Nutreco makes strategic choice for growth of its global animal nutrition and fish feed business

Nutreco today announced its two-step strategic action plan 'Rebalancing for Growth'.....
November 4, 2004

Nutreco today announced its two-step strategic action plan 'Rebalancing for Growth'. The new strategy aims to regain solid profit growth, reduce earnings volatility and improve return on invested capital. In order to achieve these goals, Nutreco will rebalance its portfolio of activities and capital employed through:

* Focus on growth of its worldwide animal nutrition and fish feed business by concentrating its resources on this part of the Nutreco portfolio. Nutreco is the world’s largest fish feed producer and the leading European player in premix, specialty and compound feed. The world market for animal nutrition is valued at EUR 150 billion. With EUR 2 billion in animal nutrition sales, Nutreco is one of the global leaders in this industry.

* Development of its food and breeding companies into industry leaders, where desirable through partnerships, either inside or outside Nutreco. Nutreco has already announced two major steps. All fish farming, processing and marketing & sales activities of Nutreco's Marine Harvest will merge with Stolt Sea Farm into a stand-alone and independently financed business. It is an example of a partnership that creates undisputed market leadership. Nutreco is committed to the development of the world's largest aquaculture company Marine Harvest. Furthermore, the announced sale of Nutreco’s Hendrix Meat Group to Sovion, the European number two in meat processing, provides excellent prospects for future growth for all stakeholders.

Wout Dekker, CEO of Nutreco: "After in-depth study and review, we can announce today a clear set of strategic choices to grow the company in the years ahead. 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," said Mr Dekker.

Rationale behind the new strategy
Nutreco was established in 1994 as the result of a management buy-out of several BP Nutrition businesses. In 1997 the company went public and obtained a listing at 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.

Almost all acquisitions in that period have been done within that strategic framework. Nutreco became the world leader in salmon farming and fish feed production, the market leader in poultry in Spain, a major producer of pork and poultry in the Benelux and Europe's largest compound feed, premix and specialty 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.

Rebalancing capital employed
The company will be better positioned to capture global and profitable growth opportunities if it rebalances its portfolio and invested capital, puts more focus on animal nutrition and takes measures to reduce its exposure to volatile businesses. 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 (ROACE) is expected to increase from current levels of approximately 10% to a range between 15 - 20%.The transition to a rebalanced portfolio resulting from this new strategic direction will take about 2 to 3 years.

Animal nutrition growth prospects
Nutreco already has global leadership in fish feed production with Skretting, a worldwide number three position in premix and specialty feed with Trouw Nutrition International and substantial European compound feed activities in Spain (Nanta) and N-W Europe (a.o. Hendrix UTD). Further development will occur through organic growth (fish feed and specialties), consolidation in compound feed and premix, acquisitions and geographical expansion into new markets in Latin America, Central & Eastern Europe and Asia Pacific. Nutreco is well positioned to grow this profitable business and penetrate these growth markets. The company has the food chains related technical know-how and feed-to-food quality and safety expertise that will differentiate it from many others. Last but not least Nutreco can also benefit from economies of scale in global animal nutrition production and raw material purchasing.

Pursue industry leadership in food and breeding
By building industry leaders Nutreco will be able to reduce earnings volatility. All programs for restructuring in order to get cost leadership in fresh poultry products and innovations in further processed and convenience products will be continued in order to add value to our retail customers. For Nutreco's breeding business Euribrid – which holds leading global positions in swine and poultry genetics – various growth options and additional partnerships are being explored.