Complementary notes to the trading update for the third quarter

Nutreco announces today additional notes to the trading update for the third quarter as published by Nutreco on 20 October 2014. These notes are complementary to the Q3 and YTD Q3 interim financial statements as published in section 15 of the Offer Memorandum that is published on 5 December 2014 by SHV, pursuant to its public offer for the shares of Nutreco.

Key figures

Nutreco  
Revenue for Nutreco's continuing operations in the third quarter amounted to € 1,428.9 million, a decrease of 4.1% compared to last year (Q3 2013: € 1,490.5 million). The volume effect was -1.0%, with positive volume developments in Animal Nutrition and Compound Feed & Meat Iberia, offset by declining volumes in Fish Feed. The price effect was -1.0%. The foreign exchange rate effect was -2.1%.

Q3 YTD revenue was flat at € 3,888.9 million (YTD Q3 2013: € 3,889.2 million). The volume effect was 2.8%, the price effect was -1.3%, the acquisition effect was 1.9% and the foreign exchange rate effect was -3.4%.

Q3 YTD EBITA increased by 7.2% to € 195.8 million (Q3 YTD 2013: € 182.7 million). The exceptional items amounted to € -11.3 million (Q3 YTD 2013: € -8.9 million) and consist of costs related to impairments in Spain, restructuring costs, and costs related to acquisitions as well as divestments. The foreign exchange impact on EBITA before exceptional items was € -6.2 million (Q3 YTD 2013 € -5.7 million) and mainly related to the Canadian Dollar and the Norwegian krone.

The EBITA in Q3 of € 87.6 million was 1.1% lower than the same quarter last year (Q3 2013: € 88.6 million).

OPERATING SEGMENT INFORMATION

*All key figures are before exceptional items

Animal Nutrition

Revenue for the Animal Nutrition segment in the third quarter amounted to € 454.9 million, an increase of 2.3% compared to last year (Q3 2013: € 444.6 million). The volume effect was 3.2%, driven by positive performances in Canada, Brazil, Europe and young animal feed. The price effect was 0.9%. The acquisition effect was -0.1% due to a small divestment in Canada. The foreign exchange rate effect was -1.7%.

Q3 YTD revenue decreased 0.9% to € 1,339.2 million (YTD Q3 2013: € 1,351.6 million). The volume effect was 2.0%, the price effect was 0.4%, the acquisition effect was 0.8% and the foreign exchange rate effect was -4.1%.

Q3 YTD EBITA for the Animal Nutrition segment of € 89.7 million was 8.7% higher than in Q3 YTD 2013 (€ 82.5 million). This increase was driven by good performances in most markets, as well as certain product categories such as young animal feed. The EBITA in Q3 of € 30.1 million was 17.6% higher than the same quarter last year (Q3 2013: € 25.6 million). As a result of this performance the Q3 YTD EBITA margin increased to 6.7% (Q3 YTD 2013: 6.1%); this increase is attributable to improved margins in Europe, mainly due to good performance of young animal feeds and to improved margins in our Canadian business. 

Fish Feed

Third quarter revenue in Fish Feed decreased by 8.1% to € 639.4 million compared to last year (Q3 2013: € 696.1 million). The volume effect was -5.8%, mostly due to -10.1% lower demand for salmonid feed. The lower demand occurred mainly in Norway due to lower volumes to Marine Harvest (as anticipated) and in the context of the strong quarter a year ago. This was partially offset by 5.4% volume growth in non-salmonid feed, with growth in Ecuador, Japan, southern Europe and Vietnam. The price effect was 1.2%. The foreign exchange rate effect was -3.5%.

Q3 YTD revenue increased by 6.9% to € 1,567.7 million (YTD Q3 2013: € 1,467.0 million). The volume effect was 8.1%, the price effect was -0.4%, the acquisition effect was 4.4% (Egypt, Ecuador) and the foreign exchange rate effect was -5.2%.

The volume share in YTD Q3 revenues of fish feed for non-salmonid species was 41% compared with 37% in the same quarter last year.

