Annual Report Food Security

Transcription

1 Annual Report 2010

2 (at the front illustration) The supply chain manager: customers in North-West and Central Europe form the biggest group of buyers. Cefetra purchases commodities for them worldwide and supplies these goods efficiently at competitive prices.

3 Cefetra Annual Report 2010

4 Contents Mission and Positioning 3 2 Profile 4 Theme: 5 Report from the Directors Market Developments 7 Approach of Cefetra 14 Results of Cefetra 20 Future Perspectives 25 Advice from the Supervisory Board 26 Key Data 27 Financial Statements (abbreviated financial statements) 28 Other Information 31 Independent Auditor s Report 32 Government intervention European marketing and origination Partnerships A wide range of tools

5 Mission and Positioning 3 Mission Cefetra consolidates the demand for agricultural commodities of buyers in the feed, food, and fuel industries in North-West and Central Europe. From this combined volume, Cefetra develops supply chains with its suppliers. Cefetra plays a coordinating and organisational role within these chains. Cefetra creates value for its regular buyers by delivering tailored raw materials and services. Cefetra does this in a socially responsible way, with a balanced concern for people, planet and profit. Positioning With a demand-driven, international, and diversified profile, Cefetra positions itself as a strong, buyer-orientated distribution organisation. As a supply chain manager, its core tasks lie in origination, distribution, logistics, and risk management.

6 Profile 4 Cefetra supplies raw materials to the feed, food, and fuel industries. This includes the animal feed industry, the food and drinks industry, the crush and starch industry, and the energy and bio-fuels industry. Cefetra trades around 19 million tonnes of agricultural commodities per year. Cefetra does not limit itself to the supply of raw materials. What distinguishes Cefetra in the market is the QLINK approach (Quality, Logistics, Information, Network, and Knowledge). Cefetra aims to hallmark its sales with the desired quality, reliable logistics, objective information exchange, the development of a broad network, and in-depth knowledge of markets and products. This added value is created via an intensive partnership with buyers, suppliers, and service providers. With the QLINK approach, Cefetra is able to create a competitive advantage for its regular supply chain partners. The foundation of Cefetra s operational management is a strategic focus on risk management, internationalisation, diversification, origination, logistics and distribution. Its objective is to perform its role as supply chain manager in the best possible way and to be a reliable, solid partner for its suppliers, buyers and service providers. Cefetra invests in conscientious and innovative risk management, considered logistical coordination, an expansion of sales opportunities and pinpoint distribution. Cefetra is carefully adding to the number of countries where it is active, to further expand both its distribution network and its origination network. In this way, Cefetra guarantees its buyers access to the necessary commodities. These strategic choices have already proven their worth for many years now, and have been translated into a growing market share and healthy financial results. In 2010, the net result amounted to 21.4 million. The equity of over 100 million forms a strong foundation for the roll-out of the strategy and thus for the further expansion of the successful Cefetra-concept. The solid equity position also provides important security to suppliers and buyers. Cefetra purchases worldwide from carefully selected suppliers with whom the company has developed long-lasting relationships. North-West and Central Europe are the most important sales markets for Cefetra. In this region, Cefetra is a leading supplier of raw materials for the animal feed sector. The company has six branches, of which five are spread across North-West and Central Europe and one is in North America, with a total of 193 employees. Cefetra has a policy of selecting chain partners who, together with the company, want to achieve a healthy balance between people, planet, and profit. Cefetra aims to ensure that raw materials are cultivated and processed under ecologically sound and socially responsible conditions.

7 THEME Food security has become an important theme on today s geopolitical agenda. The demand for agricultural commodities is rising rapidly. The world population is growing by 200,000 people per day. Countries with large populations, including China, India and Brazil, are achieving considerable economic growth. Affluence is increasing, and thus the consumption pattern is shifting more towards meat. Meat production requires more raw materials. The demand for bio-fuels is also continuing to grow rapidly. Land, water, fertiliser, infrastructure and labour are becoming more expensive. The supply is also growing, but not as fast as the demand. The growth in export volumes over the coming years will be limited to production regions in South America (especially Argentina and Brazil), countries around the Black Sea and - in the longer term - Africa as well. The relative importance of the United States (US), Canada, the European Union (EU) and Australia as exporters of agricultural commodities will gradually decline. The imbalance between supply and demand will lead to higher prices, especially when harvests occasionally fail in different regions around the world. Governments in emerging economies invest in origination regions to safeguard sufficient supplies of food for their expanding and ever more affluent populations. Not only in agricultural commodities, but also in iron ore and potash for example. Furthermore, BRIC countries are also aiming to keep or shift the added value to within their own countries. This will alter the nature of commodity flows and also have an impact on the export potential of the established exporters of meat and dairy produts. EU policy is still primarily focused on supporting the primary sector. Food certainty and pricing controls (anti-inflation) will continue to be leading factors in the commodities markets over the coming years. 5 Government intervention is increasing. Governments want to maintain their food stocks at a sufficient level and guarantee long-term food certainty for their inhabitants in order to avoid political and social unrest. Governments exercise a strong influence on market forces, especially in countries with centralised economies, such as Brazil, Russia, India and China (BRIC). The stocks of wheat in state hands between 2006 and 2010 rose from 28% to almost 50% of world stocks. Food security: the demand for agricultural commodities is currently outstripping supply. People need to eat. An ever-growing number of people. An ever-growing amount of food. And more expensive food, which requires more land. Land that has become the object of fierce competition.

