ForFarmers N.V. (FFARM) Earnings Call Transcript & Summary

Hello, and welcome to this presentation annual results ForFarmers 2020. [Operator Instructions] I would now like to hand over to our host, Caroline Vogelzang, to begin the call. Thank you.

Thanks, Kevin. Good morning all, all very well-known people to us on the call, and we welcome you to our audio webcast, which we will present the 2020 numbers. I'm here, as usual, with Yoram, all well-known to you, our CEO; Roeland, our CFO; Adrie, our COO. We've got lots of Cs here. And we will take you through the presentation that we posted on the site this morning. Also, we posted the press release and the annual report. I also recommend looking at the annual report because it's more extensive than just the IR presentation. We have, I always point out, we have got a safe harbor statement, namely that we do make projections and we do talk about future things as well. But as we all know, the world can change within a day. So please take that in mind. Having said that, I'd like to pass the floor to Yoram.

All right. Thank you, Caroline. And again, good morning to you all. In terms of the agenda for today, I'll share the brief highlights with you before I hand over to Roeland who will take us through the financials. Following that, we'll do a short strategic update versus our recently announced Build to Grow strategy. We'll then, before the guidance, give you a quick update on our latest acquisition, De Hoop, and then open the floor for any questions you may have. In terms of the highlights, actually quite happy to report, from our point of view, quite satisfactory results in what has been undoubtedly very challenging markets. If you look on a like-for-like currency, our EBITDA comes in slightly over 9% at close to EUR 97 million. And we have a very strong operational cash flow, just under EUR 100 million. If we say challenging markets, it's diseases that clearly is the name of -- has been the name of the game in 2020. Obviously, we all know about COVID, but also the animal diseases have played a pivotal role in many of the markets where we are present. One of the elements that normally doesn't jump out, but I want to still pay attention to, that in this very difficult year of COVID, if you think about the supply chain with many of our raw materials coming from around the globe and then having to deal with the challenges in harbors, in locations, some infections in your own staff, it is very -- it's been great to see that thanks to the commitment of our staff and a lot of flexibility, our supply chain has really delivered a very high level of customer satisfaction actually without -- virtually without any difference from before in all markets. So we are very pleased that our customers have not seen any negative impact from that whatsoever. Where we and our customers have seen an impact is the fact that volume has been under pressure as a result of mainly of COVID, but also African swine fever and bird flu. The increase that we've seen in the retail segment is not sufficient to make up from the restaurants that have been closed, and especially a specie like poultry is typically often consumed out of door. So quite an impact in that specie. We were happy that, in fact, the previously announced efficiency plans, we were able to accelerate and expand those. So from a cost point of view, we've made quite good progress to offset that volume impact that I was just referring to. Clearly, there have been COVID-related savings if you think about, obviously, travel and entertainment is way down. But the good part is with new technologies that we all got accustomed to, we are also convinced that post-COVID, we will have found a new way of working, which combines face-to-face meetings with much more online techniques and tools to be able to continue to operate the company going forward at a lower cost base. One of the highlights has been clearly the launch of our new strategy in the fall of '20. All of you have for sure been exposed to that. A part of that has been a very much tightened sustainability agenda where the theme has become Going Circular For the Future of Farming. We'll show you later some of the real significant progress that has already been made. And as part of that new strategy, again, new efficiency plans were launched to take an incremental EUR 10 million of cost out of our operation. And last but not least, in the -- towards the -- in the end of last year, we announced the acquisition of De Hoop, focused on broilers in the Netherlands, which was closed in the first quarter of '21. If we look at the market evolution, already talked about the fact that COVID and animal diseases reduced the volume in our sector. Overall, clearly, the environmental measures and the drive to make the business all the more sustainable is having an impact. The Green Deal will further provide ammunition for that, also creates some real good opportunities, we believe. For example, in ecological, we believe that, that segment has a good chance to grow. And there's more and more focus on innovation, on changes to reduce our carbon footprint as a sector. If we look at the various countries that we're active in, the nitrogen issue that we've been talking about in the past has been, to some extent, resolved. There's a more crystallized outline of what that will look like. But clearly, the true implementation over the next few years is also subject to political items. But it looks like this is -- that a very regional approach will be taken, and innovation is one of the elements that we can use to help reduce nitrogen emissions. The warm restructuring of the pig sector is having an effect, and most of the effect will be seen during the year '21. And more than likely, the impact will be somewhat softened compared to our earlier expectations, but it will come, and it will come during this year. One of the new developments, maybe some of you may have seen that in recent newspaper ads, but the retail chain like Albert Heijn is taking further steps to -- in terms of animal welfare and sustainability in terms of their poultry supply chain, meaning that there will be fewer birds per square meter and a much more opportunity for the chicken to develop itself in a very good way. So that also, again, creates a different regime that also creates opportunities on our hands. If you look in Belgium, Belgium was, in a particular segment in the B segment, mostly affected by COVID. The good part is the African swine fever ban has, in the meantime, been lifted in Belgium. So Belgium is one of those countries that can export again. Germany was impacted by African swine fever in the east of Germany. Again, not a single farm that has been impacted. So these are wild bores, but this is having a big impact on the sector. Germany was one of the biggest exporters. So all of those pigs now stay within Europe. So this is one of the reasons that the pricing level and the profitability level of the sector has been impacted. Similar to the situation in the Netherlands, we expect in Germany over time to also see more welfare concepts in chickens or fewer animals per square meter. Poland has been a country, especially in the broilers sector, that has been quite impacted by COVID. Poland has developed itself as a low cost and the most efficient place to produce broilers and export a lot to the EU and abroad. And given the occurrence of avian flu, they were no longer able to export outside of the EU. And then again, the closure of the restaurants significantly reduced the consumer demand for their products. So a sector that has been grown for over a decade, year-by-year, took quite a hit during '20. When we go to the United Kingdom, there are much more than any of our other markets. The ruminant sector is quite weather-related. Most of the dairy cows are outside in the fields. And if the weather is very good, and if we say very good, there's been hardly any winter, so the growing season for the farmers has been very good such that they needed far less incremental feeding. So that has affected our volume in the U.K. With that, I would like to hand over to Roeland to talk us through to some of the figures.

