Fully committed to the new VIVESCIA dynamic

Review of the 2019/2020 financial year & outlook

What is your perspective on the past financial year?

Olivier Miaux – This financial year clearly demonstrates that VIVESCIA has genuinely made a new start. That fact is perfectly clear from all the strategic initiatives and transformation plans implemented within the Cooperative and across all VIVESCIA Industries’ businesses. And that is a very real source of satisfaction for us. But we can hardly discuss the past financial year without referring to its quite exceptional events, with the sudden emergence of a global pandemic, an unprecedented lockdown of three-quarters of the world’s population, and a brutal slowdown in the world economy, trade and tourism throughout the spring of 2020... This sequence of events has been an extremely testing experience for our employees. So I want to take this opportunity to thank all of them for the unwavering commitment and determination they have shown. They have succeeded in keeping themselves and their colleagues healthy, maintaining business continuity, and pressing ahead with implementation of our transformation and development projects. Those efforts have most definitely not been in vain. It is certainly true that the Group’s consolidated fi nancial statements have been heavily compromised by the health crisis, which has severely impacted the performance of our Malt and frozen bakery businesses. But the transformational changes made with great determination since summer 2019 have helped to protect the financial and economic health of VIVESCIA. They have put in place a solid foundation for recovery as soon as the health crisis is behind us, particularly in our processing businesses and consumer markets, and when the food service sector has returned to its normal vigour. In the meantime, we must remain patient.

More specifically, how was the year for the Cooperative and VIVESCIA Industries?

Jean-Luc Jonet – Despite the restrictions imposed by the health crisis, the Cooperative reported good financial results throughout the financial year, at the same time as delivering a satisfactory overall quality of service to farmers. It has met its budgetary targets, at the same time as proactively implementing its structural projects without missing a beat. The fact that the Logistics Performance Plan (LPP) is well underway is another cause for satisfaction. A great deal of interaction in the form of dialogue and educational initiatives has taken place between elected representatives, cooperative members and field teams throughout the Cooperative region. This is essential, because our transformation plan changes certain baselines. We are moving to a logistics system built around flows that have, in some cases, been redesigned, farm deliveries of inputs and more demand driven markets for grain. When we include our other operational excellence projects, we’ve already succeeded in cutting our operating costs by 4%. So I’d like to thank the teams for their commitment in helping us to achieve that.
I’d also highlight the effective way in which the processing of cooperative members’ grains has been optimised as a result of greater agility from our sales and logistics teams, despite the fact that the brewing, starch and ethanol markets were disrupted at the end of the campaign by the fallout of the health crisis.
The financial performance of the Cooperative’s agricultural subsidiaries Sepac-Compagri (trading company) and Compas-Minjard (agricultural supplies and packaging for winegrowers)
has been impacted by the decline in agriculture and the effects of the health crisis. SeVeal (input distribution) and VIVESCIA Transport successfully met their targets.

Olivier Miaux – For VIVESCIA Industries, it was very much a year of two halves. There was before Covid-19 and there was after! Until the end of February, the economic recovery was well underway, particularly in our frozen bakery business, which had been experiencing difficulties for some years. At the end of February 2020, operating profit (EBITDA) was up by nearly €20 million on the previous year, in line with budgeted targets and refl ecting the fi rst effects of the work done. This performance gave us a great deal of confidence about projecting how we would end the financial year. Without the health crisis, our EBITDA for the year would most certainly have risen by between 20% and 25%.
But the sudden emergence of the pandemic and the subsequent global lockdown brought this excellent financial trajectory to a very sudden halt. The closure of bars and restaurants and the suspension of tourism cut our fourth-quarter revenue by around €250 million compared with our projections, and resulted in an extremely significant reduction in the financial results of our frozen bakery and malt businesses, which are highly exposed to these food service markets. In fact, these two businesses together account for around 70% of total VIVESCIA Industries revenue. But I’d like to stress that despite this extremely disrupted trading environment, our other businesses – milling, maize processing, animal nutrition, biotechnologies and R&D – succeeded in delivering strong performances, thanks to all the hard work and agility of our teams.
It’s also important to remember that our transformation projects also powered ahead during the final quarter of the year. Serious as it is, the health crisis has shaken neither the commitment nor determination of our teams.

How are you managing the effects of the health crisis on the Group?