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9 REPORT FROM THE DIRECTORS Market Developments Market parties continued to take a cautious approach during the first months of The impact of the worldwide economic and financial recession that started in 2008 was still clearly visible, and the widespread uncertainty about an economic recovery resulted in considerable cautiousness. Gradually, however, the emerging economies showed double-digit growth once more. As a result, during the course of 2010 confidence in the economy slowly started to return. There was a clear rise in the worldwide demand for commodities. The Chinese compound feed production in 2010 exceeded that of the European Union. Furthermore, the demand for agricultural commodities rose due to the increase in bio-fuel production. Energy consumption is on the increase. In 2010, the demand for bio-fuels was stimulated by the rising price of fossil oil. Demand also grew because a large number of countries made bio-fuel mixing compulsory. Investment funds managed to recover from the shock of the credit crunch, and invested heavily in agricultural commodities. Rising prices The strong increase in demand, combined with a lower increase in supply, resulted in higher prices. Prices shot up, especially in the summer of This was caused by the failed harvest in Russia, where drought and forest fires reduced yields to little or nothing across large areas of agricultural land. Russia imposed an export ban for grains in August. Government intervention: governments around the world are increasingly trying to control the supply and demand of agricultural commodities. Amongst other things via subsidies, tax incentives and regulations to either impediment or boost imports and exports. The transfer of price increases to consumers was not easy. This put pressure on margins all along the food chain. With the higher price levels, the demand for credit to finance the buying, storage and transport of commodities also went up. However, so soon after the credit crunch, banks showed little inclination to take major financing risks, which also had a negative impact on liquidity along the chain. The battle for acreage Extremely low stocks in the production and consumption regions - in absolute terms, but more significantly as a percentage of consumption - put the commodities markets under considerable pressure. This not only applied for grains and oilseeds, but also for sugar and cotton. The trend of higher yields per hectare was definitely not sufficient enough to satisfy the strong increase in demand for agricultural commodities. There will have to be a substantial worldwide increase in available agricultural land over the coming years. Consolidation The market conditions acted as a driving force for consolidation on both the origination side and the buyer s side. The growing demand for credit, the greater complexity, economies of scale, internationalisation, and the possibility of spreading and improving risk management were all ingredients that made closer collaboration, in all sorts of ways, more essential. Parties are looking for opportunities to collaborate along the chain in order to reduce risks and to guarantee reliable and predictable supplies. Cefetra is in an excellent position to play a facilitating role in such developments. This drive towards consolidation will continue over the coming years. Mergers, acquisitions and joint ventures create larger parties that are in a better position to carry (price) risks and are better equipped to survive in the new global arena. 7

10 REPORT Market Developments FROM THE DIRECTORS 8 Government Intervention Government intervention is centred on food security and the prevention of food inflation. There are numerous examples of action taken by governments in this connection: the Russian export ban on grains in August, the Russian import ban on poultry meat from the United States, the export quota set by the Ukraine, the formation and staggered release of stocks, and the introduction and then withdrawal of import and export restrictions by the Chinese government. The European government sold barley from the intervention stocks in September. At the same time, the European Commission (EC) kept the strict policy for the import of genetically modified organisms (GMOs) in place (including the zero tolerance policy). This complicated imports from third countries of competing raw materials, such as corn and corn distillers, or even made it impossible. Furthermore, the EC adopted strict sustainability requirements for the use of grains and oilseeds for the production of bio-fuels. The commodities market After commodity prices spiked in the first half of 2009, a downward trend in prices began that did not end until the first quarter of In general, there was a good supply of commodities. As of the second quarter of 2010, prices started to rise again and began to accelerate upwards during the summer. A number of factors were responsible for this: - weather problems, extremely wet weather in Canada, drought in the former Soviet Union and in large parts of Europe and drought in large areas of Argentina, which has meant the outlook for 2011 has also worsened; - ultimately disappointing yields in the United States; - large-scale Chinese buying. In 2010 the prices for Chicago wheat went up by 46.7%, Chicago corn by 51.7%, Chicago soya beans by 34.0%, and Euronext wheat by 92.7%. 1. Development of prices for rapeseed and wheat, on the MATIF (in / per tonne)

