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

Ladies and gentlemen, welcome to the ForFarmers Annual Results 2025. [Operator Instructions] I would now like to give the word to Floor. Floor, please go ahead.

Thank you, Berjan. Welcome to the webcast for the 2025 annual results for ForFarmers. I'm here with Pieter Wolleswinkel, Marloes Roetgerink and Rob Kiers. And I will now hand over to Pieter to start the presentation.

Yes. Thank you, Floor. And also on our behalf, a welcome from Lochem. We are here to present our 2025 results. I'll start off with the key events. Marloes will present the financial results, and I'll close off with a view on our management agenda of 2026, after which, obviously, questions can be asked. 2025 can be seen as a record year when we talk about volumes, when we talk about net profit. And obviously, we have seen the additional effects of our acquisitions, so the full year effect of [indiscernible], the joint venture merger with team agrar, but it is good to mention that we also have shown organic growth. That means we're gaining market share. We see that we have a very customer-focused approach. And by working this way, we are successful in gaining new customers. We do realize that 2025 was a year for our farmers with favorable market conditions. For most of the year, the returns were good, especially for eggs and poultry, but we did see with dairy and pig prices going down that the situation changed towards the end of the year. In the Netherlands, we have seen that we were able to remain our volumes despite the impact of the buyout schemes. In Germany, we worked on the integration of the joint venture. In Poland, a strong performance. It's very good to mention explicitly the good results in the United Kingdom. We have finalized the reorganization and also in the U.K., we are strengthening our market positions. This has led to a volume of 10.6 million tonnes, obviously steered by the acquisition effects, but also on an autonomous base, we saw an increase of approximately 1% of our total volume and also of our compound feed volume. Then directly moving to our underlying net profit, we see an increase of EUR 40.6 million to nearly EUR 62 million. That has led to a dividend proposal of EUR 0.30 per share coming from EUR 0.20 over 2024, so an increase of 50%. Our ROACE has increased; end of 2024, we were at 13%; end of 2025, we were at 17.4%. So therefore, clearly above our guidance. Looking at our sustainability agenda, we can be satisfied with the progress we've made on our 3 pillars: the carbon footprint reduction, the promotion of circularity and the protection of biodiversity. Starting off with the carbon footprint reduction, we see a decline of 3% per tonne feed. So we are improving. Looking at our Scope 1 and 2, for example, our factories, we are buying cleaner energy and also investing in more energy-efficient installations. Looking upstream, so the sourcing of raw materials, we've made good progress there. We see that in our procurement decisions, more and more we can work with raw materials that have a lower carbon footprint. We do recognize that looking downstream, so towards the consumer, only limited initiatives start to evolve. So therefore, not much progress has been made yet. Yet overall, if we talk about our carbon footprint reduction, we are on track. The promotion of circularity is a key thing in our strategy, and it is good to recognize that we have increased from 37% to 41%, mainly driven by the full year acquisition effect of Van Triest, a company focused fully on co-products. The protection of biodiversity has 2 key themes. The first is the sourcing of soy, and we were pleased to announce a partnership with Bunge, end of last year in which we will focus more and more on the sustainable growth of soy. Looking at nitrogen, still a key theme in the Netherlands. We are working on this with our farmers via particular feed compositions and also to help them in their manure management. So based on that, we can clearly show progress on the sustainability agenda. If we then look at our clusters, we start, as always, with the Netherlands and Belgium, a big step-up in volume driven by the Van Triest acquisition. But what clearly stands out for us is that on compound feed, we saw an increase in the Netherlands, even despite the effect of the buyout program that negatively affected the business in the second half of 2025, especially in the pig sector. For us, this means that our technical results for the farmers are very good. Our feed prices are competitive, and that has led to an increase of market share in all species. We are strengthening our positions in the poultry industry. We announced the acquisition of Beukelaar in November. So again, a step forward. And also Pavo, our horse business and Reudink, our organic business shows a good performance in 2025. So overall, a very strong results in the Netherlands that gives us the opportunity to invest in the factories and make sure they are competitive and future-proof towards the future. Looking at the U.K., a clear increase of volume, more than 5%, mainly driven by the ruminants. We see that our positioning stands out. We also recognize that we were supported by the favorable milk prices. We finalized the reorganization in the first half of 2025. The divestment of the second feed mill took place, and we recognize a clearly more competitive cost base and an improvement of the feed mill utilization. And based on that, we are also more competitive in the poultry and pig sector. So based on that, that means that also there in the free market as well as in the integrated market, we are more successful to act, and that has clearly led to an improvement of the financial result. And it is good to mention that also in the U.K., we have passed the threshold of 10% that we'd like to see on ROACE. Then moving to the East, the cluster, Germany, Poland, a strong performance. Looking at Germany, we worked on the integration, obviously, of the joint venture, but we can also say that we are satisfied on the performance of the compound feed activities. They are in line with our expectation. Point of concern is HaBeMa, the transshipment activities were slow in the first half of the year due to the small harvest size and also to the change of currency, the dollar to euro that has been a limiting factor for the exports of grain. And if the grains are not exported, the transshipment activities are slow, but it is good to mention that there has been recovery in the second half of 2025. Poland, strong development despite animal diseases as bird flu that took place in the first months of 2025 and also at the closing of the year. But we are growing, and that means we need to keep on working on investment agenda to ensure capacity towards the future. And therefore, we were also pleased to announce the acquisition of Farmpasz in January of this year. With that step, the Northeast of Poland, we are strengthening our ruminant position. Last week, we were very pleased to announce a very big step in the history of ForFarmers, namely that we are entering into a joint venture with KPS. KPS is a company that is active in poultry production, slaughtering as well as processing. We know KPS already for a long time. The owners of KPS are also shareholder of Tasomix. And by joining forces, we create a strong integrated approach with the birds, with the feed, with the slaughtering activities and the processing of the meat. So based on that, we can work more efficient, roll out innovations in a more quicker pace and respond strongly to changing market circumstances. And based on that, that helps us to grow in -- for us, a very important mark towards the future. This is aligned with our strategy that we announced towards 2030. We recognize that in Europe, more and more integrations will develop, especially in the poultry area, and we, as ForFarmers want to play an active role in that and KPS is, therefore, a logical step to take. KPS is a company with approximately 2,000 employees, a turnover of approximately EUR 250 million and an EBITDA of EUR 46 million. Based on these numbers, you can already recognize that it is, for ForFarmers, a very big step towards the future. The current shareholders are the families, Krzyzanowski and Sobczak. They own 100% of the shares of KPS and they also own 40% shares of Tasomix, where ForFarmers owns the other 60%. KPS has 7 modern poultry farms with a total of approximately 3 million bird places. All these poultry are supplied to the slaughterhouse in Radom, so relatively a new slaughterhouse opened in 2018. Half of the birds are sourced from the own farm and the other half is sourced in the free farm market in the east of Poland. Most of the meat is sold for exports and approximately 10% is moved to the processing facility in Pionki. Pionki is also where we have the feed mill of Tasomix. And the processing plant specialized in ready-to-eat products like meals and chicken nuggets. And most of these products are sold to international food services and retail customers. A new joint venture will therefore be established, ForFarmers Polska with 2 companies, Tasomix and KPS. ForFarmers will then have a controlling stake, 50.5% and consolidate the joint venture fully. The difference in valuation will be paid in 3 annual tranches and the transaction will immediately add to our net profit and therefore, also add to the future dividend. The transaction is subject to approval by the Polish Competition Authority. And given the size of the deal, we will also need approval from the ForFarmers' shareholders, and it will be agendized for the annual meeting on the 16th of April in -- at Laren. We expect to complete the transaction in the third quarter of the year. And we are also very pleased that the current Tasomix Management Board will lead the ForFarmers Polska Board. They have well experienced both on the feed side as on the food side. And based on that, we are very comfortable that they will be able to lead the integration towards the future. Having said that, I would like to hand over to you, Marloes.

