Nutreco -
FOOD FOR THOUGHT
What'S NewS Issue 10 November 1997
Nutreco, a leading player in the world agriculture and
aquaculture markets with annual sales of NLG 4.6 billion,
presently ranks among Rabobank International's most valued
corporate customers.The company's finance director offers
some honest feedback on our strengths and weaknesses as
partners in agri business.
'Rabo and Nutreco fit together as natural
partners,' says Peter Paul Verhallen, the
company's finance director. 'We share
similar strengths and expertise in many
K)f the very same business sectors.'
ffslutreco's main activities are
concentrated on the production of
compound feed and salmonid fish feed -
an area which clearly dovetails with our
agribusiness expertise. Together with
activities such as the production of
premixes and speciality feed, plus poultry
and pig processing, livestock breeding
and fish farming, the company is divided
into two business main groups: Nutreco
Agriculture and the fast-growing Nutreco
Aquaculture. Based in Boxmeer, a small
Dutch town near the border with
Germany, it operates more than 60
production and processing plants in over
15 countries.
OPTIMIZING SYNERGIES
The company appeared in its present
Bncarnation following an institution-led
^nanagement buy-out of the core
businesses from BP Nutrition in October
1994. Despite its relatively short history,
however, many of its operating businesses
have been in existence for over 50 years.
In the first years after the MBO,
management streamlined the group's
activities and optimized the synergies
between its different units. It further
strengthened market share - the company
is now a world or European leader in
businesses that generate over 70 per cent
of turnover - and increased operational
and financial efficiencies. Profitable from
the outset, thanks in part to the healthy
geographic, product, and market spread of
its activities, the company produced a
strong cash flow in 1994 and 1995 that
enabled it to replace the original buy-out
^icility with a new one, jointly arranged
by Rabobank and ABN Amro, that
delivered significantly lower borrowing
costs and thus further strengthened the
financial position.
Peter Paul Verballen, Nutreco and
Rabobank - natural partners in agribusiness
expertise.
TAILOR-MADE SERVICE
In mid-1996, Nutreco selected Rabobank
International from among four contenders
to engineer a further financial restructuring
- and subsequently provided our first
mandate to lead-manage a private equity
transaction handled by Rabo Securities. The
result was an issue of cumulative preference
shares that was an unqualified success.
More recently we organized a tailor-made
'Average Rate Basket Put Option,' a
product that delivers further added value
for the group. (See page 11 for details.) 'We
really are quite pleased with the relationship
with Rabobank,' says Verhallen. 'They
bring to the table a pro-activeness and a
level of service which is unusually high.'
BRANCHING OUT
Rabobank has also been closely involved in
efforts to favourably position Nutreco to
benefit from the concentration of the highly
fragmented European animal compound
feed industry, which is essentially bumping
up against the limits of growth. A crisis
3
working relations
affecting the Dutch pig farming industry
can be seen as a prelude to a wider process
of rationalization, Verhallen says. As
market leader in Europe, Nutreco
Agriculture is in a good position to lead a
broad-ranging consolidation. The business
group also plans to geographically branch
out into Eastern Europe and Asia.
DOUBLE-DIGIT GROWTH
On the aquaculture side, Nutreco can look
forward to double-digit levels of growth
produced by organic market expansion as
well as a geographical extension of its
activities through further acquisitions and
partnerships. The group is also expanding
into new fish species as well as positioning
itself for moving higher up the food chain
into processing and marketing. In both
Eastern Europe and Southeast Asia,
greater economie development is leading
to higher rates of consumption for both
fish and meat. This, in turn, points to
potentially exploitable synergies between
the Agri and Aqua business groups.
STRATEGIC RELATIONSHIPS
Overall, Nutreco is committed to a 10 per
cent plus annual average growth level and,
as Nutreco's relationship banker, we hope
to play an important role as it evolves a
strategy for realizing these goals. The
strategie relationship with Nutreco will
henceforth be handled by a multi-
disciplinary dynamic relationship team
lead by Senior Banker Robin Bargmann
with the executive support of Henk Visser
at board level. 'This is important,' says
Verhallen. 'It means we can access the full
array of Rabobank International products
and services, but also that there is one
individual who acts as our primary point
of contact and is responsible for
coordinating all of these activities.'
WEIGHING UP ODDS
But the relationship is hardly a bed of
roses. Verhallen is frank about our
deficiency in payments management, and
says: 'This is a competitive market. If
Rabobank can't provide an appropriate
service, I will go elsewhere.' Such honest
feedback has produced an internal
recognition of this deficiency and a new
initiative to radically upgrade our
International Cash Management services.
(See article on page 13). On balance, says
Verhallen, the pluses far outweigh the
occasional minus. 'Rabobank is the kind
of partner we like. It is eager to perform
on our behalf. It provides a high level of
service. It never takes our relationship for
granted but is committed to generating
added value and really earning the
business we can provide. This is the basis
of any good working relationship.'