11 Grains Non-grain feed ingredients After a quiet start to the year, a change in the grains mar- The supply of non-grain feed ingredients was ample ket was discernible by the end of June; in the second half throughout most of the 2009/2010 season. The supply of 2010 the world market for grains was dominated by of beet pulp within the EU went up by some declining production and lower stocks. This especially 500,000 tonnes. applied for wheat, the production of which in 2010 was In the second half of 2010 grain became too expensive down by more than 5%, or 35 million tonnes on the year to use in cattle feed in large volumes. The demand for before. traditional raw ingredients therefore increased accordingly. The extreme drought in central Russia decimated the In general, the 2010/2011 season is characterised by harvest in this major production area. Of the expected shortages. The price of palm kernel expellers went up due 93 million tonnes of grain, only around 60 million tonnes to the growing demand outside the EU. The supply of was harvested. The drought also ensured a poor start to beet pulp within the EU fell this season by some 500,000 sowing for the harvest in tonnes. Due to the higher demand elsewhere, the supply The problems in the former Soviet Union led to a big of soya bean hulls in the EU remained limited. The demand for EU milling wheat in the second half of supply of citrus pulp also stayed at a low level. In addition, the internal demand for wheat also stayed at a reasonably high level. For these reasons, there is a potential wheat shortage in the EU, whereby also the stocks of the other grains will be at minimum levels by June Figure 1 shows the development of the prices for wheat on the MATIF exchange. 2. Development in the prices of Q soya beans, Q wheat, Q corn and Q soya bean meal, on CBOT (in $ / bushel) $

12 REPORT Market Developments FROM THE DIRECTORS Rapeseed meal Since 2003/2004 there has been uninterrupted growth 10 in the supply of rape seed meal in the EU. During the 2010/2011 season this trend came to an end. Due to a drop in the EU harvest of rape seed, from 21.5 million tonnes in 2009 to 20.5 million tonnes in 2010, oil factories processed 1.0 million tonnes less. Figure 1 shows the development of rape seed prices. Sunflower seed meal Whereas the EU market in sunflower seed meal in 2009/2010 was characterised by shortage, in the season 2010/2011 the supply was somewhat more ample. The EU harvest of sunflower seeds went up slightly in EU crush is expected to be somewhat down in 2011, but there is also likely to be bigger imports of sunflower seed meal. Soya beans/soya bean meal At the start of 2010 there was a short supply of soya beans from South America. This led to a big surge in demand for American soya beans and meal. Due to optimum growing conditions in South America, the latest South American harvests reached record levels (Brazil 68.7 million tonnes, Argentina 54 million tonnes). Although there was greater availability of South American soya beans, there was also a rapidly growing demand from the emerging economies and from the bio-fuel industry. Attention shifted to the new harvest forecasts for North America after June. The initial yield forecasts quickly proved to be over-optimistic. At the end of 2010, prices reached a (provisional) peak of almost $14 per bushel. The drought in Argentina and the news that the US would continue the subsidised bio-fuel policy augmented the price increase. Figure 2 shows the development in the prices of soya beans, soya bean meal, wheat and corn on the Chicago Board of Trade (CBOT). 3. Sea freight prices for Capesize-, Panamax- and Handysize ships, (x 1,000 $ / day) $

13 Freight market The freight market experienced volatile price fluctuations once more during the year The general trend, however, was clearly downwards. The year started with good steel production margins in China, the recovery of the world economy and record congestion at the Australian coal terminals. On the other hand, there was more freight capacity because a record number of new ships were delivered. In total there was an addition of approximately 75 million tonnes of cargo capacity. After May the freight prices fell due to the restrictive Chinese government policy and this also dampened demand for steel and coal. In the third quarter, a revival in the demand for minerals caused a - temporary - surge in freight prices. But this was overshadowed by the effect of the expansion in cargo capacity. There was ultimately a discernible downward trend in prices on balance. Prices ended at around the same level as those at the end of This time round it was mainly due to the higher capacity, while the decline in prices in 2008 was caused by the strong drop in demand. Figure 3 shows the development of freight prices. Interest rate and currency exchange developments In 2010 the main interest rates (LIBOR and EURIBOR) remained at historically low levels. Since the credit crunch, however, the interest rate surcharges applied by the financial institutions have been at a consistently higher level. The US dollar-euro exchange rate in 2010 fluctuated between 1.19 and The Polish zloty remained strong against the dollar and the euro in 2010, after the currency was significantly weakened during the recession. The strong zloty limited export opportunities, particularly for grains, from Poland. Figure 4 shows the development in the exchange rate of the US dollar and the Polish zloty against the euro Development in the exchange rate of the zloty and the US dollar against the euro,

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15 European marketing and origination: Cefetra has broadened its marketing territory within Europe step-by-step. It is also opening up new origination regions within Europe. This creates a greater arbitrage potential for Cefetra to purchase wherever the conditions are most favourable, and increases the supply reliability for its buyers at the same time.