Thank you, Pieter. Good morning, everyone. As Pieter already mentioned, we look back on a very strong financial year for ForFarmers. I would like to take you through last year figures in more detail. Total volume amounted to 10.6 million tonnes, 80% above previous year, mainly driven by 2 M&A effects. First, the acquisition of Van Triest. This acquisition has been included in the figures since September 2024. And in 2025, you see the full year effect. In addition, the joint venture in Germany has been fully consolidated as of March 2025. When looking at like-for-like growth, so excluding M&A, volume growth was 1%. All clusters performed strongly in terms of volume over the past year. Looking at compound feeds, reported growth was 6.9% and like-for-like growth was 0.7%. We have been able to further strengthen our market position in compound feed, something we are obviously pleased with. Revenue at ForFarmers is strongly correlated with raw material prices, which is why we tend to focus more on the development of volume relative to gross profit than on revenue itself. Gross profit improved significantly, both on a reported and like-for-like basis. All clusters showed strong improvement. In addition to the 6.6% like-for-like growth of the underlying gross profit, underlying operating expenses have remained flat on a like-for-like basis. The like-for-like number of FTEs has remained stable and increase in salary costs have been largely offset by lower energy expenses. Underlying EBIT has improved by 58%, an achievement we are proud of, made possible by the dedication and hard work of the entire team. We see an increase in underlying depreciation, mainly due to acquisitions, but also due to a slightly higher level in investment and replacement CapEx. EBITDA for 2025 amounted to EUR 145.9 million compared to EUR 100.8 million over 2024. In addition to the underlying EBIT, underlying net profit also shows an improvement of more than 50%. Although net finance expenses increased, interest costs on loans have decreased following the lower net debt. Other components, including interest expenses on leases have increased. The share of profit of equity accounted investees is lower. HaBeMa was accounted for via this method in the past. This has been fully consolidated as of March 2025. Underlying income tax was higher as more profit was generated. Altogether, this results in an underlying net profit attributable to the owners of the company of EUR 61.9 million, which translates into underlying earnings per share of EUR 0.70. ROACE for 2025 amounts to 17.4%. Regarding exceptional items and other APMs, there are no major changes. Other operating income mainly relates to a one-off consolidation effect of HaBeMa of EUR 4 million and the sale of a feed mill and an office building in the U.K. At the level of operating expenses, this is mainly related to M&A costs. On the next line, you see the amortization of intangible assets acquired in the past. The annual unwinding and revaluation of the Tasomix put option liability are reflected in the finance results, which increased due to a strong performance of our business in Poland. The total of exceptional items and other APMs for 2025 amounts to EUR 12.5 million. Reported profit of 2025 was EUR 54.4 million. On the next slide, you find the balance sheet. Total assets increased to over EUR 1.1 billion, driven by the consolidation of the German joint venture. Equity increased to over EUR 438 million, driven by the profit contribution and partly offset by dividend paid. The solvency ratio stands at a solid 39.5%. Net working capital increased to EUR 39 million, driven by the consolidation of the German joint venture. Overdue receivables decreased to 7.9%. Last year, the net debt position was EUR 57 million. Due to the strong results, there is no longer a net debt position with a net cash position of EUR 6 million. This provides a solid basis to finance the joint venture in Poland announced last week and other M&A. On the next slide, you find the cash flow mutations. Cash flow from operating activities amounted to EUR 148 million. Investing activities are primarily related to investment in CapEx in 2025. Increase in cash flow from financing activities is mainly related to the higher dividends paid in 2025 over 2024. Together with the drawdown of loans, this results in a net cash position of EUR 6 million over 2025. With that, I would like to conclude the financial update and hand over to Pieter to further elaborate on the management agenda.