Yes. Thank you, Yoram. And also from my side, good morning to all of you. I will indeed guide you through the financial update, and I will discuss the so-called underlying EBITDA development, so that is without the incidental items. There is, however, a slide on incidental items later on in this deck. And when we look at the -- these slides, you will see that there are 3 different clusters which we use, that is FX, M&A and like-for-like. And as you can see, the M&A effect is not big in this year compared to 2022 -- 2019. And the FX effect is also limited. So we will focus on the like-for-like items. Compound feeds came down with 3.9%, basically as a result of the stuff Yoram already discussed. There was COVID, and most of our markets which has an impact on volume, predominantly here on poultry and beef, but also in ruminant sector, we saw some effect there. Animal diseases, the export bans Yoram just discussed from -- at the time, these were -- has a big impact on the swine volumes. And avian influenza, what we had in Poland, also impacted the lower volume. And the stoppers arrangement there, also already discussed, was also impacting this volume. When we look at the trend, you will see that in the first half of the year, the decline compared to 2019 was higher than in the second half. And -- but you can also see on top of this slide on the right-hand side that we see stable volume in the cluster Germany/Poland, whereas the other clusters are a bit down. Further down, you will see the gross profit and the gross profit is minus 1.3%, whereas the volume was 3.9% down. Yes, the gross profit obviously came down because of the lower volume, and that has an impact, obviously. The other one is that we saw this margin pressure in especially Poland in the second half, overcapacity in the market, which led to market pressure on pricing and on margins, and we also saw that in the U.K. in the second half. Positive effects on this gross profit line is the product mix. We sell more concentrate specialties, which contributes to a higher gross profit. And when we compare it to 2019, we need to take into account that last year, we had an unfavorable position on our purchasing book, which we don't have this year. So that's also a positive effect on the gross profit. Now what you can see is that we were able to have good cost control. That cost came down with 3%. So again, lower volume also leads to lower cost. But also here, we see the effect of the efficiency plans, the plans we took in 2019 where we closed several mills, which has a full effect in the 2020 figures. And the last item on cost is that because of COVID, there was less cost on, for example, travel and also less cost on training. Now all in all, then the EBITDA adds up to EUR 96.2 million, which is 9.2% better than last year. And if we take into account the translation effects, it's trending towards EUR 97 million. And the translation effect, as you will understand, has to do with the weakening of the Polish zloty and the British pound compared to the euro. Now on this slide, you will see the profit development, and I will pick out some highlights. We see the share of profit of equity-accounted investees. Well, basically, that's our 50-50 joint venture in Germany called HaBeMa, which is in business with transhipment activities and feeds, and both of them had a good year. So better margins at HaBeMa, but predominantly the transhipment activities contributed to this higher profit. The underlying income tax expenses went up. That has to do with the revaluation of our deferred taxes. As you might have seen, the Dutch government and the U.K. government have changed their view on lowering the tax in 2020. They did not do that. And it was -- the plan was to do that. They did not, so we had to revaluate our deferred taxes, and that led to EUR 2 million plus -- or EUR 2 million extra charge on this income tax line. The, yes, underlying profit adds up to 9 -- EUR 46.3 million, which is 10% better than the year before. And here, you see also the incidental items, EUR 32.1 million, which I will discuss later in this presentation. But as you can see here already, this is the impairment of the goodwill in Poland or predominantly the impairment of the group in Poland. Now the ratios developed quite nicely, as you see that the earnings per share were higher than the year before. The dividend per share is higher than the year before. And also, our return on average capital employed, it's much better than we had in 2019. If you look at the dividend per share, you will see that we are suggesting or proposing to the annual meeting of shareholders to pay out 60% of the underlying net profit. That adds up to EUR 0.29, whereas last year, the underlying net profit is down to 50%, adds up to EUR 0.19, and we had a special dividend of EUR 0.09. But all in all, it's EUR 0.01 better than the year before. Now the capital structure, like it says in the title, quite healthy, although there are some elements maybe to discuss. You will see that our equity came down with EUR 56 million. And yes, let's say, the normal items are in there like our dividend distribution, and we have our share buyback in 2020. But also here, you will see that we have a pension reevaluation in the U.K., and that has to do with a lower interest rate and a higher inflation. And yes, that's led to a higher obligation -- a future obligation when it comes to pensions in the U.K. But as you may be are aware, this is only a balance sheet item, so it's debt to equity. There is no cash effect and there is no P&L effect. And the solvency is, because of this lower equity, a bit down compared to last year, but still at very reasonable level of 44%. Now like we have seen last year, also this year, we were able to lower our working capital and -- especially in the U.K this