Vion has built a strong foundation despite a challenging market

Date: 28-03-2019

Boxtel, 28 March 2019 – In 2018, Vion finalised the four year business plan to invest in and modernise its production footprint in its home markets of Germany and the Netherlands. This contributed to the annual results for 2018, where a strong operational cash flow reduced the net debt position and further improved the solvency rate of the company. However, the EBITDA was below that of 2017, due to low cattle-hide prices and high pig prices in an exceptionally warm and dry summer.

Financial highlights

  • Normalised EBITDA of €60.5 million compared to €64.0 million in 2017
  • Net profit decreased with €11.6 million to €10.2 million, following higher depreciation charges from investments in recent years and lower tax benefits
  • Free cash flow of €28.8 million, mainly driven by a reduced operating working capital
  • Solvency rate increased to 45.4% (2017: 44.3%)
  • Net debt of €35.1 million at the end of 2018, representing a decrease of €14.9 million

Operational highlights

  • Launch of Good Farming Balance, a demand-driven Pork supply chain, in Germany
  • Rise to Tier 2 on the global animal welfare benchmark BBFAW
  • Significant investments of €61.2 million improving our competitive base, for example in our plants in Leeuwarden and Waldkraiburg
  • €35 million planned investment in Boxtel, enabling a shorter supply chain and a sustainable way of working at one location
  • Unexpected increase of pig prices during a warm and dry summer and low cattle-hide prices which had an impact on the operational profit

CEO statement
Ronald Lotgerink, CEO of Vion: “The initiatives included in our strategic plan to modernise our production footprint will provide Vion with a strong competitive base for our future growth. On 28 February 2019, we announced the last initiative, an investment of €35 million in our production facility in Boxtel, which will enable a shorter supply chain and a sustainable way of working at a single location. The initiatives contribute to our operational profit, but they could not fully compensate for the effects of low cattle-hide prices and high pig prices during a very dry summer. However, we managed to decrease our net debt due to good working capital management and a lower number of investments and restructuring costs compared to 2017. Therefore, our balance sheet remains strong. By building on this solid foundation, Vion will initiate a new strategic plan with a focus on building balanced chains (BBC) in close cooperation with our supply chain partners, thus ensuring a sustainable future for our suppliers, our customers and ourselves.”

After a successful introduction in the Netherlands, Vion’s Pork division launched Good Farming Balance, a demand-driven supply chain, in the German market. Other initiatives that were started in the previous year paid off in 2018, such as the closure of our Zeven facility and productivity investments in Emstek in Germany and in the expansion of our facility in Apeldoorn (NL).

Investments in the production plants of our Beef division in Leeuwarden and Waldkraiburg were finalised in 2018, resulting in two state-of-the-art beef facilities that are equipped in accordance with the most up-to-date animal welfare criteria.

Our Food Service division invested in its production technology, resulting in a leaner and more efficient division. In our home market of Germany, the Food Service division is a market leader in schnitzel and mince-based products, as well as finger food and burgers and wraps.

For Vion, corporate social responsibility (CSR) is an essential part of our daily business. We are committed to building a sustainable future together with our partners in the supply chain. Vion was the first company to be certified according to the criteria of the German Animal Welfare Association for dairy cows. Furthermore, De Groene Weg, Vion’s brand for organic meat, has launched an EKO code for its pork supply chain with a commitment to an even more sustainable food production process. In South Korea, Vion received the Hamel Business Award for investments in sustainability and animal welfare. In 2018, Vion rose for the third consecutive year on the global animal welfare benchmark BBFAW to reach the 2nd level. CSR is an integral part of the business strategy. Vion will issue a separate CSR report for the year 2018.

Looking at the outlook for 2019 the company faces a number of developments. African Swine Fever has been detected in Eastern Europe, Southern Belgium and China, and control efforts have been made by the respective authorities to limit the risks of spreading this disease. Vion actively participates in the debates on food safety, meat consumption, animal welfare and human health, but also in talks with governments aimed at balancing pork and cattle herds, especially in our home markets. In addition the ‘war on trade’ between the US and China may impact markets while the outcome of Brexit is still uncertain. In the course of the year the company starts a strategic initiative to build balanced chains (BBC) together with farmers, customers and chain partners in order to create sustainable growth for the future.

Financial results and financial position

Consolidated key figures

(Amounts in millions of euros) 2018 2017
Revenue 4.670 5.070
Normalised EBITDA from ongoing activities 60.5 64.0
Earnings before interest and taxes 16.8 23.5
Net result 10.2 21.8
Cash flow from operating activities 90.0 39.1
Cash flow from investing activities -58.5 -61.5
Net debt 35.1 50.0
Solvency 45.4% 44.3%
  • In 2018, revenues decreased by 7.9% compared to last year, while volumes only decreased by 2.9%. This decline in revenue was mainly caused by lower sales prices, which were more than offset by lower purchase prices for raw materials and consumables, resulting in improved gross margins.
  • The improved gross margins were more than offset by the increased operating expenses, resulting in a decrease of the earnings before interest and taxes of €6.7 million.
  • Normalised earnings before interest, taxes, depreciation and amortisation (EBITDA) decreased from €64.0 million in 2017 to €60.5 million in 2018. Despite the positive contribution of investments made in recent years, which started to pay off in 2018, the impact of the warm and dry summer on the results of the Pork division and the challenging market conditions in the hides market for our Beef division could not be fully offset by the positive contribution of these investments.
  • Depreciation and amortisation costs increased by €5.4 million as a result of the investments made in footprint and operational effectiveness in recent years.
  • A tax expense of €2.9 million was recognised for the year in contrast to €3.8 million income in 2017. This was mainly driven by the realisation of net operating losses from the past, and changes in the corporate income tax rate in the Netherlands.
  • Operating cash flow for the year amounted to €90.0 million, as the result of a positive cash flow from the operating activities of €46.3 million and an improvement of the working capital of €43.7 million. The decrease in working capital was the result of both lower prices and working capital improvement initiatives.
  • In 2018, more than €60 million was invested in the further optimisation of the company’s footprint and efficiency improvements to the various production locations of the company.
  • The company generated a free cash flow of €29.5 million.
  • Cash and cash equivalents decreased in 2018 from €20.9 million to €6.1 million.
  • At the end of 2018 Vion had a total available liquidity of approximately €184 million, consisting of €6 million in cash and cash equivalents and €178 million available under the new working capital facility of €200 million.
  • In 2019, Vion will pay a dividend for the year 2018 of €78.17 per issued share to an amount of €4.0 million.

Annual report 2018
Vion’s 2018 annual report is available on the company’s website.

Click here for our annual report 2018

Vion Holding N.V. (Vion) is an international meat producer with production locations in the Netherlands and Germany and with sales support offices in thirteen countries. In 2018, Vion realised a €4.7 billion turnover with a total of 11,900 employees (FTEs).

Vion’s sole shareholder, Stichting Administratiekantoor SBT, is a trust office that has issued depositary receipts for its shares to NCB-Ontwikkeling, which acts as the investment fund of ZLTO, an association for entrepreneurs working in the agricultural sector.