Yes. Thank you, Marloes. We realize that the market circumstances are somewhat different than a year ago. Milk prices are down and the big returns are also under pressure. Nevertheless, our management agenda stands. Obviously, much attention will go to the completion of the transaction and the start of the integration of Tasomix and KPS. In the Netherlands, strengthening of market position in all species stands out. Also with Reudink, our organic feed company, we want to achieve growth. In Poland, also the expansion of capacity is on the agenda as well as expansion of our ruminant position given the Farmpasz acquisition. In Germany, we focus on growth now that we have worked hard on the integration of ForFarmers and team agrar. In the U.K., we've shown growth in the ruminant sector. And based on that, we foresee that we need to invest in our capacity towards the future and plans are made for that. We do this with a continuous focus on our cost control. And also when we talk about our sustainability agenda, we will continue to work with chain partners, especially towards consumers to ensure we achieve our ambitions. With that, we come to the end of this presentation, and I would like to give the floor to questions.

[Operator Instructions] The first question comes from Fernand de Boer, Degroof Petercam.

Fernand de Boer from Petercam. First of all, congrats with the results. And then I have actually 2 questions. If I look at your implied performance in Q4 with EBITDA still substantially rising, while your volumes were actually quite down. How does that then work with the operational leverage? Or where does any actually strong results in Q4 come from? That's the first question. And then the second one on the return on invested capital, well above your target of 10%. So how do we have to look at that forward -- going forward and also in light of the acquisition of the merger in Poland?

Yes. Thanks, Fernand, especially for the compliment. On the first point, what we see, especially in Q4 is that on the co-products, one product stream is not longer supplied to the feed industry, but has moved to the biogas industry. That has taken away quite some volume. And as you can recognize, more volumes than margins. We know that the co-products are competitive products. So based on that, it has not so much affected our profit. And given that these products don't go into our factories, it's also not that it has pushed our capacity fill down, so it's -- indeed, the observation is there, but it is good to see that if we look at our compound feed volumes, also Q4 was good to mention. On the ROACE, indeed, we are already now for 2 years, clearly above our target of 10%. That is obviously also what we recognize. We've always said we will be investing towards the future, and that might affect our future ROACE. Obviously, we have now made the announcement on KPS, but we don't foresee that, that will put a strong pressure on the ROACE figure. So coming back to your question, we obviously realize what the question basically means that what is your future guidance on ROACE over the summer period, we will take a closer look on that. And most probably in the autumn, we'll then come up with a new guidance on ROACE.