16 REPORT Approach FROM of Cefetra THE DIRECTORS Cefetra s answer to developments in the market is to strengthen its position in origination, distribution, and 14 logistics and to expand and deepen the knowledge within the organisation. This approach has resulted once more in a significant increase in turnover and a greater market share in all the key geographical regions for Cefetra in In combination with the comprehensive management of risks, it once more proved to be a platform for excellent financial results. The approach of Cefetra has proven to be successful during turbulent economic conditions, across a variety of regions and for all types of buyers. Cefetra is continuing to broaden its markets. Cefetra has a varied range of tools that it can use to organise and implement the various aspects of supply chain management. Figure 5 illustrates the business model of Cefetra. Logistics, origination, and distribution Cefetra continues to strengthen its position in storage and handling during 2010 in order to remove bottlenecks in origination and distribution for the relevant markets. In the past, Cefetra has always avoided direct ownership of real estate and other fixed assets in order to maximise its flexibility. Now the client base and origination outside of North-West Europe is growing so rapidly, however, there is a need for greater control of commodity flows, both in order to ensure more reliable logistics and from the perspective of risk management. In 2010, Cefetra continued to expand its activities in the Baltic States and Central Europe. With storage in dedicated silos, Cefetra was able to provide its buyers with more certainty that the contracted commodities would actually be delivered. In Poland and Hungary, Cefetra is sourcing from local farms to create more supply certainty. Cefetra has increased its storage capacity with the lease of silos in Poland and Hungary. Furthermore, Cefetra signed a long-term contract for the handling and storage of soya bean meal in the port of Riga (Latvia). Cefetra moreover widened its origination in Romania, Serbia, and Hungary. For the export of these commodities from these countries, Cefetra made greater use of handling and storage facilities in the Romanian port of Constanza. Cefetra not only used the storage facilities in Poland and Estonia to store grains and rape seed produced in this region, but also for the import and storage of proteins, such as soya bean meal. The opportunities for further optimisation of deepsea transport will continue to grow in 2011 as Cefetra will start to use handling and storage facilities in the deep-sea port of Hamburg. This will allow Cefetra to fill a geographical blind-spot between the North Sea ports and the ports of Gdynia and the Baltic states. It will enable Cefetra to serve the German hinterland more efficiently. Cefetra has reinforced its network in South America; in 2010 grains were once more being imported from this region. 5. Cefetra Business Model Transport Multi destinations Multiorigin Origination Logistics Destination Storage Multi purpose Multi products Risk management

17 Across its combined operating territories, Cefetra now has a total available storage capacity of approximately 600,000 tonnes, either in direct ownership or leased. Furthermore, the Group has floating stocks with an average of 350,000 tonnes shipped to 12 different seaports. Knowledge and Risk Management Cefetra has invested strongly in recent years in knowledge, both by attracting highly-qualified recruits and by increasing the knowledge level of its existing staff. Over the years, the company has developed to become more of a knowledge organisation with a focus on quality, logistics, risk management and market analysis. A new employee was added to the market analysis desk on 1 January In total, there are now six people working at the market analysis and risk management desk of the Cefetra Group. The Canadian branch was established several years ago as a base for North American origination and as a source of information for regional market developments. This knowledge and information has allowed Cefetra to make informed analyses of market developments and to respond accordingly. Since 2010 an external analyst has been reporting from Russia about market developments, which amongst other things enabled Cefetra to identify the drought problems in this region at an early stage. Risk management is an integral part of all the activities of Cefetra from origination to distribution. In order to manage risks strategically Cefetra has placed an emphasis on information gathering, quality systems, investment in handling and storage, expanding origination to an increasing number of regions, widening the product portfolio and attracting more customers from the fuel and food and drinks industry. Positions in commodities, freight and currencies are monitored continually by Cefetra. Cefetra also constantly monitors the creditworthiness and reliability of its contract partners. Furthermore, Cefetra makes sure it has sufficient liquid funds available, and tracks quality as well as sustainability 15 risks. In 2010, this integrated approach to risk management yielded benefits at several levels resulting in excellent financial results and a strong increase in turnover. Collaboration As a supply chain manager of (compound feed) raw materials, Cefetra plays a major role within the food chain. Cefetra is keen to share the knowledge that it has acquired over the years with its chain partners and stakeholders. Market conditions are changing. There is less and less transparency. Prices and geopolitical tensions are becoming ever more volatile. As a result, there is a growing recognition of the desire and necessity within chains for closer collaboration and for better spread of risks and margin management. Cefetra is glad to make its tool kit available and to play a facilitating role in this process. Network Cefetra has a broad network, within which producers from all origination areas, buyers, and logistical service providers work together and utilise and deepen each other s knowledge. Cefetra wants to expand its network and also create closer cooperation between governments, knowledge institutions, financial institutions, and trade and industry. The need for closer collaboration is also recognised outside Cefetra. Cefetra shares its knowledge and resources with its regular chain partners via bilateral meetings, seminars and presentations in which specific products or subjects, such as sustainability, quality issues, market analysis and risk management are discussed. In 2010, Cefetra extended the access to its extranet, Cefetranet, to the partners of its subsidiaries, and added new features to the Dutch Cefetranet. This raised the provision of information to regular buyers and suppliers to a higher level.

