Dutch-based Nutreco says it is adopting a two-pronged strategy to ''... regain solid profit growth, reduce earnings volatility and improve return on invested capital''. It has been affected by falling sales.
A statement from the company said it would "focus on growth of its worldwide animal nutrition and fish feed business by concentrating its resources on this part of the Nutreco portfolio." It said the world market for animal nutrition is valued at €150 billion. "With €2 billion in animal nutrition sales, Nutreco is one of the global leaders in this industry," it said.
The other part of its strategy will be to develop its food and breeding companies 'into industry leaders, where desirable through partnerships, either inside or outside Nutreco'. The statement recalled recent merger moves under which all fish farming, processing and marketing and sales activities of Nutreco's Marine Harvest would merge with Stolt Sea Farm "into a stand-alone and independently-financed business".
Reports in the financial press this summer on Nutreco focused on profit warnings from Nutreco announcements that it was expecting lower profits for end fiscal 2004, because some parts of the business had been performing less well.
Lower salmon production
Part of the problem was attributed to lower farmed salmon production amongst Nutreco customers. Nutreco said it plans to sell its Hendrix Meat Group to Sovion a major EU meat processor. This sale and the recent merger await approval from Brussels with a decision expected in Spring 2005." Wout Dekker, Nutreco ceo said "Nutreco will develop into an animal nutrition and fish feed company with a strong food orientation. We will hold selective downstream positions in the food chain, with the explicit objective to build market leaders.
"In the decade of Nutreco's existence we managed to grow all the different building blocks of our company. Now we have reached a point where we have to make some deliberate choices. We cannot continue to grow all our businesses on our own at the same ambition levels," he added. A note from Nutreco said that: "In 1997 the company was listed [on] the Amsterdam Stock Exchange. Since 1999 the Nutreco strategy has been focused on building strong positions in the poultry, pork and salmon chains, on top of its traditionally solid base in animal nutrition. Nutreco became the world leader in salmon farming and fish-feed production, and Europe's largest compound feed, premix and speciality feed producer. However, the strong growth in food sales did result in more volatile and less predictable earnings. In the last two years Nutreco has been suffering from the effects of low salmon prices and the impact of Avian Influenza on the poultry industry in the Benelux," it said.
"Capital employed will shift from salmon farming and processing of meats and fish (at present 70%) to the animal nutrition businesses (at present 30%). The return on average capital employed is expected to increase from current levels of approximately 10% to a range between 15 - 20%." The statement said Nutreco which owns Trouw Nutrition International and Spain's Nanta plans new products and expansion in Latin America, Central & Eastern Europe and the Asia Pacific region. It says as a global player it will benefit from economies of scale in raw material purchasing. The reaction of fisheries raw material suppliers on pricing will be interesting to watch.