Okay. Maybe one follow-up question on the Dutch market because I think in the second half of the year, you saw more impact of the buyout agreement in the Netherlands. How do we have to look at that in, let's say, the first half or maybe in '26 as a total for your volumes?

Yes. So the observation is correct. That's also basically what we stated that the impact was mainly there in the second half of the year. So the buyout schemes meant that in November, the bonds need to be empty. So we still saw obviously also for us a decline in the pig sector coming from that. The good thing is that we have largely compensated it on a year-to-year base. But indeed, it means that in the first half of 2026, this will put the pressure on the factory fill. We're working on that with the teams. At the end of the day, we always said for every farmer that quits, we need to fill that with a new customer. So we're working on that. And at the end of the day, still with the ambition that we keep our volumes in the Dutch market stable. And that means that we need to gain market share.

And yes, apologies. With the new government in the Netherlands, do you expect new legislation for the farmers? Or is it now finally for everybody a little bit clear that also the farmers can move on? Or how do you feel at that point?

Yes. So what we see is that there's limited money available for buyout schemes, and we're pleased on that. I think ForFarmers has always been very explicit that we don't believe in buyout schemes. It's a relatively expensive way to solve a problem. And we've seen that also with the analysis that have been done on the program of 2025. So it has costed the Dutch taxpayers approximately EUR 2 billion and the effect is minimal. So what we recognize in the new governmental agreement is that there is much more room for innovation. It's target steering. So that means that every farmer will get its targets for nitrogen, and that means with management steps with different feeds, you can work on improvement. And we believe that, that is a very quick way to move forward to show progress and that will also help farmers towards the future. Will that solve everything? No, there will be particular situations, especially around the material -- 2000 where issues will remain. And there also local steps will most likely be taken. But nevertheless, we do see that it is an opening in the nitrogen crisis, but I also realize that still a lot of work needs to be done also to see what exactly the targets will be for the farmers. Are they realistic? What measurements can be taken also with sufficient legal background backing. So based on that, still a lot of work to do. But for us, the glass is half full.

[Operator Instructions] Next question comes from Henk Slotboom, the IDEA.

Sorry, I was on mute myself. Apologies for that. But here I am. A topic I've been addressing before, Pieter, and perhaps you can clarify it a little bit. Although I like the KPS deal you announced last week a lot, it basically really puts you on the map in Poland even more than you were already before this deal. But there are 2 ways to look at this. There's also a look from a risk perspective perhaps. Let me explain. If we're talking about avian flu, you got away with it pretty well last year in Poland. Now it's spreading over into other territories as well. Suppose you -- you would have this joint venture already today in the past situation, if stables have to be emptied, have to be cleared and that sort of things, you suffer a damage that you don't sell feed to poultry farmers. But in this case, you're a co-owner of poultry farms as well. Is that increasing the risk there? How we should look at ForFarmers? Or is it at the end of the day, worthwhile being involved in the poultry farming anyhow, so the integration model you're now establishing. Perhaps you can shed some light on it? And how do you manage this risk? Because this looks like an external factor, which is less easy to control than running your cost base, for example, itself?

Yes, it's a fair observation, Henk. And obviously, we have taken this into account coming to -- at the end of the day, the deal as has been announced. So what we recognize is, one, the impact of Poland will be bigger. Two, the impact of poultry in Poland will be bigger. So indeed, the market circumstances in Poland will play a big role on this. And that can indeed mean, for example, animal diseases. So for us, it's indeed, it's all about how to mitigate the risk of this. And at the end of the day, that starts with the biosecurity measurements to avoid that you run into issues. Also there, we will evaluate options to ensure. We've also seen that in other countries where with insurance, you can mitigate the risks of that. And on the other side, we also need to be realistic that if we now look at the returns for the poultry farmer, both on eggs as well as on meat, the returns are very good and that basically has to do with the shortage that we recognize also because of the bird flu. So where it's a risk on one side, looking at the financials, it can also be an upside and that might be that over time, we have particular fluctuations and volatility in our results. In general, that is not what we like, and we want to be reliable in our forecast. But on the other side, we always said, look at ForFarmers don't steer on a quarter-to-quarter look. At the end of the day, we are in this business for a long period of time. And that will also mean that in Poland, we always need to take a longer perspective on the results. So based on that, Henk, we recognize the risk, but we feel comfortable on the mitigation of the risk.

[Operator Instructions] And with that, I will now turn the call back over to Pieter Wolleswinkel for any final remarks. Pieter, go ahead.

Yes. So my final remark will be thank you very much for your attention. Thanks also for the questions. It also gives a good interaction to the meeting. And if over the coming period of time, there are any further questions, then obviously, you can get into contact with ForFarmers, and we'll be more than pleased to answer your questions. So with that, thank you, and I wish you all a very good day.