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19 REPORT Approach FROM of Cefetra THE DIRECTORS Diversification Cefetra not only uses its knowledge and facilities for the compound feed industry, but increasingly for food and drink manufacturers and buyers in the energy sector. There was a clear rise in turnover from such buyers in On 1 January 2010, Cefetra opened a dedicated biomass desk. Some of the products it handles were already being traded by Cefetra, but new non-feed commodities have also been added to its product range. With the addition of biomass products, Cefetra is no longer purchasing commodities purely based on nutritional value, but also on calorific value. The global biomass market is still at a pioneering stage of development. Under the Kyoto Protocol, 20% of energy demand in 2020 must be supplied from bio-fuels. Most providers and processors in the EU were still waiting for more clarity about possible subsidies for renewable fuels in In 2010, it became clear just how important the price development in traditional fossil fuels is for the price of bio-fuels. The increase in sales, the spread across more origination regions, and the broader commodities portfolio delivered greater arbitrage potential and more efficient utilisation of logistical resources for Cefetra in Quality Food production demands maximum security. Cefetra has to have total certainty about the safety of the raw materials it purchases, which have to satisfy the high quality demands of the food chain. As a buyer s organisation, Cefetra is consequently more concerned with achieving the right level of quality than other companies in the sector. Buyers expect guarantees in relation to constant nutritional quality, the absence of harmful substances, reliability of transport and storage, and adequate measures in the event of disasters. Cefetra has been sourcing raw materials from selected and approved suppliers for many years. This means Cefetra has an in-depth understanding of the quality assurance, expertise, and mentality needed within the origin. In 2010, a lot of time was invested in broadening the risk analysis of its supplier base. The aim is to broaden the knowledge about commodity flows and production methods, to improve risk assessments, and take measures when an analysis identifies unacceptably high risks. The central quality desk uses its knowledge to carry out risk analyses for the relevant links in the chain, and to support these links in the introduction and improvement of their own quality systems. Cefetra continues to work on acquiring the right knowledge and developing the right mentality in relation to quality within its own organisation as well. This is done through product group sessions and targeted training. The quality meetings in 2010 were broadened to include the quality managers across the whole Group. Relevant information about quality-related issues was exchanged throughout the entire organisation, including changes in European and national legislation, developments in the field of food safety, and the current state of affairs in relation to GMOs. In order to reduce the risk of contamination with prohibited GMOs, Cefetra put a lot of time and effort into the development of a GMO database in This database contains information about the development and cultivation of GMOs worldwide. The involvement in chain quality was extended even further in 2010 with participation in several quality working groups and conferences at industry level. Furthermore, Cefetra is certified for the quality certificates GMP B3, B4.4, B4.5, GTP, and QS. Cefetra also operates a Cert-ID certified non-gmo programme, within which identity preserved non-gmo soya is supplied. 17 Partnerships: markets are becoming more complex and the problems more wide-ranging. If governments, trade and industry, financial institutions and knowledge institutions work closer together, they will be able to tackle these challenges more effectively.

20 REPORT Approach FROM of Cefetra THE DIRECTORS Sustainability Sustainability has begun to play a prominent role in the 18 Dutch animal feed sector. The Dutch animal feed industry has declared an ambition for all soya processed in the Netherlands to come from sustainable sources. Cefetra has contributed already for some time to the establishment of sustainable agricultural production chains in its sourcing areas. Cefetra was closely involved in initiatives for the sustainable production of animal feed ingredients in In addition to its active membership of the Round Table on Responsible Soy (RTRS) and the Dutch Task Force Responsible Soy, Cefetra has played a leading role in the programme for Responsible Soya in the Dutch and Belgian animal feed industry. These efforts resulted in considerable increase in the volume of Responsible Soya. The positive working relation ship with crushers and growers proved once more to be of great value during the year when it came to achieving the objectives of the programme for Responsible Soya. During 2010, a large number of growers and soya processors in South America were audited in order to qualify for Responsible Soya certification. The reports from the audits in 2010 mean Cefetra can provide its customers with details about how certified companies satisfy the principles and criteria for Responsible Soya. Progress has also been achieved in the field of palm kernel expellers by Cefetra. Cefetra has been a member of the Round Table on Responsible Palm Oil (RSPO) since The RSPO programme for the production of responsible palm oil has already proved successful: a large number of producers and processors of palm oil now participate in this program. The RSPO programme for the by-product palm kernel expellers has made less rapid progress. Because a large volume of palm kernel expellers are used in animal feed, Cefetra has taken a lead in setting up a programme for Responsible Palm kernel Expellers. In 2010, Cefetra shipped the first consignment of 20,000 tonnes of Responsible Palm Kernel Expellers to Europe. In light of the considerable progress that has already been achieved in the sustainability of palm oil cultivation, Cefetra hopes that it can quickly increase the volume of Responsible Palm Kernel Expellers. Cefetra is a supplier of the bio-fuel industry as well as the animal feed industry. Since December 2010, the raw materials for the production of bioethanol and biodiesel, grains and rape seed respectively, have had to meet the criteria for sustainability as laid down in the EU Renewable Energy Directive 2009/28. In 2010, Cefetra B.V. and Cefetra Hungary were audited by the ISCC (International Sustainability & Carbon Certification) for the trade in responsible biomass. This established that the tracking & tracing system of Cefetra satisfies the requirements set by the EU for quality control in the chain for responsible biomass. With this ISCC certificate Cefetra will be able to further expand the trade in sustainably produced raw materials for the bio-fuels industry in Nutrition The QLINK approach of Cefetra has the aim of creating added value and competitive advantages for its regular buyers. Because the buyers of Cefetra are primarily active in the animal feed sector, knowledge concerning nutritional value and suitability for animal feed is essential. With the appointment of a new employee at Cefetra Feed Service, another step forward has been taken in the development of animal feed expertise within the Cefetra Group. This will help to improve the understanding of the needs of customers within the animal feed sector. Furthermore, it will make it possible to focus on the specific animal feed characteristics of the products traded by Cefetra. Cefetra will moreover use its knowledge concerning animal feed to provide a better response to changes in both the raw ingredients market and the cattle breeding industry. A wide range of tools: Cefetra has many tools at its disposal in order to ensure the smooth supply of commodities. This toolbox includes: a logistics desk, market analysis and risk management.