time, and it ended up at EUR 33 million for the end of 2020. Now another highlight on this slide is the ratio of overdue receivables, and we were able in this challenging market, therefore, our customers to make sure that the overdue receivables came down. And this is a trend that we see in the last couple of years already. And of course, going forward, also something to watch out for. But 12.5% is a big achievement compared to last year. Now when we look at debt, last year, we had a net debt of EUR 7 million, and now we are cash rich. It's almost EUR 16 million cash at hand, so to say. And yes, that had, of course, to do with the strong cash generation and the working capital movements there. You see that also on this slide, when you look at the cash flow development, it's almost EUR 100 million, and it has to do with the strong EBITDA and the good performance on working capital. Now when we did, we spent our money predominantly last year, it was on regular CapEx. Like Yoram already said, we still keep investing in our plans, obviously. What you also will see here is that we had the sales of plants that tips into a better cash flow generation here. And we received about EUR 7 million on dividend from our investments. And we paid out an earnout, as you are aware, to Vleuten-Steijn. Then to the incidental items, the alternative performance measures. Maybe let's start with the comment on the left-hand side at the bottom. In general, what we have done is that we changed the definition of the alternative performance measures. We included now the amortization of acquired intangible assets, and we see that as an APM item because, in our view, that has -- then we have a better view of our -- on our underlying profit. And what is this? Well, when you do an acquisition, you have to evaluate your clients. You depreciate it or amortize that over a couple of years. And that gives a blurry situation when you look at your results. So that's why we thought it's better to take it out, and we checked it also with other companies. And in our view, this is a better view to look at our net income. We also did -- we changed the 2019 figures as well. And in both years, on average, it's about EUR 7 million on the EBIT line and about EUR 5 million for the profit for the shareholders. Now the other big item on this slide is the impairment in Poland. As you are aware, the Polish business is predominantly a poultry business, and the out-of-home segment throughout Europe and Poland is exporting to all European countries. The out-of-home segments and all these European markets came down or even to a standstill, and that left that we had to take another look at the projections of our volume and margins. And like I said, there was margin pressure also in Poland, but also the volume effect is different than we -- than the picture that we had when we acquired our Polish business. So we had to take another look, look at our projections and also build on several scenarios in order to see whether what could happen in a best, worst or a good scenario. You can see that also in our annual report in Note 17 to get more insight into that. But in that sense, we took a full impairment on the Polish goodwill. Then to the clusters, we have 3 clusters, the first one being the Netherlands and Belgium, volume came down with 2.6% of -- yes, you can see for yourself the main drivers for that. I think they have been discussed enough. The gross profit came down -- sorry, the gross profit was higher despite this lower volume, so that's a good performance, and because lower volume is, of course, leading to lower gross profit. But like I said before, last year, we had this unfavorable purchase position, which is not there anymore. OpEx was well balanced there. You see that it came down with EUR 1 million to do with lower volumes, which leads to also lower cost. We are trying to flex our cost, and that's, of course, especially on the variable cost, which came down. But if you take into account a higher overhead allocation, then the performance of this cluster is quite nice. Yes, it adds up to almost EUR 73 million for this cluster and, again, an increase in the ROACE almost to 40%. The cluster Germany/Poland is -- has a stable volume development in Total Feed, predominantly 2 effects, and we see in the poultry sector was impacted by COVID. But we saw also higher volumes in the ruminant sector and in the pig sector and then predominantly in Germany. The lower -- what you see is that the gross profit came down, although we had a stable volume, and it has to do with the margin pressure in the Polish markets, which we saw in the second half of the year. The last cluster is the cluster United Kingdom where we have seen, and Yoram discussed it already, there was an early spring and a good summer and a mild winter, which led to good forage and then there is less supplement feeding for us. So volumes came under pressure, and our clients also were faced with lower milk prices that also impacted the volume. And if you go look further down this slide, you will see the gross profit came down because of this lower volume. But if you look at the underlying operating expenses, you will see that also there, our operations were able to flex cost and to make sure that we are going down with costs in line with our volume, but also because of the plants we closed in 2019, we see the full effect in this cluster and in this year. In summary, it's lower volumes and a bit lower gross profit as well. But the higher EBITDA and a higher net profit almost are 10% higher than the year before. Now together with a strong cash generation and a strong balance sheet, we were able -- or are able and we will propose it to our shareholders to pay out 60% of dividend, which adds up to EUR 0.29. That, Yoram is the summary of our financials.

