Nutreco N.V.

Company Profile
Publication Date: 31 Oct 2011

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TABLE OF CONTENTS

TABLE OF CONTENTS
Company Overview..............................................................................................4
Key Facts...............................................................................................................4
SWOT Analysis.....................................................................................................5

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Nutreco N.V.
Company Overview

COMPANY OVERVIEW
*Nutreco (or the company) manufactures and markets animal nutrition and fish feed.The company's
portfolio of products include meat, fish feed and food products for farm animals such as poultry, pigs
and ruminants. The company primarily operates in Europe. It is headquartered in Amersfoort, the
Netherlands and employs about 9,585 people.
The company recorded revenues of E4,939.7 million ($6,553.5 million) during the financial year
ended December 2010 (FY2010), an increase of 9.5% over FY2009. The increase in revenue was
primarily due to price hikes on its products by the company. The operating profit of the company
was E185.7 million ($246.4 million) in FY2010, an increase of 17.6% over FY2009. The net profit
was E135.3 million ($179.5 million) in FY2010, an increase of 36.1% over FY2009.
* In July 2010, the company changed its name form Nutreco Holding N.V. to Nutreco N.V.

KEY FACTS
Head Office

Nutreco N.V.
Prins Frederiklaan 4
3800 AG Amersfoort
NLD

Phone

31 33 422 6100

Fax

31 33 422 6101

Web Address

http://www.nutreco.com

Revenue / turnover 4,939.7

(EUR Mn)
Financial Year End

December

Employees

9,585

Euronext
Amsterdam Stock
Exchange Ticker

NUO

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SWOT Analysis

SWOT ANALYSIS
Nutreco (or the company) manufactures and markets animal nutrition and fish feed. The company's
portfolio of products include meat, fish feed and food products for farm animals such as poultry, pigs
and ruminants. It holds leading positions in the most of the segments it operates. A strong market
position helps the company enhance its brand image and boost its bargaining power. However,
outbreak of animal diseases in the regions where the company operates could impact its animal and
poultry inventory and hence its revenues.
Strengths

Weaknesses

Leading market position

Strong research and development
capabilities

Overdependence on European market

Opportunities

Threats

Strategic acquisitions to strengthen market

position
Capacity enhancement initiatives to improve
manufacturing capabilities
Focus on eco friendly measures

Outbreak of animal diseases

Quality of raw materials affects the quality
of Nutreco's offerings
Foreign exchange risk

Strengths

Leading market position

Nutreco, engaged in the production of animal nutrition and fish feed, holds leading positions in most
of the segments it operates. According to the company, Nutreco's Skretting, the companys subsidiary
in fish feed business is the world's number one salmon feed producer, with a 36% market share. In
the premix and specialty feed segment, the company's Trouw Nutrition subsidiary is the world's
second largest premix producer after DSM, with a global market share of 12%. In the compound
feed segment Nutrecos subsidiaries has a second position in Benelux with a market share of 12%
and number one position in Spain with a market share of 13%. In addition, in Canada the company
has leading position with a market share of 23%. Further, in Spain it has the market leading position
with a market share of 26%. Furthermore, Nutreco ranks in the top three position of the global animal
nutrition industry in terms of revenues. This makes the company a market leader in almost all the
segments it operates in. A strong market position helps the company enhance its brand image and
boost its bargaining power.
Strong research and development capabilities

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SWOT Analysis

The company has strong R&D capabilities. Nutreco conducts research for each of the business it
operates, including agriculture, specialties and aquaculture. The eight R&D centers of Nutreco are
linked with the operations to ensure their activities have direct relevance to the needs of its customers.
The R&D centers have strong connections with universities and research institutes to ensure they
remain at the forefront of their domain. In FY2010, the innovations introduced include, the
MicroBalance concept for fish feeds, Fysal Fit-4 poultry, DIVA sow feeds and CalFix for dairy cattle,
clearly illustrate this. Strong R&D capabilities facilitated continued innovations in products and farm
management models that differentiated Nutreco from its competitors and enable customers to
enhance their business performance financially and in sustainability.
Thus, continuous focus on R&D helps the company deliver high quality products to the customers,
which in turn enhances its top line growth and brand image, which in turn helps the company to gain
a competitive advantage. Moreover, the company's focus on introducing new product ranges enables
it to stand out in competition and enables it to broaden its customer base.

