NETHERLANDS - Last week, Vion announced that it continued to improve results in 2016 resulting in a net profit of €31 million versus €22 million in 2015. Vion was glad to see pork prices increase to the benefit of its suppliers.
Its Beef and Food Service divisions again showed a solid performance. The year was also characterised by continued investments in its production infrastructure, its people and organisation and its service to customers and suppliers.
- Normalised EBITDA from ongoing operations increased 33 per cent to €60 million (2015: €45 million).
- Net profit of €31 million versus €22 million in 2015.
- Return on capital employed (ROCE) increased to 5.6 per cent (2015: 3.7 per cent).
- Robust balance sheet with a solvency of 44.1 per cent.
- Several commercial successes moving from supplier to chain coordinator.
- Publication of the company’s first corporate social sustainability (CSR) report and high profile initiative in Germany to increase transparency in the meat industry (www.vion-transparenz.de).
Francis Kint, CEO Vion said: "In 2016 we continued to improve our results. EBITDA improved to €60 million, which leads to a return on capital employed of 5.6 per cent. This is still not at a satisfactory level but the investment programme of €180 million over the last three years, the rationalisation of our production footprint and several successes on the commercial front are leading to improved performance. We now clearly perceive appreciation from all stakeholders for the hard work done and intend to continue in 2017 on this path to success."
After a challenging year in 2015 the market conditions for pork meat picked up in 2016 thanks to stronger global demand. Vion’s high quality pork meat from the Netherlands and Germany proved to be much appreciated capturing a market share of 8 per cent of Chinese imports. Vion had several breakthroughs in which it moved from supplier to chain coordinator and/or category specialist. Examples are the expansion of its animal welfare “Good Farming Star” programme from fresh meat to inputs for processed meat and the development of the Food Service division as provider for complete solutions to caterers, including culinary code seminars.
Publication of first corporate social responsibility report
Food in general, and meat in particular, is a subject of numerous societal debates. These debates can be grouped into four major themes: animal welfare, supply chain–related issues such as traceability, transparency and product integrity, the environmental impact of meat production and human health. Vion is an active participant in the societal dialogue on these relevant themes. Vion aspires to be a game changer on some of these topics and, in other words, be about more than just meat. With the publication of our first annual corporate social responsibility (CSR) report, we report on our efforts and achievements. We also intend to stimulate the discussion and creativity with our stakeholders on these relevant items.
High profile transparency initiative in Germany
Realising how important transparency is to the sector, Vion decided to expand its transparency initiative - started with the publication of audit results on its Dutch website in 2014 - to Germany through the launch of www.vion-transparenz.de. On this website, Vion explains transparently how it operates, publishes facts and data of audits and opens a forum for discussion with stakeholders. This initiative was perceived to be a breakthrough in the industry and in the so-called “Voedseltop” (Food Summit) organised by four Dutch Ministers, Vion was invited to cover the theme of transparency in the food chain.
Investigation of financing options
On 19 September 2016, Vion and its sole shareholder NCB Ontwikkeling announced that they had decided to investigate financing possibilities to realise further growth and to make use of market developments. ABN AMRO was appointed as the financial advisor for this. This has led to the decision to refinance the company’s receivables based working capital facility (expiring in June 2017) at a level of € 200 million, up €75 million from the existing €125 million. The company has reached agreements about the terms and conditions for the new facility with a syndicate of four banks including existing lenders ABN AMRO Commercial Finance and NIBC.
Prospects for 2017
The main investment in 2017 is the creation of the new facility for beef meat in Leeuwarden, Friesland. In the middle of this rich live-stock area, Vion will focus on meat concepts based on quality and animal welfare. On 9 March, Vion announced the closure of its pork plant in Zeven to focus its production in Niedersachsen in its plant in Emstek, which provides an ideal bridge to global markets. On 4 March, Vion’s Pork Division introduced Good Farming Balance, a demand-driven approach, to better capture the opportunities in the international pork markets, bringing improved perspectives for Dutch pig farmers.
Financial results and financial position
Net turnover increased in 2016 with almost 4 per cent positively impacted by higher meat prices, particularly in its Pork division. Sales volumes increased in all three divisions.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) from ongoing activities increased by more than 33 per cent to €60 million in 2016 as a result of the ongoing execution of the strategy of performance improvement. EBITDA also included a €7 million settlement received from the city of Ansbach for a BSE-related claim dating back to 2005. Operating result showed a small decrease in spite of the increased EBITDA because of significant one-off income items included in the 2015 results of €24 million and a 4 million impairment charge in 2016 related to the closure of Zeven that was announced on 12 March.
For 2016 Vion reported tax income of €13 million following the recognition of net operating losses from prior years.
In 2016 €69 million was invested, mostly in maintaining, modernising and expanding the production locations in all three divisions. Also, working capital increased with €59 million driven by higher meat prices. As a consequence, the net cash position of €52 million at the end of 2015 turned into a net debt position of €17 million end of 2016. Despite the large investments made during 2016 our solvency remained stable at 44.1 per cent.
Annual and CSR reports 2016
Vion’s 2016 annual report and the corporate social responsibility report 2016 are available on the company’s website.
Vion will convert to IFRS
Vion will convert from Dutch GAAP to IFRS in 2017. For further details about the impact of the conversion reference is made to Vion’s 2016 annual report.
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