Great. Thank you, Roeland. Well, let me move forward then with the strategic update in terms of our new strategy, Build to Grow. Again, just to remind everyone, our objective there is to establish a position in 7 countries over time versus the 5 that we're active in today. It does not mean that we view the 5 that we're in today as less important. We continue to invest in further strengthening our position in the current ones as well. And in both new regions as well as in existing regions, we will continue to focus heavily on M&A and getting acquisitive growth. If we look at some of the changes since the last update, first of all, sustainability as part of the strategy, we launched the Going Circular For the Future of Farming. We now have additional KPIs that are being followed and audited as part of the normal process. Specifically, our sustainability approach is looking at 3 components. The one that has the biggest impact on emissions on CO2 is actually the raw materials that we use that go into the feed. So we are now able, product by product and components by components, exactly share the CO2 footprint and are able to optimize like that. And again, I think we are probably the first feed company that is able to do so. The second part is related to our own production and our own logistics, again, where we are looking at optimizations and many projects that we have in that field to make progress year-on-year. And last but not least, the solutions, the products that we ultimately sell to the farm, they also need to contribute to that farming practice and help the farmer get to a more sustainable livestock solution. On top of those elements, we also have what we call one flagship projects. The biggest feed mill and the biggest site that we have, the Lochem, which is our headquarters. So we have 35 plants, but that headquarters and the biggest site, we have committed to make carbon neutral, and we are well on our way in terms of achieving that. In terms of ambition, we -- recently, a few months ago, we conducted an employee survey with a leading international group to be able to also benchmark that with other industries. And actually, we have a very positive score that came out, but that in itself is not the value. The value is more department by department where there's still opportunity to improve. And we're now in the process, working those plans out, and they will be implemented during the course of this year. Next year, we will revisit the survey to see if, indeed, we have made the progress that we want to do. In terms of partnerships, we have a number of partnerships already ongoing. We believe that partnerships throughout our supply chain are vital in terms of making progress. And a new one is the one that we entered with the transport company, AB Texel. In a certain region, we agreed to merge our operations and outsource the planning part to them to be able to actually have fewer kilometers with empty trucks, and that is ultimately what is not sustainable. So again, we've made good progress on that. It's been implemented during the course of the year and is now close to complete, and it's running well. In terms of operational excellence and other pivotable part of our strategy to make the operation more efficient and to make the processes go right first time, we did have a significant project to look at our internal processes to see which ones can be harmonized and further improved. We came up with a long list of opportunities. That list got prioritized, and we're now just on the verge of starting the implementation of those projects. As we have so many opportunities still ongoing to improve our operation, and you can't do everything at the same point in time, we also created a project management office to really help us drive excellent execution throughout the projects that we implement. Next-level innovation, this is a new group that we established to drive -- to accelerate innovation and specifically drive innovation around data and new processes. We were able to launch a new tool in the ag supply chain where we're now able to combine the data from various pieces in terms of the value chain and then be able to have it so that we can change the optimal rather than look at just one component of that value chain. On top of that, we have been moving forward with various investments, especially in the Netherlands, in terms of further differentiating our products over time and investments that, from a process point of view, give our products further uniqueness. Relating to customer excellence, we launched our very much enhanced e-business capability in the beginning of 2020. We started with one specie because we wanted to ensure that, from a customer point of view, this will really be a way forward. So it's really been derived at transforming the customer experience to a much higher level. We succeeded with poultry. Then we said, okay, it's now time to roll out the other species. So in fact, it's now running in all species in the Netherlands to a great deal of satisfaction. We have now started to launch or to start the implementation of the next country and moving it to Belgium before we move it on to the other countries. And then last but not least, 2 acquisitions that I can actually talk about, De Hoop acquisition that we announced end of last year, I'll come back to that shortly. But secondly, we also acquired mid-February another company, a smaller company in Germany called Mühldorfer. They are involved in the branded horse business. This is where we've been active with our premium brand, Pavo, which has a market-leading position in Western Europe. Germany is actually one of the most important countries where -- which we had targeted to become stronger. And here, we are able to not only get a new customer base in Germany, which, by the way, amongst others, consist of an interesting customer like Amazon. But also the range of products that we are able to offer to our retail chains will be significantly expanded because of this transaction. Sustainability, I already mentioned that now we are able to really measure the -- what has been referred to as Scope 3 impact, so the impact including that of our raw materials. And that is where the biggest component of CO2 is coming from. In terms of making Lochem carbon neutral, we have recently installed solar panels. We also made quite a significant investment in a biomass operation here to reduce the use of gas, recognize that biomass is quite a publicly loaded element right now. But in this particular case, we can also assure you, this is only local waste woods that is being used here. So truly in a sustainable way, actually, in a close cooperation with local crops to be able to deliver that waste product. And then last but not least, in our journey to become more sustainable, we realized that in 2018 when we acquired Tasomix that they were still working with coal. And we have now invested in the capability, and we're taking this year to transition away from coal also in Poland. As I mentioned already, very pleased with now also having closed the previously announced transaction of De Hoop. De Hoop is a very modern feed mill, actually only 20 minutes by car away from Lochem, and this company has really focused itself entirely on broilers. So very good products, very strong focus on this segment. We were not leading yet in the Netherlands prior to this transaction. And now by combining our operations, we are also leading in this section, which is a section where we still believe there will be a very good future also in the Netherlands in terms of this segment. In terms of the acquisition price, we actually have 2 parts. We paid EUR 23 million at closing, but we also agreed to an earnout, which is not the result of De Hoop, which will be the result of the combined operation in time, is up to EUR 17 million at that point in time. And the previous owner of De Hoop has agreed to lead this organization -- this joint organization going forward. The integration is happening quite fast by the midst of this year. Organizationally, we will have fully completed it, and we'll have one team in place. We obviously have to also integrate our systems, and we expect that to be completed by the end of the year. So by the end of the year, within 1 year -- in fact, within 11 months from operation, we believe the full integration here will be completed. In terms of the outlook of the sector, longer term, actually, not a lot has changed, certainly not in terms of ruminants. In swine, we will have to deal with the impact of African swine fever, which unfortunately will be with us for quite some time, we believe. And in poultry, we've seen the biggest impact of COVID, but we also believe that this is the specie that will benefit from a -- from the situation past COVID or the opening of the restaurants the quickest. So we actually see good hopes of -- we continue to be positive about the long-term perspective that poultry has. In terms of the outlook of ForFarmers, I want to repeat the outlook when we gave the -- our strategic update in terms of Build to Grow. So by 2025, underlying EBITDA between EUR 125 million to EUR 135 million, including the acquisitions. Cost reduction of EUR 10 million, of that we are planning to achieve EUR 7 million over the next 2 years. One of the elements through which we are doing that is through this process optimization that we were referring to. And in terms of CapEx, we expect a CapEx figure pretty much in line with what you've seen from us over the last few years. But there's one change in the sense that over the past few years, we invested quite a lot in maintenance capital and now given that we're able to put more investments into new differentiating technologies and more sustainability concepts. And that brings me to the final slide in terms of our integrated objectives, again, 4 components: one about people, one about environment, one about customers and last one about shareholders. The one about people, we have made great progress in safety. A number of accidents last year came down more than 30% again. But we're still not at [ Welcov ] levels. So we believe we can continue to make progress, and there will be an ongoing element of our organization. In terms of helping our customers to enhance their results, this is, I guess, exactly what we stand for. And good to see that again, the FCRs, the feed conversion rates, again last year improved. So well on our way to continue to generate value for our customers. Going Circular, critically important for the sustainability of our business. And this is the program that we laid out in terms of our environmental commitment. And last but not least, again, as I just mentioned, the value that we are planning to create for our shareholders as well. That brings me at the end of what we have to share and wanted to give the floor to you -- all of you, undoubtedly, your valued questions.