Weaknesses

Overdependence on European market

Although Nutreco operates across its majority of its revenues are contributed by European region.
For instance, in FY2010, the company derived about 67.6% of the revenues from Europe. This
makes the company highly vulnerable to any economic, political, or social changes taking place in
these geographic regions. In addition, due to the sovereign debt crisis, Euro zone has experienced
a recessionary trend in the recent past and is still struggling from the crisis. The consumer confidence
in Europe is down and is affected by both property slump and rising prices of food and fuel. Consumers
are managing their discretionary spending conservatively in this region. Further, according to IMF
World Economic Outlook 2011, the real GDP growth rate of Europe is forecasted to decline from
2.1% in 2010 to 2% in 2011. Although, the company registered a strong growth in FY2010, sluggish
wage gains and credit crunch are all expected to keep consumers relatively cautious in 2011-12.
Hence, high dependence on the European market makes the company highly sensitive to the demand
dynamics of this region. Moreover, the company is also exposed to risks associated with the economy.

Opportunities

Strategic acquisitions to strengthen market position

Nutreco plans to expand its global market position by way of inorganic growth. In recent years, the
company focused on the new geographic areas with attractive profitable growth prospects such as
Vietnam, Russia, China and Brazil. For instance, in February 2011, Nutreco announced to acquire
100% of the shares in Shihai Co Ltd., (Shihai) a fish and shrimp feed company in China for about

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SWOT Analysis

E40 million ($53.1 million). In addition, in July 2010, Nutreco acquired 100% of the shares in Vietnam
based Tomboy Aquafeed JSC (Tomboy), a fish and shrimp feed company.
According to the company, the fish feed market in China, targeted by the companys subsidiary
Skretting, is estimated to about 8.6 million tonnes. In the last five years this market has grown by
more than 10% per year and growth is expected to continue supported by Chinese authorities and
strong domestic demand for seafood. Shihai situated in the Pearl River Delta, has approximately
5% of the high end fish feed market in the south of China and has shown an annual growth rate of
approximately 23% during the last five years. In addition, Shihai produced approximately 100,000
tonnes of fish and shrimp feed in 2010. In the same year, it commissioned a new feed plant with a
capacity of approximately 150,000 tonnes. The new plant is constructed and equipped to a high
standard and is capable of operating to Skretting specifications. Following the completion of the
acquisition, Skretting plans to continue growing the business, supplying fish feed for species such
as shrimp, various marine fish species, tilapia, snakehead and catfish. In addition, with the acquisition
of Tomboy, a fish and shrimp feed company in Vietnam, the company focused to tap the growth
potential in Vietnam. According to the company, Vietnam is the third largest country in global
aquaculture, after China and India, and is one of the world's largest producers of shrimps. With a
long coast line and the Mekong Delta it has over the past decade experienced strong growth of its
aquaculture sector, initially for shrimp, then catfish and recently also for marine fish species. Vietnam
is well poised to develop into a leading Asian producer and processor of farmed shrimp and marine
fish with a strong export focus. With a number four market position, Tomboy is one of the leading
players in Vietnam for shrimp. Recently, it invested in a new plant and started producing feed for
marine and high value fresh water species such as tilapia, barramundi, snapper and grouper. Further,
Tomboy Aquafeed produces high-quality feed and has country-wide distribution networks in Vietnam
for fish and shrimp feed. Thus, through its strategic acquisitions the company is well poised to tap
the potential market in growing markets by widening its customer base and strengthening its market
position.
Capacity enhancement initiatives to improve production capabilities
According to the company, world population is expected to grow from the current 6.9 billion to more
than 9 billion in 2050. The world faces the challenge to sustainably feed these 9 billion people. About
90% of the growth is expected to come from Asia and Africa. Next to the growth of the world population
food consumption is expected to increase due to urbanization, rising incomes and improved nutritional
status. Urbanization is expected to increase to 70% of the world population by 2050; that implies
more people will depend on fewer farmers to produce their food. In addition, rising incomes in the
developing world could lead to a higher demand for animal proteins, as economic development is
normally accompanied by an improvement of the overall nutritional status of the countrys population.
In addition, animal protein consumption is expected to double in the first half of this century and the
differences in growth rate per region continue to exist. In developed economies such as Western
Europe or North America the number of farmed animals is expected to remain stable or even
decrease. However, the number of farms is expected to decrease but the average size of the farms
would increase. This could lead to more or less stable animal nutrition markets in these regions.
Further, the robust volume growth in animal nutrition consumption is expected to take place in
developing countries.

