4.5 million) on the cumulative preference shares. The foreign exchange result amounts to EUR 0.8 million (2008: EUR 0.6 million).

Income tax expense  

Income tax expense on continuing operations decreased from EUR 37.2 million to EUR 34.7 million. The effective tax rate in 2009 was 27.2% for continuing operations (2008: 26.0%). The effective tax rate in 2010 is expected to be 26 to 28%.

Result for the period

The result after tax from continuing operations decreased to EUR 93.0 million from EUR 105.8 million. Basic earnings per share for continuing operations were 13.6% lower at EUR 2.61 (2008: EUR 3.02). The result for the period attributable to equity holders of Nutreco was EUR 90.3 million (2008: EUR 114.8 million).

Cash flow and investments

The net cash from operating activities improved from EUR 98.0 million to EUR 267.0 million. This was mainly the result of a strong improvement in working capital. The decrease in working capital was EUR 98.4 million compared to an increase of EUR 51.7 million in 2008. The improvement was amongst others the result of a company-wide programme to reduce working capital and of lower raw material prices compared with last year. Further improvement to the cash flow came with the reduction in capital expenditure. The capital expenditure declined from EUR 90.2 million to EUR 54.1 million in 2009. Nutreco invested in new production facilities in Italy, Indonesia and Poland for premix and feed specialties. In fish feed a new plant was opened in Turkey.

Furthermore, Nutreco invested in projects to improve efficiency and in upgrading and replacement projects.

Strong cash position and capital structure

In comparison with the previous year, net debt decreased by EUR 144.2 million to EUR 222.9 million (2008: EUR 367.1 million) mainly to the reduction in working capital. The total equity on 31 December 2009 was EUR 740.7 million (2008: EUR 665.5 million). The net debt/EBITDA ratio declined to 1.00 compared with a ratio of 1.57 in 2008. Also the net debt/equity ratio improved from 0.56 to 0.30 at 31 December 2009.

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 partly used to repay the maturing USD 46 million tranche of the notes that were issued in 2004 and to refinance existing bank debt by 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, 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.

With both the private placement and the new revolving credit facility, Nutreco has extended its debt maturity profile and ensured extra liquidity.  

Dividend in line with policy of 45% payout

The General Meeting of Shareholders to be held on 1 April 2010 will be recommended to declare a dividend of EUR 1.32 (2008:1.43) per share for the 2009 financial year. This represents a payout of 45% (2008: 45%) of the total result attributable to holders of ordinary shares of Nutreco over the period from 1 January 2009 to 31 December 2009, excluding impairment and the book result on disposed activities. This dividend payout ratio is the maximum payout percentage within the Nutreco dividend policy to pay out a dividend in the range of 35 to 45% as adopted at the Annual General Meeting of Shareholders of 2006.

In August 2009, the Company already distributed an interim dividend of EUR 0.20 (2008: 0.40) per ordinary share. Following adoption of the dividend proposal, the final dividend of EUR 1.12 can be received in cash or in ordinary shares, chargeable to the share premium account, at the shareholder’s option. The ratio between the value of the stock dividend and the cash dividend will be determined on the basis of the average weighted price during the last three trading days of the period for opting to take the stock dividend, i.e. 19, 20 and 21 April 2010. Both the cash and the stock dividend will be made payable to the shareholders on 27 April 2010. It is Nutreco’s intention to purchase the necessary shares on the market.

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