Nutreco will release its 3Q12 trading update pre-market on Thursday 18 October. No conference call has been planned. At the group level, we count on 12.5% sales growth in 3Q12 on the back of 1.2% volume growth, a 5.6% rise in prices, 3.0% from acquisitions and a positive currency effect of 2.8%. Group sales are expected to rise from € 1,314.2m in 3Q11 to € 1,478.8m (CSS € 1,446.4m) in 3Q12. The price of several raw materials including soya, cereals and fish meal rose sharply in 3Q12. In animal nutrition and fish feed, Nutreco passes on higher input prices while keeping its profit per tonne stable.
Premix and Feed Specialties:
Sales (KBCS € 324.5m and CSS € 321.3m) are expected to rise by 11.6% (volumes +2.5%, prices +6.0%, acquisition +3.1%) with growth geographies such as China and value added products underpinning volume growth.
Volume growth should slow down from 26.0% in 1Q12, 10.7% in 2Q12 to 5.0% in 3Q12 as comparables get tougher. We’ve pencilled in a 3% rise in Fish Feed prices on the back of higher fish meal and soya prices. Assuming external growth of 5.8% and a positive foreign exchange effect 5.0%, we arrive at 18.8% sales growth for Fish Feed. Sales should rise from € 518.0m to € 615.6m (CSS: € 596.0m). The strong rise in salmon production led to a sharp decline in salmon prices last year. This led to concerns about the profitability of the salmon farmers and fears that production might decline next year. Salmon prices appear to have stabilized in 3Q12. Kontali expects global Atlantic salmon production growth to slow down from +18% in 2012 to 3% in 2013.
We arrive at 5.0% sales growth for Compound Feed on the back of a 3% decline in volumes and an 8% rise in prices. Sales should reach € 156.8m (CSS 155.8m). Compound Feed continues to face tough macro-economic headwinds in Spain.
Animal Nutrition Canada:
We bank on 18.0% sales growth (volumes -1.0%, prices +10.0%, currency +9.0%). We estimate 3Q12 sales at € 137.7m (CSS € 132.5m). Lower swine feed demand and the shift from complete feed to farm minerals should continue to dampen volume growth.
Management expects REBITA to rise by 12% in FY12, implying 6% growth in 2H12 following the 24% increase in 1H12. We consider this guidance to be conservative. The stock trades at attractive valuation multiples when taking into account the earnings growth potential. The group aims to grow REBITA to € 400m in 2016 implying 11% CAGR. About half of the growth will come from acquisitions in Latin America, Russia, China and Southeast Asia. The recent acquisition of Gisis S.A., a shrimp feed producer in Ecuador isin line with the group’s Ambition 2016. We maintain our Accumulate rating.