Vion to return to core markets, divest UK operations
Vion Food Group has announced that it will be returning to its core markets, focusing entirely on its food operations in the Netherlands and Germany and on its global ingredients business.
The new strategy means that Vion will be divesting all its food activities in the UK and a number of non-core activities, including Banner Pharmacaps (divestment announced on 29 October 2012) and Oerlemans Foods (frozen vegetable and potato products). The decision to create a smaller Vion, with increased strategic and geographic focus, follows the strategic reorientation implemented earlier this year, the results of which were announced on 15 June 2012. This new course is also aligned with the announcement made on 4 September 2012 that the company would be implementing the strategy.
Vion’s board of directors and main shareholder have concluded that the new course is essential, given the failure of the previous acquisition and growth strategy in Food, to deliver the expected operational synergies and financial performance. Combined with the poor market conditions in the European pork sector, this has forced the company to take some difficult but necessary decisions.
Vion’s CEO and executive board chairman Dirk Kloosterboer said: “This is a particularly difficult day for everyone at Vion. The decisions we have made have not been easy ones, but they are essential. We are returning Vion Food to its core pork and beef activities in the Netherlands and Germany, whilst Vion Ingredients will continue to develop globally. The divestments, of which our British food activities constitute by far the largest part, will be implemented carefully. These are steps in a challenging programme to get our food activities back to the desired returns, but I am fully confident that, with the hard work and support of all our people, we will once again ensure Vion’s strong position in our chosen markets.”
Background to the new course
Over the past year, Vion’s board carried out detailed analysis of the markets in which the company is active, its competitive position in these markets, and the outlook for the future. This revealed that the scale achieved in recent years in food did not deliver the necessary competitive cost base. The disappointing results achieved by the food activities in 2011 and 2012 also made Vion reconsider its presence in its three home markets the Netherlands, Germany and the UK.
Given limited resources, the company has decided to focus entirely on its redefined core activities. To restore performance and results, the ongoing integration and focus of the food activities in the Netherlands and Germany will demand greater attention. The firm states that its significantly-reduced operational base, will only have a healthy future outlook if the food activities in the Netherlands and Germany can once again achieve sustainable returns.
Divestment
Vion is now focused on a detailed process to sell its pork, red meat and poultry UK businesses. The interests of the employees, customers and suppliers in the UK are of the utmost importance and the company is keen to provide clarity to all those involved as soon as possible. It has had a major presence in the UK since its 2008 acquisition of Grampian Country Food Group. The UK activities are split into a number of sub-markets, the principal ones being pork, beef, lamb and poultry.
Oerlemans Foods has been an entirely independent part of Vion since September 2007. As a cultivator, producer and supplier, Oerlemans Foods has specialised in the fresh and frozen vegetable, fruit and potato products. These are marketed under the Oerlemans brand (vegetable, fruit and potato products), under the Keizer brand (food service potato products), the organic brand BIO+, and under private label or store brands.
On 29 October 2012, Vion announced that it had entered into a definitive agreement for the sale of its US company Banner Pharmacaps, headquartered in High Point (NC). The buyer is Patheon Inc., a listed company in the field of services to and production for the global pharmaceutical industry. Banner Pharmacaps, a specialised manufacturer and developer of soft gel caps for the pharmaceutical industry, occupied an independent position within VION. This transaction is expected to be fully completed by the end of this year.
New organisation
Food and Ingredients will become two independent core activities within the Vion organisational structure. These are activities that operationally and strategically complement each other, but serve different markets. Vion Food produces and processes pork and beef in the Netherlands and Germany, supplying clients in retail, industry and food service. The Netherlands and Germany are geographically aligned and provide synergies for achieving far-reaching operational integration, and a considerably lower cost basis.
Vion Ingredients and its many companies are active in the creation of raw materials and products from meat-based by-products. These products and semi-manufactured products, such as gelatine, proteins and fats are successfully sold to a variety of B2B markets including pharmaceutical, cosmetics, food, feed, energy and technology industries.
In the new organisational structure, Vion N.V. will become a smaller strategic holding company (Vion Group) which will be adjusted to Vion’s size and the parent company, and to the core Food and Ingredients activities. After thorough consultation with the banks and the shareholder, refinancing has been agreed, tailored to a smaller Vion that can invest in further growth of Ingredients and in the integration of Food in the Netherlands and Germany, thereby assisting financial recovery.
Perspectives
The company is entering an important phase which revolves around the company’s new course. On the one hand, it will carefully and successfully complete the divestments announced, whilst on the other, it will prepare and implement the steps necessary to return the food activities to a healthy position by means of investments, integration and reorganisations. This will make substantial demands of the management and all employees at the company in order to successfully tackle all the necessary activities and changes.
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