Vion assumes responsibility for a sustainable food supply

Date: 27-03-2020

Boxtel, 27 March 2020 – Vion initiated its new strategy ‘Building Balanced Chains’ in 2019. The objective of this strategy is to enable Vion to develop sustainable chains that contribute to a healthy food supply. Vion’s aim with this strategy is to respond to global food challenges, such as the increasing global demand for animal and plant-based proteins and the debate concerning animal welfare, as well as the climate change challenges that affect agricultural entrepreneurs. 2019 was a good year from a financial perspective due to the results of the Pork division, with good margins in Europe and increased demand in Asia, from which Vion benefited due to its excellent shipping infrastructure to Asia.

Key financial figures

  • Revenue increased by 390m million (8.4%) to €5.1 billion in 2019, primarily due to the increased prices for pork products.
  • The normalised EBITDA for 2019 was €113.2 million compared to €60.5 million in 2018. The increase was a result of investments in recent years and excellent results achieved by the Pork division.
  • Net profit increased from €10.2 million in 2018 to €26.6 million in 2019.
  • Working capital increased by €125.5 million due to higher livestock and meat prices.
  • In 2019, €54.7 million has been invested in various production locations.


Operational and Corporate Social Responsibility (CSR) key figures

  • Initiation of new Vion ‘Building Balanced Chains’ strategy with concepts for sustainable chains.
  • €35 million investment in Vion Boxtel location to shorten the chain and enable a sustainable way of working at a single location.
  • Vion ranks at the top of the global ‘Business Benchmark on Farm Animal Welfare’ (BBFAW) and once again increased its ranking in the ‘Transparency Benchmark’.
  • Good Farming Star, Good Farming Balance, Good Farming Organic, De Groene Weg [The Green Path] and GQB, are examples of the ‘Building Balanced Chains’ strategy.
  • Vion launched a new plant-based protein chain named ‘ME-AT’ for retail customers.
  • The cattle slaughterhouse in Leeuwarden has been converted into a plant-based meat substitutes production plant.
  • Vion identified 18 relevant themes for its CSR policy, including 11 social themes, 5 environmental themes and 2 economic themes. Vion has formulated active policy for nine of these themes within the organisation.
  • The Good Farming Organic chain, an organic chain concept, was launched in Germany.
  • The mixed pigs and cattle location in Altenburg, Germany, will stop the supply of pigs and will invest in expanding the cattle slaughterhouse.

Message from the CEO
Ronald Lotgerink, CEO of Vion: “Vion has had a very good year with excellent figures and a strong balance sheet. This was in part due to the significant demand in 2019 for pork from Asia resulting from the outbreak of the African swine fever there, as well as due to our investments in the modernisation of our production locations. In addition, last year there was social unrest in our domestic markets about our food production methods. In 2019, we developed a new strategy with these social developments in mind. The ‘Building Balanced Chains’ strategy was announced at the end of 2018. It continues to build on the development of sustainable and modern chains designed to make our sector strong and resilient, and to provide everyone with healthy future prospects. The choices emerging from this new strategy determine our driving force and way of working for the coming years, and make a positive contribution to a healthy and sustainable food supply.”

In 2019, the Vion Pork division benefited from the rising demand for European pork on Asian markets and the positive results on European markets. The well-organised infrastructure for supplying Asia, with a long-standing and robust customer base has paid off. The expectation is that demand will continue to be strong in 2020. However, the unrest on the markets at the beginning of 2020 due to the coronavirus (COVID-19) has created greater volatility. At the Boxtel location, Vion has started to modernise the plant and to expand the packaging halls.

It was a challenging year for the Vion Beef division. The demand for, and the supply of cattle and beef were lower. This was in part due to the phosphate measures introduced in recent years in the Netherlands and the increased market competition due to the import of cheap beef from South America. In addition, the demand for hides was weak for the second year in a row. In the third quarter of 2019, Vion announced its plans for converting the cattle slaughterhouse in Leeuwarden into a production plant for plant-based products. The mixed pork and beef production location in Altenburg, Germany, will specialise in beef starting in the first quarter of 2020.

The Food Service division The Food Service division is a market leader in schnitzels and minced meat products on the German domestic market. Furthermore, the division is an important producer of finger foods, burgers, wraps and vegetarian products.

Corporate Social Responsibility as an integral component of the business strategy
Vion ranks at Level 2 of the international Business Benchmark for Farm Animal Welfare (BBFAW) and in 2019 significantly moved up in the Transparency Benchmark for the third year in a row (from position 112 to 58). The company is particularly proud of this, given that Corporate Social Responsibility is an integral component of its business strategy. In the new corporate strategy, ‘Building Balanced Chains’, sustainable growth is an essential component of the company’s daily operations. Each year, Vion publishes a separate CSR report to highlight the steps the company is implementing in relation to key social themes on which it can in fact exert influence.

