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Nutreco assures on profits despite contract losses

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Nutreco shares extended their recovery after the feed giant said it was on course to at least meet last year's earnings despite setbacks including the move of Marine Harvest to making its own fish feed, and a loss of business with Spain's Mercadona.

Nutreco shares hit a two-month high of E33.21 in morning deals in Amsterdam, up 7% from a low two weeks ago, after the Dutch group unveiled underlying earnings before interest, tax and amortisation (ebita) of E108.2m for the first six months of 2014, a gain of 15.0% year on year.

Revenues, at E2.46bn, were up 2.6%.

And the group eased concerns over its performance in the second half of the year, saying ebita for the full 2014 would be "at least equal" to that for 2013, "barring any unforeseen circumstances".

Furthermore, Nutreco unveiled a E100m share buyback, expected to cover some 3.0m shares, to begin after an ongoing 1.4m share repurchase programme, to cover stock dividends and employee options, is completed.

The buyback will "optimise the efficiency" of the company's balance sheet, while leaving scope for investment in organic growth, and in acquisitions.

"Nutreco has ample financial room to grow the business, both organically and through selective acquisitions," the group said.

Fish feed setback

Investors had expected Nutreco's results to show improvement in the first half of the year - in part thanks to comparison an early 2013 period when fish feed volumes in the key Norwegian salmon market were undermined by "exceptionally cold" sea temperatures, which reduced fish appetites.

Ebita in the fish feed division rose 24% to E43.5m, on sales up 20% at E928.3m, boosted in particular by a recovery in demand by salmon farmers, which soared 30%.

However, the group has faced concern over a loss of business to Norwegian fish farming giant Marine Harvest, which is starting its own feed operations, opening a plant with capacity for 220,000 tonnes a year which is expected to supply more than half its needs in Norway.

Nutreco said that its sales under its Marine Harvest contract would "gradually reduce as Marine Harvest starts producing its own fish feed in the second half of the year".

Supermarket switch

Concerns have also surrounded Nutreco's Iberian feed and meat business whose chicken business, Sada, has lost a contract to supply Spanish retail chain Mercadona, which is switching to Baringo's Avinatur division.

Indeed, Nutreco put its Iberian unit up for sale, but announced in June that it had ditched the auction after talks with "several" prospective buyers indicated that "no fair valuation could be obtained".

In the first six months of 2014, the division's revenues fell by 10.2% to E647.4m as sales to Mercadona tumbled 25%, by volume, because of the "ongoing disengagement process".

However, the Iberian unit raised its ebita by 315 to E18.1m, helped by the boost to margins for both the feed and protein operations from lower grain prices, with "good chicken and pork meat markets" too.


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