[Operator Instructions] Our first question this morning comes from the line of Christophe Beghin from Kempen.

I have 2 questions, if I may, and then I will queue in again. But you didn't provide any quantitative guidance into 2021, which I can, on the one hand, understand due to the nature of the business, but also COVID. But what should we expect? We have seen very volatile marketing raw materials, very steep increase on a very short period. And on the other hand, we see, of course, that the end markets for livestock farmers are not dead great. So I think that combination is a bad mix. How should we look into that into the first half year? Can you guide me a bit more on that, please?

Yes. I would say the factors you are pointing out, Christophe, are there. So indeed, raw material costs are up, farmer income under pressure. But the good thing is, in fact, is that this is across the world. And it is just a question of time before the consumer will have to start paying the price that is being pushed through the room to maneuver of our farmers or to swallow some of this just isn't there. And actually, that probably helps in all areas pushing it through. The speeds varies actually region by -- or country by country. So we explained before that in the Netherlands, customers expect you to have certain positions to not pass the daily price on immediately. So there, it has a delayed impact. In some other markets, you see a very fast impact. But again, our approach in terms of raw materials is risk-averse. So we did have positions in place. So we do expect ongoing volatility in the markets. In some markets, we may have temporarily some advantages. In some other markets, we may have to compensate for that. So hopefully, that provides you some guidance there, Christophe.

Yes. Okay. And second question is on Tasomix or in Poland in general. I've seen in the annual report that production liability came down by EUR 8 million. Are you still committed? Of course, can you -- so the second payment for the remaining 40% share, if you're still going through it, would take place this year? Can you confirm that you still commit to that? And secondly, can you maybe give a quantitive update on the progress in Poland/Tasomix itself? I remember, in 2019, you gave a kind of numbers on 2019. We didn't see that today. So what is the capacity usage of Pionki? Are you still above the EUR 8 million EBITDA? And what is maybe the progress in volume pickup?

Yes, a couple of points. There's probably some misunderstanding then if I listen to your question in terms of the option because we have no obligation to buy out the 40% at the end of the year.

Yes. To make that point, the second payment for the 60% would be in 2021.

For the -- correct, for Pionki earnout. Yes.

[ For 15% ]. And the option, the 40%, there was no time frame or a stake that...

Okay. Okay, the number -- apologies. Okay. Then you can fill that question. But then some quantitive numbers, maybe update on Tasomix, please?

Yes. We do not share quantitive numbers specifically to Tasomix. We would have to refer to the cluster results. We mentioned last time that, again, we did this last year on an exceptional basis only. What we can mention is that the market volume, again, in Poland, has been significantly impacted. Our volume has been much less impacted by that. But obviously, we did not achieve the growth that we were looking for. On top of that, we have seen that due to the shortage of volume, the market has become much more -- or it did become much more competitive during 2020. So there was a -- certainly, in the second half, there was a significant margin impact that we believe to be temporary. So already, there are signs that things are starting to turn. So Poland, overall, had a very difficult 2020, the sector as a whole, but also we did not achieve the results that we were counting on.

