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    1 ANNUALREPORT 2017/2018 ANNUAL REPORT


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    2 Report on the 99th financial year of Coöperatie AVEBE U.A. in Veendam, to be issued at the General Members’ Meeting on 13 December 2018.


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    3 ANNUALREPORT INTRODUCTION Binding & Building 2.0 In this annual report we render account for the The next step to more value results we have achieved during the past financial year. We believe that successful innovation of Avebe is a cooperative of some 2300 starch potato products and processes is vital to the cooperative’s growers in the Netherlands and Germany. Avebe is the continuity. We regard innovation not as a task but world market leader in the field of potato starch and as something that comes naturally to us. We’re potato protein and focuses on the production of high- constantly looking for ways of increasing returns quality food ingredients by using modern, innovative with fewer resources, growing more sustainably and techniques. developing new varieties with better properties. Avebe is an international company with a significant For 2023 we have a clear vision in mind. “We have impact and Avebe seeks to increase this impact in a positive influence on the life of more than 500 a positive way for employees, growers, customers, million consumers by promoting their health, society and the planet. We can count on a century wellbeing, prosperity and sustainable lifestyle. We of knowledge and experience in the area of potato are increasing our sales substantially by growing cultivation, production, research and development, in food ingredients and reducing our impact on the innovation and market insight. Together with our environment by 75 per cent. members and customers we turn this into value. Avebe refers to that as ‘Innovation by Nature’. Sustainability will occupy a more prominent place in the entire chain with greater transparency. We want to achieve optimum returns for our growers not just today, but also tomorrow and in the future beyond. That’s why we seek harmony between market orientation, a good income for our growers, a strong financial balance sheet, care for the environment and good employment practice.


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    4 CONTENTS INTRODUCTION 3 READING GUIDE 5 KEY FIGURES 7 REVIEW KEY FINANCIAL FIGURES 8 COMPANY PROFILE 10 MISSION, VISION AND GOALS 11 STRATEGY 11 BRANDS 11 REPORT OF THE SUPERVISORY BOARD 12 COMPOSITION OF THE BOARD OF DIRECTORS AND THE SUPERVISORY BOARD 14 COMPOSITION OF THE DISTRICT COUNCILS AND YOUTH COUNCIL 15 REPORT OF THE BOARD OF DIRECTORS 17 REVIEW OF THE FINANCIAL YEAR AND INVESTING IN THE FUTURE 20 INNOVATIONS 25 RISKS & UNCERTAINTIES 26 CSR & SUSTAINABILITY 29 FORECASTS OF THE BOARD OF DIRECTORS 33 FINANCIAL STATEMENTS 2017/2018 Consolidated balance sheet at 31 July 2018 36 Consolidated profit and loss account 38 Consolidated cash flow statement 39 Notes general 40 Notes to the consolidated balance sheet 48 Notes to the consolidated profit and loss account 53 Balance sheet at 31 July 2018 54 Profit and loss account 56 Notes to the balance sheet 57 Notes to the profit and loss account 62 Other information 63 Contact 66 Publisher’s details 67


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    5 ANNUALREPORT READING GUIDE Avebe publishes an annual report each year to inform Company principles its stakeholders about the financial results. This Avebe has a Corporate Governance Code which annual report covers financial year 2017/2018 and will contains, among other things, information about be presented for adoption to the Members Council at strategic starting points, business principles, the Members Council Meeting of 13 December 2018. sustainability, transparency, equality, labour and union relations, health, safety and the Structure environment and anti-corruption measures and This year we are once again publishing two other matters to do with integrity. A whistleblower documents in which we explain our annual figures. policy is also in effect. The annual report provides a detailed explanation of the financial results of the past financial year and Latest news the strategy to a more limited extent. The document The latest information about Avebe is made available is available in three languages: Dutch, German and on our website (www.avebe.com) and in social media. English. The online magazine is also available here (Dutch and More background information about the strategy English) as are downloads of the annual report and and developments at Avebe is given in our Avebe the Corporate Governance code. Follow us on Twitter Magazine. The financial results are also presented in via the account @Avebe_group and LinkedIn clearly summarised form so that the reader can see at (www.linkedin.com/company/avebe). a glance how we have performed. Guidelines The 2017/2018 annual report was drawn up in accordance with the statutory requirements for annual reporting of Article 391 of Book 2, Title 9 of the Dutch Civil Code. We also test our annual report against the transparency benchmark of the Ministry of Economic Affairs.