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22 REPORT Results of FROM Cefetra THE DIRECTORS Financial 2010 was once more an excellent year. The net profit of million exceeded expectations. The turnover in tonnes rose to a record level of almost 19 million tonnes. Turnover Turnover in 2010 was up by 24% compared to 2009 (figure 6). The market share went up in all operating areas, and in addition to a broadening of the product portfolio, there was also strong organic growth within the existing product groups. Because Cefetra has invested in recent years in the qualitative and quantitative growth of its internal organisation and because of this it was able to increase the added value and its market share in its primary operating areas. As in 2007/2008, the import of grain from South America proved to be possible in Cefetra is putting a growing emphasis on finding new origination areas. This approach will enable it to take maximum advantage of the differences in liquidity for each origination region. It will also create more logistical flexibility. Financial results For the fourth year in succession, Cefetra achieved excellent financial results. The net profit for 2010 of 21.4 million was just under the record set in 2009 ( 22.3 million). This excellent financial performance was the result of the geographical spread of Cefetra s sales markets, the diversity of its product portfolio, more efficient utilisation of handling and storage facilities, in-depth market analysis, and strict risk management. In addition the greater professionalism of the organisation provides a platform to make these developments possible. Cefetra now has a broad geographical marketing area in North- West and Central Europe, with strong positions in a considerable number of product/market combinations. This creates advantages of scale in terms of both origination and logistics and offers additional arbitrage potential. In-depth market analysis has allowed Cefetra to respond quickly to market developments. Especially in the second half of the year, when volatility increased and strict consistent risk management once more proved its worth. The spreading of risks within the broad product portfolio, and between different origination areas, enabled Cefetra to achieve good margins even in volatile markets. 6. Development turnover volume, (x 1,000 tonnes) 18,000 16,606 16,000 14,000 12,000 10,000 12,720 2,386 15,437 3,621 15,204 3,691 3,042 8,000 10,582 9,822 10,017 8,424 6,000 18,868 3,951 12,825 4,000 2,000 1,910 1,994 2,333 2,145 2, Shareholders Other consumptive customers Trade turnover

23 The overheads mainly consisted of personnel costs. These costs went up due to the growth in the number of staff and the policy of maintaining a highly-qualified workforce. They also included a certain amount of variable remuneration because of the excellent financial results. Open book The size of the open book - future transactions already traded - is an indicator of both the confidence of buyers in taking future positions and for the market share of Cefetra. During the year, Cefetra executed in 2010 its open book as of the end of 2009, and already traded volumes for execution in The profit on the open book at year-end 2010 was 5.6 million (2009: 5.4 million). The size of the open book grew in 2010 from 5.4 million tonnes to 6.6 million tonnes at year-end Investment After Cefetra had invested in property with the acquisition of two inland silos in Poland and in the relocation to the new terminal in Belfast in 2009, investment was moderated in In order to expand its logistical potential, Cefetra concluded a handling and storage agreement for the port of Riga (Latvia). Furthermore, Cefetra decided to go ahead with the expansion of the storage capacity of the Baltic Grain Terminal in Gdynia in Development of equity (x million) (blue) and solvency position (red) Cefetra Group, % 30% Financing 21 growth was the direct result of good financial results over In 2010, the equity of Cefetra grew strongly once more (figure 7). It exceeded the level of 100 million (2010: million, 2009: 88.3 million). This strong the previous years and a restrained dividend policy. The price of commodities went up substantially in Moreover, Cefetra partially achieved its growth in turnover in regions that traditionally require a high level of working capital in light of the need to maintain stocks and the longer payment periods. The balance sheet of Cefetra has grown significantly over the years as a consequence. Despite this trend, the Milestone: in 2010 the equity of Cefetra increased to more than 100 million; Cefetra is a solid partner for parties in the supply chain of agricultural commodities. solvency position has remained at an solid level: 27.6% at year-end 2010 (figure 7). Cefetra has satisfied the greater need for working capital by strengthening its equity position with undistributed profits, and because Cefetra is repeatedly able to extend, and make more flexible, its credit facilities with financial institutions. In 2010, Cefetra was able to increase the flexibility of its credit facilities, and Cefetra was able to capitalise on the confidence the banks have in the company by negotiating a significant extension of its credit facilities. A third bank will be added alongside the existing company bankers % 10% 0%

