Turnover 1st half year 2007: €351.1 M (+ 11%)
|
Turnover in €M IFRS Standards |
2007 |
2006 |
Variation |
|
1st quarter |
178.0 |
167.7 |
+6.2 % |
|
2nd quarter |
173.1 |
148.2 |
+16.8 % |
|
1st half-year |
351.1 |
315.9 |
+11.1 % |
Worldwide and lasting context high raw material prices
The sharp rise in raw material prices, and cereals in particular, deeply affected the working environment of our different activities. The reasons are manifold and worldwide: growing need for foodstuffs linked to the increasing population, reduced supply due to drought (Australia, Ukraine…) and above all, the increase in the importance of biofuels as encouraged by international energy policies.
The animal nutrition market saw the benefits of this increase on turnover, but was only partly able to pass on this increase to the stockbreeders and wholesalers. Hedging positions taken on the futures markets will have helped to limit and smooth out the impact on profit margins.
Nutrition Compound Feed
Good resistance for the Nutrition France activity
Concerning the Nutrition France activity directly managed by Evialis, turnover increased by 5.5% compared with the first half of 2006 to €151.8 M due to the rise in the cost of raw materials, with volumes remaining constant. Poultry feed perked up, progressing by 7.5% in volume compared with the first half 2006. This upturn is reasonably explained by the avian flu virus which was largely detrimental to our “quality” products over the second quarter 2006.
For ruminants, the market remained buoyant, both for milking cows and meat cattle. This sector, at the heart of our offer, accounting for almost 50% of volumes, is progressing in line with the growing demand from stockbreeders for technical products.
For pigs, the market is structurally down-turned; concentrating on the West of France, working with integrated networks, it suffers from a disadvantageous price of meat, particularly in view of high raw material prices. In this unfavorable environment, Evialis’ volumes, which are marginal in the contribution to the product mix (9% of volumes), dropped off.
Nutrea hit by poultry
Nutrea, the joint venture with Unicopa in the West of France Region partly made up for its sluggish first quarter 2007, finishing with a reduction of some 2.1% for the first half-year. The good performances recorded for Ruminants and Pigs are nevertheless neutralized by the structural losses supported through the poultry export market, due to the Avian flu virus. In this West of France region, affected by strong competition on the industrial production market, for which cereals are in great demand, the 6.6% increase in turnover reflects only partly the upward movement in raw material prices.
A good first six months for the international nutrition branch
The International Nutrition branch activity grew considerably over this first half-year, contributing €72.0 M, an increase of 22% on a like-for-like basis. There was an 11% increase in volumes produced over that period.
To explain, in Asia, volumes progressed by 22% and contribution to the first-half amounted to €25.4 M. Vietnam, with its 3 factories confirmed its development
with a 33% increase in production, particularly in the area of fish and shrimp feed. This country is in the process of becoming the largest group entity in terms of volumes, with some 80,000 t over the half-year. India and Indonesia maintain their positions in both volumes and turnover, but remain affected by the avian flu virus.
The two Polish factories registered increases in volumes and turnover, which reflects market share gain in the poultry sector.
In Spain the efforts made in the ruminants and poultry sectors are bearing fruit: volumes increased by over 7% to 35,000 tonnes. On the other hand, the repercussions of price increases of raw materials were only partially passed on to the sales price.
Brazil posted a stable turnover on a like-for-like basis at €20.4M. The local teams continue to work on a high added value product mix.
In South Africa the subsidiary Monti Foods which was acquired end 2005 turned in an excellent performance for its product mix, with its contribution to turnover increasing by over 30% on a like-for-like basis, for steady volumes.
Premix Specialties
Consolidation of premix positions in France
The French market remains strained: the industry sector remains animated by sharp competition regarding margins and the home-mixer activity is in competition with the compound feed market, enabling a better optimization of raw materials. The Premix-Specialties France Division is pursuing its consolidation policy to confirm its position among the market leaders, through the integration of those activities purchased from Nutreco at the beginning of the year. Half-year turnover for this activity totals
€18.7 M.
Encouraging developments on the international front
The international activities of the Premix-Specialties Division achieved an increase in turnover of over 24% over the first half-year, totaling €24M. This good performance was helped by the steadiness of Rossovit, the Russian subsidiary acquired in January and which accounted for €4M of this figure. It also takes into account the good work of the export teams who increased their contribution to turnover by 20% over the first half-year.
Otherwise, the contribution from Eastern Europe which, in addition to Russia, includes the Czech Republic, Poland, Romania, represents €8.2 M over the half-year.
The Southern Europe zone (Spain, Italy, Portugal) contributed €8.3 M with good increases in volumes taking into consideration the strain on prices.
Lastly, South Africa confirms its successful integration within the local market: its turnover increased by over 11% on a like-for-like basis thanks to high added value products, making a contribution of €5 M.
The industrial development projects in Romania and China are going ahead according to schedule and should be operational by the first quarter 2008.
Health
On the “standard medicated premix” market the start of the year was difficult: severe competition was felt in the prices with the overhang of 12 month tenders lost in 2006. Over the second half of the year annual contracts for medicated premixes were regained. Moreover, stocking up in preventative medicine (antibiotics for example) paid off and allowed this division to straighten up and turn in a good performance on the more remunerative business of specialties.
Outlook
The first half-year 2007 reflects perturbed market conditions: although we have seen real growth in volumes in the emerging markets, the general trend on turnover translates essentially the repercussion of high raw material prices on sales prices (corn : +43%, wheat: +46%, soya: +20%, notably over a 12 month period).
In spite of the fact that Evialis was most determined to adjust its prices upwards, the rapidity and widespread impact of this phenomenon could not be completely absorbed and margins were consequently reduced.
In the short term there is a high amount of uncertainty, and the drop off at the half-way mark will be difficult to make up over the full year. The Group anticipates high supply costs for the rest of the year, and notes the Summer harvest rates which confirm this tendency. It will continue therefore to pursue its policy of research optimization and cost control.
This environment comforts the strategic choices made by the Group, based on :
- Innovation, offering the stockbreeders optimal nutritional and economical solutions.
- Internationalization through organic or external growth, to capture growth where the markets are making strong progress.
- Optimization of the French base to capitalize on a market demanding excellence.
Additional information
The Evialis Group has finalized an agreement for a 30% share to be acquired in its Chinese subsidiary based in Qingdao, for which the new plant is under construction, by its Japanese partner Nosan.
This agreement allows the two Groups to pool their resources to develop in the immense Chinese premix market and to benefit from an high performance analytical tool to guarantee the quality of various locally sourced products, intended for the home and international markets.
The Group will communicate its half-year results on 31 August 2007