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SWOT Analysis

In order to tap the growth in its business segments, the company announced to make substantial
investments in the recent period to the increase its manufacturing footprint. For instance, in March
2010, the company's subsidiary, Skretting announced to invest E20 million ($27.8 million) to upgrade
and expand the capacity of its fish feed plant in Tasmania, Australia. In addition, the company
announced that investment is expected to double the capacity to 120,000 tonnes per annum and
includes the installation of a second extrusion line, upgrading of silos, site services and batching
equipment and the integration of the existing line with the renewed plant. In addition, the companys
subsidiary, Selko Feed Additives located in the Netherlands, announced to invest E6 million ($8
million) to upgrade and increase its production capacity in April 2010. Further, Nutreco announced
to invest E20 million ($26.5 million) in a new factory in the Voronezh agricultural region in Russia in
January 2011. The new factory would produce young animal feed, concentrates and premixes for
ruminants, pigs and poultry. The plant is scheduled to become operational in the first half of 2012.
Furthermore, Nutreco invested E27 million ($35.8 million) to upgrade its fish feed plant in Averoy,
Norway in April 2011. The investment in the Averoy plant consists of an upgrade of the grinding
facility, a new intake line and expansion of both storage capacity and operation premises. Thus,
similar capacity enhancement initiatives allow the company to enhance its production capacity and
derive economies of scale in operation and procurement and further enhance the export capability
of the company.
Focus on eco friendly measures
Sustainability has become a major focus for Nutreco. The company, through its 'Feeding the Future'
program aims to reduce CO2emissions to half by 2015. Nutreco has implemented many eco friendly
measures. To reduce the emission of CO2, in the recent past, Skretting installed a high-efficiency
wood-burning (biomass) boiler at its Osorno feed plant. The fuel used is wood by-products from the
Chilean timber industry. In addition, the boiler has reduced carbon dioxide emissions per tonne of
feed produced by one-third of the previous system and produces low levels of particulate matter. It
is 84% energy efficient compared with 57% previously. The company realized carbon footprint
reduction of about 22% in FY2010 as compared to FY2009 in its own operations. In addition, the
Nutreco meat business in Spain together with the Nutreco Food Research Centre collaborated in a
packaging development with the objective of reducing environmental impact. The innovative project
led to totally recyclable meat packaging that reduces carbon footprint, increases convenience, saves
time and cuts costs. Thus, there are many similar initiatives that Nutreco has contemplated to reduce
the impact of its operations on the environment. Such initiatives enable the company to enhance its
brand value and reduce cost.

Threats

Outbreak of animal diseases

Since Nutreco is engaged in the production of animal nutrition and fish feed, hence any outbreak of
animal diseases in livestock farming poses a potentially tough challenge for the company. In 2008
and 2009, the salmon of Nutreco's customers was impacted by ISA (Infectious Salomon Anemia)
disease in Chile and hence the segment's revenue witnessed a gradual decline from E247 million

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SWOT Analysis

($343.3 million) in FY2007 to E118 million ($164 million) in FY2009. In addition, Nutreco owns pigs
and poultry, mainly in Spain. The total value of livestock as at the end of 2010 was E127.8 million
($169.6 million). Therefore outbreak of animal diseases not only affects the company's revenues,
but also severely impairs its inventory.
Quality of raw materials affects the quality of Nutreco's offerings
Nutreco depends on its suppliers for raw material like fish meal and corn. The potential of a hazardous
substance in a raw material affecting the company's products is relatively high since the quality
control measures are beyond its purview. Thus, the company is directly exposed to the risk related
to the quality of raw materials. For instance, the company recalled products in relation to a
contamination in raw materials in the Netherlands in 2009. Corn with extremely high level of aflatoxine
was used in compound feed products, which in turn led to the product recalls. Therefore, low quality
or contaminated raw materials, when used in feed preparation, would hurt not just the company's
credibility in the long run, but would attract huge penalty from the regional statutory bodies as well.
Foreign exchange risk
Nutreco is exposed to fluctuations in foreign exchange rates. Most of Nutrecos foreign currency
translation risks relate to the purchase of raw materials. In Animal Nutrition Canada, Compound
Feed Europe and Fish Feed segments of the company, price changes, as a result of foreign currency
movements, generally are passed through to customers. This makes the price of company's products
very volatile and uncertain. In addition, the equity and sales of the company is also affected. The
capital of the company is generally in Australian Dollar, Canadian Dollar, Pound Sterling, Norwegian
Krone and US Dollar. Therefore, this is subjected to volatility with fluctuations in the currencies other
than Euro. According to an estimate, a 10% strengthening of foreign currencies vis--vis Euro would
have increased the company's equity by E17 million ($23.63 million), a 10% weakening of the same
would have the reverse effect. Further, fluctuations in foreign currencies would have a certain impact
on the sales of the company. Therefore, any unfavorable movement in currencies could severely
impact the company's financial position.

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