24 REPORT Results of FROM Cefetra THE DIRECTORS In 2010, Dun & Bradstreet continued to give Cefetra a class-1 rating. This represents the highest level of credit- 22 worthiness and the least risk of bankruptcy. Organization Personnel The number of employees went up in 2010 from 174 to 193. Additions were made across the entire breadth of the organisation both at Cefetra B.V. and at its subsidiaries. As well as additions to the traders and execution, the financial staff were strengthened at Cefetra Ltd., Cefetra Polska, and Cefetra Hungary. Cefetra also strengthened the quality desk with a specialist in sustainability/nutrition, and the market analysis team was also reinforced. Cefetra has consistently expanded the organisation in recent years in order to improve the quality of the service delivery and to handle the great complexity of activities. Nonetheless, the overheads of Cefetra are still relatively low: with an overhead cost per tonne of 1.16, Cefetra is the cost price leader. The quality of the personnel was further improved during 2010 with a stringent selection policy to ensure more highly-qualified staff were recruited, with internal and external training courses, and through job rotation to ensure existing knowledge is spread throughout the entire organisation. Young Cefetra set up in 2009 continued to develop in 2010 as a broad platform for young employees working in sales. Within Young Cefetra, these employees are given the opportunity to expand and deepen their knowledge in sessions on various themes. It consequently provides them a way of contributing to the refinement and implementation of the Group strategy. Shareholders After the merger of Cehave-Landbouwbelang with Agrifirm on 1 June 2010, the new entity, known as Agrifirm Group B.V., is now a 32.3% shareholder of Cefetra. The shareholders represent a total volume of compound feed production of approximately 7.4 million tonnes. Main operating area of the shareholders is primarily centred in the Netherlands, but the shareholders also take international feed positions in Poland, Hungary, Germany, Belgium, and the Ukraine. The percentage of share ownership at year-end 2010 was: ForFarmers B.V % Agrifirm Group B.V % Rijnvallei Holding B.V % The composition of the Supervisory Board on 1 January 2011 was as follows: The Chief Operating Officer appointed at the end of 2009 decided in May 2010 to make another quick career move, and left for a job elsewhere outside of Cefetra. After a review, the decision was taken to appoint somebody else to the position. Furthermore, Cefetra decided, in light of the very strong growth of the organisation in terms of quality and quantity, to train employees internally within Cefetra for promotion to fill any new or existing management vacancies. B.J. Ruumpol (chairman) M.A. Grift A. Loman

25 Subsidiaries Cefetra Feed Service BV Cefetra Feed Service can look back with pride at a very successful 2010 in all respects. The financial results were very satisfying, as in previous years, and there was growth in turnover. At the end of 2010, Cefetra Feed Service had seven employees. The company managed to further increase turnover in minerals, acids, high-grade proteins, and special by-products from the milling industry in Moreover, Cefetra Feed Service successfully added soya oil and palm oil to the product range. Cefetra Feed Service has now established a strong position in the vegetable oil truck market. The basis for its success is its specific knowledge of special commodities and its logistical know-how. Cefetra Feed Service is therefore able to provide its buyers with specific market and commodity knowledge. The logistical network that Cefetra Feed Service has built up in the field of road transport enables the company to provide customised deliveries to its buyers even under difficult circumstances. In addition to quality and sustainability, activities in the field of product development and nutritional support are also handled by Cefetra Feed Service. To maintain the professional level of its service delivery, Cefetra Feed Service has appointed a new member of staff. Cefetra Ltd Cefetra Ltd made excellent progress in 2010, both in terms of quantity and quality. The turnover in the United Kingdom and Ireland rose by more than 300,000 tonnes to a total of 2.5 million tonnes; an increase of 16%. This increased turnover was achieved by Cefetra Ltd with both existing and new buyers. Its financial results were also up on last year, which was 23 created by the Group s strategy. The investments in risk primarily due to the efficiency and scale advantages management and market analysis in recent years were key factors in the success of Cefetra Ltd in 2010 despite the volatile markets. The diversification in origins and products, and the use of different ports and storage locations, offered both suppliers and buyers major advantages. This flexible approach delivered supply reliability to buyers at a competitive price. Cefetra Ltd utilised its capacity more efficiently by using good logistical coordination to handle growing volumes. The company handled record volumes in 2010; in Belfast handling went up by almost 30% on the year before. Cefetra Ltd continued to adopt the QLINK approach. This meant quality received plenty of attention throughout the year. Together with Cefetra B.V., Cefetra Ltd made progress in the incorporation of sustainability standards in its raw materials purchasing policy. The company improved the digital information flow to buyers via Cefetranet, a process that will continue in In order to raise the service level even further, and to allow an expansion of activities, the number of staff was increased by five. The total number of employees thus reached 51. Cefetra Hungary In 2010, Cefetra Hungary Kft achieved a record turnover. The volume grew explosively from 348,000 tonnes in 2009 to almost 500,000 tonnes in 2010, an increase of 43%. This increase was primarily associated with turnover in corn and rape seed. On the other hand, there was a slight drop in the import of soya bean meal. The financial results were satisfactory. In addition to the traditional activities, the company developed two new activities in order to generate growth. Cefetra Hungary introduced a logistical model for the shipping of goods via the Romanian port of Constanza on the Black Sea. Moreover, origination from Serbia was also extended.