Olivier Miaux – The way that the VIVESCIA community has responded to this extraordinary crisis commands our total respect. Agriculture and agrifood were identifi ed as priority industries right at the start of lockdown, so we had a major role to play in terms of societal responsibility. The Cooperative teams worked very hard to support farmers so that they could continue to work in the fi elds. Our processing businesses that produce basic necessities, such as flour and bread, were also vital. In addition to our Group-level crisis unit, all our individual companies have also set up crisis units to monitor the effects of the pandemic in real time. The unfailing support of our governance bodies, President and Board of Administrators, the SICOM (limited partnership with share capital) and VIVESCIA Industries’ Supervisory Board has been invaluable. So despite the unstable situation, which was sometimes very worrying for our teams, we were able to ensure seamless continuity of all our business activities even at the height of the crisis during lockdown. We were able to do that because every time we encountered a problem, our teams successfully identified the right solution. Combined with their inventiveness in adapting and working in new ways, their expertise and commitment have been remarkable, and are undoubtedly a powerful asset for the future of the Group!

Jean-Luc Jonet – I don’t think there’s any doubt that these testing times have made us a much more cohesive Group. We have a lot of positives to take away from this experience. I’m thinking particularly of the day when the French President announced his decision to impose a national lockdown. In just two days, our field and support services teams adapted to the new situation by ensuring strict compliance with the personal protective measures introduced to protect themselves and our cooperative members, who have also adapted well to the new ways of working, and have successfully ensured the continuity of their own businesses under almost normal conditions. Farmers and employees have genuinely been working hand-in-hand in what is a shining example of cooperation and mutual solidarity.
And thanks to the support of our IT teams, our experimentation with large-scale teleworking has also been very successful. Feedback on all these new ways of working will provide valuable insights for the quality of life in the workplace agreements currently being negotiated in every Group company.

Olivier Miaux – I’d like to add at this point that the effects of the health and economic crises would have had a much more negative effect on our annual results if our teams hadn’t responded so promptly in March to implement all the cost saving measures needed to protect the fi nancial position of our companies. As a result, we’ve been able to cut our expenditure by around €20 million, and save as much again by postponing capital expenditure.

So, as the health crisis continues, how do you see the future outlook for the Group?

Olivier Miaux – For our processing businesses, the 18 to 24 month delay in implementing our medium-term business plan as a result of the health and economic crises in no way detracts from my absolute determination to work closely with the teams of VIVESCIA Industries to accelerate the rollout of the action plans introduced to boost our volumes and strengthen our innovation policies, at the same time as taking the operational efficiency of our businesses to a new level. The ongoing nature of the global pandemic also means that we must be extremely prudent in the way we manage our operations and investment commitments if we are to maintain healthy financial balances.
The crisis and the testing times we’re now living through are acting as a catalyst enabling us to work even more collectively, with real application and discipline. The courage, will and agility shown by our teams, who have worked and succeeded so brilliantly over recent months in helping to keep the agricultural and food chains on track, at the same time as keeping our companies healthy, will be the driving forces behind our post-crisis recovery!

Jean-Luc Jonet – This mindset focused on conquest and leading from the front is essential for facilitating the changes now underway in our companies. In an increasingly challenging agricultural environment with structurally lower incomes and a disappointing 2020 harvest for a large number of cooperative members, transforming the Cooperative has become a duty! We must press ahead with our current projects, as well as launching new initiatives to accelerate the momentum we’ve already created.
As well as launching the second year of our logistics transformation plan, another major challenge for 2020-2021 will be to work with our colleagues at VIVESCIA Industries and agrifood customers to improve our production processes. If we are to effectively address the issues of climate change, carbon and biodiversity, agronomic expertise will be more central than ever to our action plans. Lastly, 2021 will see us begin implementation of VIVESCIA Agriculture 2025. Finalised at the end of 2020 by the Board of Administrators and the management team, this roadmap is designed to take our transformation to a new level and chart the course of the Cooperative over the next five years in ways that will benefit cooperative members.

Olivier Miaux – It’s important to stress that the Group has the resources in place to emerge successfully from this unprecedented crisis. Having begun the process of putting together our €1.04 billion refi nancing package of 5-year syndicated bank loans for the Cooperative and VIVESCIA Industries in autumn 2019, we finalised the arrangements in July 2020. The financial resources are now in place to build our future and achieve our (re)conquest ambitions in a world gripped by economic upheaval, subject to the vagaries of the climate and the ever-increasing and varied expectations of consumers. We also have strength in depth, by which I mean the expertise of our people, our enhanced management team, a robust business model that seamlessly connects upstream and downstream operations with our grain value chain, the recognition by major food producers and industrial clients of the agricultural expertise and sustainable practices of our cooperative members, and the French and international status of our processing businesses.
Together with our Chairman, the Board of Administrators, Jean-Luc and the Group Executive Committee, we are resolved to make every decision necessary to ensure the future growth of VIVESCIA, enable the Cooperative to succeed in its challenges as we work our way through nothing less than an agricultural and climate revolution, and continue the process of putting VIVESCIA Industries back on a solid financial trajectory.