rate effect was 0.5% and related to the Canadian pharma egg business. In a difficult
economic environment, EBITA before exceptional items decreased to € 22.0 million
(2011: € 32.7 million).
Profile
Nutreco’s Meat & Other segment primarily relates to the production of broilers and the processing and sale of Sada poultry products in Spain. Furthermore, this segment includes pig farming and trading activities in Spain, a poultry hatchery and a pharma egg business in Canada. The broilers from Sada and the pigs from Inga Food are supplied with feed from Nanta, Nutreco’s compound feed business.
Sada is the Spanish market leader in poultry meat products and is well known for its brands Sada and Cuk. The majority of its products are sold to consumers through supermarkets and hypermarkets. Sada has ten processing facilities throughout Spain with a total annual production of about 143 million broilers. About 90% of the production relates to fresh products and the remainder to frozen products. Nearly half of the products are value-added products. The Spanish supermarket chain Mercadona is an important customer, representing 7% of Nutreco’s total revenue. Our relationship with Mercadona aims for a long term partnership.
Inga Food is a pig farming company in Spain producing 1 million pigs per year. These animals are raised by contracted farmers throughout Spain.
In Canada, Nutreco owns four poultry hatcheries and a joint venture, producing a total of 70 million one-day-old chicks in the eastern region. The hatchery businesses are closely linked with the sale of poultry feed products to producers in the region. In Quebec, one of the hatcheries is dedicated to the production of embryonated eggs for the pharmaceutical industry (Les Embryons Lanaudière).
Market developments
In the first half of 2012 the supply of the poultry market in Spain was more in balance with demand, resulting in good sales prices. In the second half of the year the economic crisis in Spain affected the poultry industry less than other meat
markets as poultry is relatively cheap. The market demand was less in balance with supply as selling prices for poultry do not reflect increased feed costs. The Spanish poultry meat market continues to be a relatively closed market comprising 90% fresh products. Frozen products compete with imports from other countries such as Brazil.
With a market share of 27%, Sada is the number one poultry producer in Spain. Its main competitors are Vall Companys Group (9%), Coren (6%), Uvesa (8%) and Avícola de Navarra-LDC Avilaves (6%). In the fragmented pig farming industry in Spain, Inga Food has a market share of 2%.
The Canadian poultry markets remain stable due to the supply- managed quota system of the Canadian government. By matching the total supply of the product available in Canada with the market demand, supply management systems aim to provide efficient producers with fair returns and to provide Canadian consumers with an adequate supply of the product at reasonable prices. It is a stable market that grows in line with domestic demand. Nutreco Canada has a leading position in the production of one-day-old chicks, with a market share of 36% in eastern Canada.
Strategy
Sada is implementing a value creation plan that includes initiatives to retain stable sales volumes, to improve the commercialisation in the retail and food service channels, and restructure more traditional parts of the business to optimise the industrial footprint and the product range. Fresh packed and value-added poultry products play an important role and offer the best growth opportunities. Value addition is achieved through innovative and flexible products and new packaging developed in close collaboration with customers.
Inga Food focuses on cost reduction, improvement of quality through official certifying entities, reduction of volatility by means of cost plus agreements and close collaboration with feed businesses.
OPERA
TIONS & BUSINESS PERFORMANCE
2010 812 918 935 Revenue development € x million EBITA development € x million 2012 2011 2010 27 33 22 2012 2011
The Canadian poultry operations are closely linked with the poultry feed operations and are used to form strategic partnerships with poultry feed customers and enhance the stability of this business, while still being profitable in their own right.
Developments in 2012
The relatively positive performance of Sada in the context of a challenging environment is a result of many factors. Market leadership, continued investments in innovation, and operational excellence including active debtor and cash management have all contributed. In the second half of the year, Sada experienced difficulty in transferring increased feed costs into higher consumer prices for poultry, and this increased pressure on operating margins. Meat prices are to a larger extent exposed to changes in supply and demand and raw material price changes are not immediately reflected in meat prices.
Sada has launched new product packaging that stores chicken breasts in two separate pouches. This design gives consumers the choice to open only one pouch and extends the shelf life of the second chicken breast. Sada also completed a roll-out of new packaging for whole chickens and individual leg quarters. This innovation uses stronger plastic packaging and a modified atmosphere containing lower oxygen levels and higher nitrogen levels to extend the shelf life of the chicken meat significantly, benefitting both Sada customers and consumers.
Inga Food continues to make progress with local research institutes and universities on projects to improve the genetics of their Iberian pigs. This breeding programme is designed to expand the current single female pedigree line. The new sow line is called Castua and shows increased productivity, higher quality meat, and better feed conversion ratios.
KEY FIGURES (€ x million)
2012 2011 Δ%
Revenue 934.9 918.3 1.8 EBITDA* 31.4 41.7 -24.7 EBITA* 22.0 32.7 -32.7 Operating margin (EBITA*/revenue) 2.4% 3.6% Average capital employed 212.1 194.3 9.2 ROACE (EBITA/ACE) 10.4% 16.8%
* Before exceptional items