February 11, 2011
Nutreco to increase 2011 feed prices
Nutreco would pass on expected commodity price rises for farmers in 2011, whereas ongoing uncertainty in its markets meant it could give no firm earnings outlook yet, the Dutch food group said.
The company, which produces animal and fish feed, passed on higher prices to farmers in 2010 to report better-than-expected full-year operating profit on Thursday (Feb 10), but concerns have intensified in recent weeks about rising raw materials prices.
"We didn''t give an outlook out of prudency. We will have precise figures in April when we report first-quarter results," said Chief Financial Officer Cees van Rijn.
He said he expected commodity prices such as grain, corn and soya bean to rise further, fuelling the cost of meat production, but added it will have no impact on Nutreco''s revenue because the company would increase its prices to reflect this. "We will keep our margins," said Van Rijn, adding Nutreco had weathered raising its prices 20% in 2008.
Nutreco reported a 27% rise in 2010 underlying earnings before interest, tax and amortisation (EBITA) to EUR222.5 million (US$304 million), beating the average expectation for underlying EBITA of 207 million in a Reuters poll.
It said it has EUR500 million (US$679.27 million) to spend on acquisitions and capacity expansions and is eyeing acquisitions or capacity expansions in emerging markets in China, Brazil and Russia.
The company reported net profit of EUR113 million (US$153.52 million), up 21.5% but below the average forecast of EUR128 million (US$173.89 million), on a 9.5% rise in sales to EUR4.94 billion (US$6.71 billion).
"Operating earnings are in line with expectations, but higher restructuring charges and higher financial expenses result in net profit some 10% below our estimate. Overall slightly disappointing," said Richard Withagen, an analyst with SNS Securities.
Nutreco shares slipped 1.9% to EUR52.50 (US$71.32) at 1354 GMT, underperforming the Amsterdam midcap index which was down 0.85%. The shares are down 13.5% from a record EUR60.73 (US$82.50) on December 16.
Van Rijn said Nutreco''s diversified portfolio should be able to offset the negative effects of high commodity prices and that earnings will be further supported by recovery in the pig farming sector, which has been hit by low meat prices. "I think the pig farming sector will recover soon. We see pork meat prices in the US and Canada going up. We think the market here (in Europe) will follow," Van Rijn said.
Nutreco, the world''s fifth-largest compound feed producer, competes with Provimi, Norvite Animal Nutrition Company, Cargill, Alltech, DSM and Danisco.
The company has a leading market share of more than a third in salmon feed and said its fish feed business benefited from improved volumes in Norway and in Chile, a region hit by fish disease problems in recent years.