Q3 YTD EBITA in Fish Feed was 3.8% higher at € 96.5 million compared with € 93.0 million in Q3 YTD 2013. The higher EBITA in Q3 YTD 2014 is mainly caused by higher salmon feed volumes in Norway in the first half-year and the contribution of the businesses in Ecuador and Egypt which were acquired in the first half of 2013 as part of our strategy to grow in non-salmonid species and growth geographies. The increase in salmonid feed volumes in the first half year was mainly caused by favourable growing conditions especially in Norway compared to the exceptionally cold seawater temperatures last year which reduced feed volumes. The EBITA in Q3 of € 53.0 million was 8.5% lower than the same quarter of 2013 (€ 57.9 million). This was mostly due to lower sales in Norway (impact Marine Harvest) and China, offset by good performance in almost all other geographies. EBITA margin is slightly down Q3 YTD at 6.2% (2013 Q3 YTD: 6.3%).

In June 2014 Nutreco signed an agreement to enter into a joint venture in Nigeria with Durante, a leading supplier of fish feed in Nigeria and our existing distribution partner. The joint venture Skretting Nigeria will invest in the local production of extruded fish feed for Nigeria as well as the wider West African region. The financials are consolidated as from 18 September 2014 onwards.

Compound Feed & Meat Iberia

Revenue for the Compound Feed & Meat Iberia segment in the third quarter amounted to € 334.6 million, a decrease of 4.3% compared to last year (Q3 2013: € 349.8 million). The volume effect was 3.3%, with good progress made in increasing sales to customers across various channels. This compensated substantially for lower volumes to Mercadona due to disengagement process. The year-to-date volumes in tonnes to Mercadona were 28% lower than the last comparable 9 month period before the start of the disengagement process. We have successfully replaced approximately 75% of these volumes. The price effect was -7.6% caused by lower raw material prices.

Q3 YTD revenue decreased 8.3% to € 982.0 million (YTD Q3 2013: € 1,070.6 million). The volume effect was -3.6% and the price effect was -4.7%.

Q3 YTD EBITA of Compound Feed & Meat Iberia increased by 11.6% to € 28.8 million (Q3 YTD 2013: € 25.8 million). The increase was related to a better performance in all business unit operations due to lower raw material prices and good chicken and pork meat markets in the first half. The EBITA of € 10.7 million in Q3 was 10.8% lower than the same quarter last year due to declining poultry prices.

Corporate costs
The corporate costs are 3.2% higher than in Q3 YTD 2013 at € 19.2 million (Q3 YTD 2013: € 18.6 million).

Net financing costs
Net financing costs amounted to € 22.0 million (Q3 YTD 2013: € 21.8 million). Financial expenses were slightly lower at € 24.0 million (Q3 YTD 2013: € 25.5 million). Financial income decreased to € 2.0 million (Q3 YTD 2013: € 3.1 million).

Income tax expense
Income tax expense for the first nine months increased from € 36.2 million in 2013 to € 40.9 million in 2014. This corresponds to an effective tax rate of 26.5% in the first nine months of 2014 which is 1.5% higher than the prior year period mainly as a result of the fiscal amortisation of the goodwill in Brazil in 2013.

Result for the period
The total result for the period increased by 4.1% from € 108.5 million to € 113.0 million. Basic earnings per share increased by 2.5% to € 1.61 (Q3 YTD 2013: € 1.57). The total result for the period attributable to owners of Nutreco was € 111.4 million (Q3 YTD 2013: € 108.7 million).

Cash position and capital structure
The net debt position as at 30 September 2014 was € 486.9 million compared to € 477.9 million as at 30 September 2013. Total equity as at 30 September 2014 was € 968.7 million (30 September 2013: € 943.1 million).

On 20 October 2014 Nutreco terminated the share buy-back programme of € 100 million which commenced on 26 August 2014. Pursuant to this programme, that had the purpose of optimising the efficiency of the balance sheet and enhancing future earnings per share, Nutreco purchased 1,680,553 of its ordinary shares at an average price of € 29.25 per share, for a total consideration of € 49.2 million (up to 20 October 2014).

Per 30 September 2014, Nutreco purchased 933,445 of its ordinary shares under this programme for a total consideration of € 27.7 million (at an average price of € 29.66 per share).

Nutreco currently holds 4.4% of its ordinary shares. The issued share capital per today amounts to 70,237,364 ordinary shares.

Outlook full year 2014
Based on current trading conditions and barring any unforeseen circumstances we expect EBITA before exceptional items for continuing operations for the full year 2014 to be at least equal to last year (2013: € 256.3 million), which is a confirmation of the outlook we provided as part of our Q3 trading update, dated 20 October 2014.

Due to seasonality of the business, the majority of Nutreco's result is generated in the second half of the year.

END OF PRESS RELEASE

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