Okay. But then a follow-up because I was maybe wrong on the commitment, but how do you look at the remaining stake? Because the numbers are fully consolidated, and there is no correction in the noncontrolling interest. So that's with the understanding that you are likely to take in the remaining share. How you look to that?

Well, we believe at a certain point in time, it is probably likely that we will acquire that. But the timing remains fully flexible. We have a call option and the other party have a put option. So you just...

I may would like to add as well that the partner as such is still committed to the business. It's one of its core businesses. He also believes in the future of poultry and in Poland. So from his perspective, he wants to grow with us in that market if that's still his intention.

And maybe to add a little bit more, Christophe, we use the consolidation method where we consolidate 100%. So you don't see it in the noncontrolling interest part there. And as you can see in the annual report that we still, of course, have the valuation for the option of about [ 27 ].

Our next question this morning comes from the line of Guy Sips from KBC Securities.

Two questions from my side. First is on the CapEx, on the maintenance CapEx, you said it will be lower. Is that something that we can expect going forward as well for the next few years? And the second is on the impairment in Poland. Will that make you a little bit more prudent in paying multiples for your growth plans going forward? And you were also stating that in the Netherlands or in your more mature markets, you're paying 5 to 8x multiples. Is that something that -- yes, could you give us some more color on that one?

Yes, maybe starting with the latter, I don't think it will change our approach going forward. At the time of the acquisition, bird flu had not occurred in Poland for many, many years, and we all know about how COVID came about. So we believe that this is an exceptional event. We also believe that over time, the business will recover from that. So I don't think this is changing our approach in terms of looking at acquisitions. Acquisitions is a pivotal part of our strategy, and we're absolutely committed in terms of achieving that. The first question was related to the...

CapEx.

Oh, yes, CapEx. So your question there, is that just for this year? Or can you count on that as a pass-forward? I think the next few years, we do indeed expect that maintenance CapEx will be relatively less than previous years. So that gives us the room to spend more on differentiating and value-added types of CapEx.

We now have a question from the line of Paul Hofman from The IDEA!

I have actually 3 questions. The first one, on the underlying OpEx decline, at a group level, that was EUR 13 million. But if I look at the countries, it was EUR 10 million for the U.K., EUR 3 million for unallocated units. Yes, the latter was kind of a reallocation, I understand. But I would have assumed also some lower OpEx at the other units given the cost savings. Or what do I miss? Or what can you say about the spread of the -- also the savings that you realized? That is the first question. Then the second question, on the U.K. and Germany, traditionally, these have been challenging markets for you. But yes, the volume recovery was there in the second half versus the first half in the U.K. And Germany also, yes, good comments, I believe. Yes, what can you say there? Did you gain market share? You have -- yes, you have, let's say, more or less bottomed out, but what can you say about your performance versus competition? How do you explain these -- yes, that pickup there? And then the last and third question, that's an accounting thing. You explained these adjustments for 2019. Will the H1 results in 2020 also be adjusted? Or was that already taken care of the restatement that you made?

I'll handle the first 2 and then Roeland will handle your third question. In terms of OpEx, actually, in all countries have we seen OpEx savings. So our FTEs has come down mostly in the U.K., but also in group, in the Netherlands, in Germany, and only Poland has been pretty much flat. Obviously, there has been a small inflationary increase in terms of the indexation of our costs. And wherever the volume has been lower, for example, in the U.K., there, we have taken, obviously, the volume-related cost out as well. So it's not just been the U.K. Again, if you look at OpEx, please also look at the overhead that had been charged because that was increased in various countries. So if you take that out, you will see that we have actually made good progress, pretty much rough. But especially in the U.K., there, we have made most progress at this point in time in terms of our costs. When you're talking about the performance of ForFarmers compared to competition, again, these are just our best guesses at this point in time, as you will appreciate, but overall, if you look overall markets, I think we believe that we more or less held our market share. I don't think -- there are certain countries where we have gained and some countries where we probably lost a little bit. Overall, we believe our market position has been at least stable. In the U.K., we believe in the swine segment, we have lost some market share. We've taken a strong stand there that business that is -- that cannot be long-term profitable. It's not a business that we are all that interested in. So that was, again, has been a conscious decision to say goodbye to some unprofitable volume. In Poland, we actually have continued to increase market share. So our swine and ruminant business group, broilers came down somewhat, but not by far, not as much as the overall drop in the market. In Germany, we have actually seen an increase in volume, so our market share has improved. And in the Netherlands, it varies by specie, but overall, our market position has been constant. In Belgium, we've probably lost some market share, especially in the swine segment.

And to the last question, the adjustment we made on the definition of APM where we take out the amortization on acquired assets or intangible assets, it is something that you report on at least internally on a monthly basis. So we will also, as it comes to our half year figures and also the comparable figures, we will adjust that. And -- but it impacts the EBIT and the underlying performance of net income. And -- but we have now also distributed in the presentation that it's on gross profits and volumes and EBITDA and not on the EBIT level or underlying. But going forward, for half year, you will see that we also will adjust the APM items for half year.