2020 Outlook
In 2020, on the basis of its new ‘Building Balanced Chains’ strategy, Vion will continue to intensively work on building new chains in the Netherlands and Germany. This is of key importance for all agricultural entrepreneurs and Vion’s chain partners. Furthermore, Vion will be restructuring the organisation from three divisions to four business units: Pork, Beef, Food Service and Retail. The Retail business unit is new and will focus on innovations, plant-based protein and meat products for retail customers. The strategy’s implementation is supported by targeted communications, culture and leadership programmes, together with the associated ICT solutions.

The coronavirus (COVID-19) is creating major uncertainties in 2020. In supplying food products, Vion plays a critical role in the continuity of society’s food supply. The corona crisis has created a major change in consumption patterns; people are no longer eating out, but are eating at home. The sale of meat to restaurants and hotels has come to a standstill, while deliveries to supermarkets have significantly increased. The turnover of convenience meat products, such as minced meat, is increasing in comparison to more luxurious products. These shifts have a major impact on the valorisation of meat, causing the relationship between purchase and selling prices to shift as well. The safety of our employees has the highest possible priority, while we are doing everything in our power to responsibly continue production. Vion plays an essential role in supplying food to society and is working in close cooperation with governments in the Netherlands and Germany to keep the supply of food up to par during this crisis.

Due to the coronavirus, the infrastructure in Asia has become difficult for pork exports. Yet, Asia continues to offer opportunities in 2020, in part due to the persistent African swine fever outbreak there. This also is a potential threat in Europe, which is being monitored in close consultation with governments.

Financial Results and Financial Position

Consolidated key figures

(in millions of euros) 2019 2018
Revenue

Normalised EBITDA from continued operations

Earnings before interest and taxes

Net result

Net cash flow from operating activities

Net cash flow from investment activities

Net debt

Solvency

 

5,060

113.2

36.4

26.6

-30.1

-51.8

178.7

38.1%

 

4,670

60.5

16.8

10.2

90.0

-58.5

35.1

45.4%

  • Revenue increased by 8.4% in comparison to 2018, to almost €5.1 billion. The increase in revenue is primarily due to the increased prices for pork and other pork products. Sales volumes decreased by 4.3% in comparison to 2018.
  • Gross margins increased due to the further optimisation of valorisation initiatives and the increased global demand for pork.
  • The normalised earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by €52.7 million to €113.2 million. On the one hand, this is the result of the investments in production in recent years, which made a positive contribution to the development of the result, and on the other hand, this is the result of increased prices and margins for pork and pork products, and the positive results of the Food Service division. This positive result was in part negated by the lower results achieved by the Beef division due to challenging market conditions. The EBITDA increased by approximately €16 million due to changes in the accounting of rental and lease expenses pursuant to IFRS 16.
  • Depreciation and amortisation expenses increased by approximately €17.9 million, primarily due to changes in the accounting of rental and lease expenses pursuant to IFRS 16.
  • Following the company’s strategic reorientation, impairment charges were recognised in the amount of €12.6 million relating to the closure of several production locations and IT-related initiatives. In addition, €6.7 million in restructuring costs were recognised for the year for the closure and relocation of several operations and production locations.
  • The net result increased to €26.6 million, primarily driven by the improved operating results.
  • The financial income and expenses increased due to the increased use of working capital and changes in the accounting of rental and lease expenses pursuant to IFRS 16.
  • Due to the significant increase in purchase prices, particularly in the Pork division, working capital, in the amount of €125.5 million, is higher in comparison to 2018. As a result, the operating cash flow decreased to -€30.1 million. Excluding the effect of the increased working capital, the operating cash flow amounted to €95.4 million compared to €46.3 million in 2018.
  • In 2019, €54.7 million was invested in further optimising the company’s footprint and improving the efficiency of the various production locations.
  • In 2019, the net debt increased from €35.1 million at year-end 2018 to €178.7 million at year-end 2019. This increase is primarily due to the higher working capital and the increased lease commitments resulting from the implementation of IFRS 16.
  • Due to the significant increase in working capital and the recognition of the Right of Use assets on the balance sheet following the implementation of IFRS 16, and the consequent increase in the balance sheet total, solvency decreased from 45.4% to 38.1%. In absolute terms, equity further increased in comparison to year-end 2018.
  • At year-end 2019, Vion’s liquidity position was approximately €82 million, consisting of €4 million in cash and cash equivalents, and approximately €78 million available under the €200 million working capital facility.
  • In 2020, Vion will issue a dividend payment of €14 million (€275.68 per issued share) for the year 2019.

2019 Annual Report
Vion’s 2019 Annual Report is available on its website.