26 REPORT Results of FROM Cefetra THE DIRECTORS This provided an impulse for exports to North-West Europe and shipping to Koper on the Adriatic Sea. 24 With the addition of (leased) storage facilities, Cefetra Hungary was able to increase its control of the growing goods flows. Cefetra Hungary took on two new employees in 2010, which brought the total number of employees to 12. Cefetra Polska Cefetra Polska continued to maintain the upward trend of previous years in 2010, with record turnover (up by 18%) and the best financial results in its young history. With a volume of more than 1.2 million tonnes of grains, rapeseed, and proteins, Cefetra Polska is currently the biggest player on the Polish agricultural market. Despite the volatile market, and the associated higher risk of non-performance, Cefetra Polska still managed to receive the lion s share of the purchased commodities as contracted. The increase in turnover was partly due to the addition of new products to the portfolio of animal feed ingredients, such as rapeseed and milling wheat. Moreover, Cefetra Polska supplied biomass to energy producers. Cefetra Polska also increased its market share in the import of soya bean meal in Poland. In order to handle the considerable volumes, the company expanded its storage capacity. Cefetra Polska leased additional handling and storage facilities in the Polish port of Gdynia. The inland silos in Dobre Miasto and Nidzica, which the company acquired in 2009, proved to be of great value for the storage of Polish grain and rape seed. Cefetra Polska also leased additional inland storage capacity in 2010, which created a total capacity of 200,000 tonnes. It allowed the company to purchase more grain locally, to store grain for longer periods for local buyers, and to maintain a buffer for exports. Cefetra Polska distinguishes itself in the market by offering a complete package of services for quality, logistics, and market expertise. In a volatile market where supply certainty is becoming increasingly important, Cefetra has established itself as a reliable supplier. The logistics department of Cefetra Polska expanded the transport capacity in 2010 in order to handle the logistical needs of both suppliers and buyers. The use of ICT applications allowed carriers, suppliers, and buyers to track and trace consignments. The Cefetra Polska team was strengthened with a number of professionals from multinational companies within Poland. Furthermore, the staff followed various training programs to ensure the company continues to maintain the current high level of quality. At the end of 2010, Cefetra Polska had a total of 53 employees. Cefetra Canada Cefetra Canada once more proved its great value as an advanced information source for market developments in North America. It was a pro-active sparring partner in the development of the market analyses that Cefetra makes on a daily basis. Despite the fact that only a limited amount of commodities were actually originated during 2010, the network has been expanded in such a way as to provide a solid platform for the successful export of oilseeds and by-products in Joint venture Baltic Grain Terminal The disappointing grain harvest in Poland, combined with the strong Polish currency, depressed grain exports from Poland. The Baltic Grain Terminal in Gdynia, in which Cefetra has a share of 50%, also felt the consequences of this. On the other hand, imports stayed at the same level as in This could not prevent, however, overcapacity at the Baltic Grain Terminal, which meant its result was under break-even. The Baltic Grain Terminal is currently working to expand its capacity, which will improve its future competitive position. Investment will be carried out for this in 2011.

27 Future Perspectives After an increase in turnover of 24% in 2010, the focus in 2011 will primarily be on improving the quality of the operation. Furthermore, the strategic objectives will stay the same: stronger positions in origination areas, logistical optimisation, further diversification, refinement of risk management and close attention to sustainability. Cefetra aims to fulfil its role as supply chain manager in close collaboration with its chain partners, while at the same time strengthening its relationship with knowledge organisations, financial institutions, and government bodies. Cefetra expects sharp price fluctuations and historically high prices in The increasing complexity of the market calls for more attention to market analysis and risk management. The greater risks with respect to trading partners call for a strict selection policy and strict observance of the set limits. Cefetra will be cautious in this respect, and will be careful when selecting its trading partners and the extent of financial exposure in its dealings with counterparties. There are still ample opportunities for organic growth, but Cefetra does not exclude the possibility of targeted acquisitions should a good opportunity present itself. Cefetra has the intention of growing through the acquisition of assets, in order to support the operational processes in the various regions. Financing 25 agreement with the banks about a substantial extension The available financing, in combination with the of the credit facilities expected to be completed in 2011, is expected to be sufficient for the continuation of the current activities and the achievement of the objectives. Should new investment opportunities present themselves that require a further increase in the credit facilities, then a constructive response can be expected from Cefetra s banks. Investment Cefetra expects investment to take place in 2011 to increase the handling and storage capacity in the Polish port of Gdynia. If other concrete opportunities present themselves, which can help to increase (logistical) added value, then investment might be made in acquisitions or joint ventures. Rotterdam, 17 March 2011 Personnel The number of employees will grow across the group in This is a logical consequence of the importance Cefetra places on qualitative growth. The success of Cefetra stands or falls with the quality of its employees. The current vacancy for the position of COO is expected to be filled in H. W. Stam, CEO R.M. van Gelderen, CFO