We now have a question from the line of Patrick Roquas from Kepler Cheuvreux.

I've got 3 questions. The first is on raw materials. In the press release, you explicitly indicated that it might not always be possible to pass them on in time or in full. Should we read this as a kind of a disclaimer, knowing what happened not that long ago? Or do you see something really special in the first half? That's the first one. Second, on your cash position. In the past, when you turned the balance sheet in cash, you were open to do share buybacks. So let's say, if this year, there would not be material M&A, is that something that we can expect that new share buybacks are around the corner? And then thirdly, on Poland. Not that long ago, your Dutch colleague, De Heus, did a sizable acquisition in Poland. Does this impact your ambition to become #1 or #2 in time? And secondly, I mean, if you look at Tasomix versus Golpas, which one is the most preferred one in your opinion? I probably know the answer, but happy to hear you or, let's say, your comments on this.

Okay. So let me start -- Patrick, thanks for your question. Let me start with the raw material situation. As you know, we have -- coverage depends on the country. So we are trying to match our coverage with typically the expectations and competition in the market so that we minimize our risk. And given the huge increase in raw materials, as I mentioned before, there will be markets where we will temporarily benefit from that. And there are also markets where passing it all on to the customer even though you don't have the full position is challenging and might take a bit more time. So it is -- it remains a volatile area. But at this point in time, there is no strong ground to expect anything out of the ordinary there.

Yes. And when it comes to the share buyback, we just launched the Build to Grow strategy, which entails quite some M&A activities as well. And you're completely right, so we hope to do acquisitions this year. And then it will not materialize in the course of this year or early next year. We, for sure, will look at doing a share buyback in that case. But for now, given that we just launched a new strategy and focusing on M&A, we thought it was prudent to first look at that. And then going forward, if it doesn't materialize, we will indeed look at a share buyback program.

Then your third question, probably we're not objective, but I'll try to be objective anyway. Yes, if it's a choice between Golpas or Tasomix, I think that would be a very simple straight answer. Tasomix is a super-modern operation, highly efficient. So from that point of view, without any doubt, in terms of quality and focus, I would say, it was the #1 target. And we would do it again like that without any doubt. However, we are still not in the #1 or #2 position, and it will take some time in order to get there. Are we interested? Are we serious in terms of in moving that forward? No doubt. We see Poland as a growth market, as an attractive market and one -- even though we can continue to grow organically with Tasomix because there is obviously capacity in place to be able to do so, we do see further consolidation as important to build that leading position in Poland. So this is definitely one of the markets where we continue to focus our M&A attention to.

So this company that was bought by De Heus was not on your target list in the past?

No, they were on our target list. In fact, during the new strategy update, we explained there was an auction that took place. We were initially in the process and then the process stalls. So it became a bit of a tainted asset. And then at that point in time, the seller or private equity went to, in this particular case, to De Heus because they -- but you have to -- our assumption was they felt that was the fastest way to secure their money. So that's how the process went. So we could have been interested, but we did not want to pay more than we felt the business was worse. But we continue to be interested in ongoing M&A opportunities in Poland.

We now have a question from the line of Fernand de Boer from Degroof Petercam.

Most of my questions have been answered. But still, regarding this impairment charge for Poland, EUR 34 million is still a lot if you take into consideration that you actually say, we expect it to recover quite quickly after COVID. With vaccination now going across the world, you should expect that to recover very quickly. So why then such a significant amount of impairment? That's the first question. Then the second one, on De Hoop, you gave us the production capacity figures. But could you say anything about the utilization rates for this capacity? What does it really add to, let's say, 2021 volumes for our models? And also, did they also suffer that much from the weak out-of-home market as Tasomix did? And then the last one, on the U.K., you actually said on the cost side, given the fact that the volumes declined, we took there the action. Now it seems that volumes are going to recover, certainly with a weak comparison base. Do you then expect OpEx to rise again? Or can you do it with the current OpEx levels? And that's one question. And the second one, on the U.K., you said, okay, we are phasing out some contracts which were not profitable, but what was in pig meat -- or in pigs, swine. But I always thought, okay, swine, with the Brexit, is going to be the growth market in the U.K., the growth segment. So isn't a dense train to say temporarily to your customers, you are not welcome. And then if the market picks up again, okay, you're welcome again. How does that work in terms of marketing-wise?

Okay, let me -- thanks for the questions, Fernand. Let me start with the impairment. As you might see if you -- and we will publish it today in the annual report that we have built several scenarios when it comes to looking at the future. And then, of course, we look at margins and projections of volume for the next 5 years. And yes, we had 3 different scenarios there, a downward, a base case and an upward scenario. And then we have to apply a likelihood, so the chance that it will happen. And although we see, like you said, there is a relief on COVID, it's still out there. How fast will the market recuperate from all of this? And how structural is it? Is it already this year? Is it the next year? And that's why we built these scenarios and gave a likelihood to that. And if you put that into the equation, and it's also mandatory nowadays, of course, by IFRS, we get to this full impairment. And maybe also to address your question on the U.K. In the U.K., you have 2 things. One was the decline in volume, led to lower cost. I mean it's less variable cost. So as volumes goes up, then, of course, variable costs come up again. But there's also more structural element there is that the closure of the plants we had in 2019 is, of course, something that will also materialize in 2021 because the plants are closed. So -- but when volumes goes up, the variable costs go up again and then also cost will go up.

I'll respond to the questions on De Hoop. Before COVID, De Hoop was running at a fairly high level or very high level of utilization in their plant. But when COVID did happen, it did impact that business, and they also saw that some of the changes in industry were also changing. So they feel that in order to continue to have a good way forward, that they needed to be stronger and also have an international exposure. So COVID accelerated that in making the decision. In fact, we had -- even before, we had contacted them a number of times in terms of our interest because we always felt that they would be a good add. And other than giving us some decent cup of coffee, they really showed no interest. But as soon as COVID hit, the second wave, they were very quick to pick up the phone and, again, we were able to complete the transaction. So surely, COVID will have also probably an impact on their business going forward because where, as we say, in Poland, we expect the business in broilers to recover fully. We don't expect that to be fully the case in the Netherlands. So especially the lower end or the non -- the part that is not going to the retailer, Poland is the low-cost place to produce those. So as expected, in the Netherlands, we will see a reduction of the non-value-added stuff that will move towards Poland. So they will see an impact there, but they are very well positioned in that part that actually will grow in terms of the retail component. Then your question to the U.K., how does that work? Aren't we expecting swine to grow over time in the U.K.? And the answer is, yes, we are. And in fact, the whole industry is running at a high level of utilization, and we do expect growth over time. And that is exactly the reason that we just can't justify continuing to serve customers without the required level of profitability that you need in order to continue to reinvest in that business. So we really want to serve our customers well. We want to continue to serve our customers well. So those that are significantly below the hurdle rates that we need, this is the time where we obviously need to improve that.

Okay. May I have one follow-up question on De Hoop? In your introduction remarks, you said the owner agreed to leave the company, which sounded that you are actually -- yes, please...

No, no, no, lead. Lead.

Oh, lead. Okay. Yes, I...

The owner leads the combined organization now.

We now have a question from the line of Anne Margaret Crowe from Edison Group.

I'd like to begin by saying a personal thank you to the people working in your organization who've effectively kept food on the table throughout the coronavirus outbreak, which I sort of panicked about at the beginning. But actually, everything's been totally fine, thanks to people like your employees. So moving to my question. My question is really focused on the gross margin in the U.K., which you've noted sort of pressure on that during the period. And this is a slightly different story from NWF and Karro Food and Wynnstay. But I guess they are not involved in the poultry market to the same extent and particularly not involved at all in providing feed to companies that are producing the very big turkeys for catering markets. Is that a fair interpretation of the situation?

That is correct. The ones that you mentioned are primarily focused on the ruminant markets only.

I think Wynnstay does a little bit of -- well, they do a lot of stuff for hens, but it's for egg production rather than meat.

Correct.

Yes. Okay. So that would...

But even Wynnstay, it's primarily ruminant.

Yes, yes. Okay. So that would be the difference in the situation?

Yes. Correct.

We do, in fact, have a follow-up question now from the line of Christophe Beghin.

I have a question on M&A in general. I think you're making good progress in kind of cost restructuring and getting the business more in lean following the changing end markets. But can you maybe elaborate a bit more on how are you making progress in determining the 2 new countries you would like to target on the longer 5-year term? Because I know it's work in progress, but did you make already some, yes, good steps there?

I know you would all like to hear who they are, and you know also that I will not be able to share those. What I can mention, following the strategy update, we said we would further strengthen the team. And actually, we have. We attracted [ Roeland Tjebbes ] who came from Nutreco and was leading Asia and Africa there as well as M&A. He has become our M&A director. We have further expanded the team in terms of support. So we are taking all of the steps that we said we would. But we all know sometimes these things happen quickly. They can take more time, but we are absolutely committed to delivering those objectives that we stated as part of our strategy.

Okay. And maybe a follow-up. I've seen that you have changed the 5-year Total Feed growth expectations for Belgium positively. What does explain you becoming more positive on Total Feed growth on a 5-year basis compared to last year?

Now what we've done is that for the impairment test, that's what you're referring to, we have -- we included the growth. And we took another careful look when we did the impairment test again this year, and we were less conservative than the year before. And we have programs in place, what we discussed also today on the -- also the customer brands we have in place. And that's why we see that from that perspective, compared to the impairment as of last year, we are a little bit more, let's say, bullish than we were in the year before.

And maybe on Belgium, it's probably worth to mention, following the acquisition of Whole Foods, actually, we lost more volume than we initially anticipated. But the synergies and the benefits that we're getting from formulation and nutrition have also been much stronger. So the inherent profitability of that business has actually moved forward.

All questions have now been answered. So I'd like to hand back to our host, Caroline Vogelzang, for any closing remarks.

Thank you so much, Kevin. And thank you all of our very well-known analysts who called in. We will be back to you, of course, with the half year results in August. But in the meantime, we will definitely also be in contact for Q1, but we don't have any webcast of Q1. But I know that there will be follow-up questions. You know where to reach me, and we will set up meetings whenever and when appropriate. So looking forward to speaking to you again soon. Thanks. Bye.

Thank you very much, everybody, for joining today's conference call. You may now disconnect your lines. Speakers, please stay connected.