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    7 ANNUALREPORT KEY FIGURES 2017/2018 2016/2017 2015/2016 2014/2015 2013/2014 Consolidated unless otherwise indicated (in millions of euros where applicable) Gross turnover 613.9 588.2 584.6 559.6 579.9 Net turnover 576.6 551.3 548.6 521.1 540.7 Operating result 16.6 14.3 12.7 17.6 15.1 Interest expenses 7.4 7.0 7.0 7.2 7.6 Cooperative result after taxation 7.8 6.3 6.5 11.8 8.3 Depreciation 30.4 30.3 29.0 23.6 25.8 Investments fixed assets 55.0 45.1 30.5 45.3 24.8 Group equity 203.6 202.4 201.4 199.6 195.0 Loan capital including provisions 263.1 211.0 211.6 230.6 200.3 Balance sheet total 466.7 413.4 413.0 430.2 395.3 Group equity as a % of balance sheet total 43.6% 49.0% 48.8% 46.4% 49.3% Net cash flow before financing activities -40.4 11.6 25.3 -12.7 31.6 Net debt 148.5 102.5 108.7 127.3 108.8 Personnel expenses 1) 106.7 99.6 98.7 94.7 94.1 Average number of employees 1,326 1,311 1,306 1,314 1,311 Number of cooperative members 2,268 2,310 2,397 2,475 2,479 Number of shares issued 101,455 101,455 101,450 101,450 101,450 Performance price (EUR/ton) 2) 85.81 82.16 77.10 78.41 75.07 1) Including movements in personnel provisions. 2) The performance-related price comprises the payments for the delivered potatoes plus the net result divided by the tonnage delivered by members on shares. Calculated at a starch percentage of 19% (under water weight of 470 grams).


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    8 REVIEW KEY FINANCIAL FIGURES Positive cooperative result The other operating costs rose in the financial year from In financial year 2017/2018 AVEBE achieved a 94.0 million euros to 100.6 million euros. This increase performance price of 85.81 euros a ton of starch is mainly the result of higher costs for third party potatoes. The financial year was concluded with a services, costs directly related to production, storage and cooperative profit of 7.8 million euros. transport and IT costs. Performance price These developments resulted in the operating result Approximately 96 per cent of the performance price rising as a percentage of turnover from 2.6% to 2.9%. was paid out directly to the members; this was 97 per cent in the previous financial year. The performance Balance sheet price was 82.16 euros a ton. Through the proposed The balance sheet total rose in the year under review additional payment a further approx. 1.21 euro a ton of by 53.2 million euros to 466.7 million euros. This rise potatoes on fully-subscribed shares will be additionally was caused on balance by an increase in the fixed paid out, taking the pay-out ratio to around 98 per cent. assets, stocks and receivables and a slight fall in cash at bank and in hand. The rise in the balance sheet total Financing is reflected in a rise in debts to banks and an increase Avebe has concluded a financing agreement with its in the other debts. Equity capital at the end of financial house bankers. This agreement has a term of five years year 2017/2018 was 203.6 million euros compared to 202.4 and ends on 24 November 2021. million euros at year-end 2016/2017. This increase was Avebe has a line of credit of 225 million euros under this caused by the addition of the net result for 2017/2018 to contract. the other reserves following adjustment of the proposed profit appropriation and the repayment of some of the Result development related share premium. An explanation of this is given on Net turnover rose by about 25 million euros compared page 62 of this annual report. to 2016/2017. This rise can be attributed to a higher sold volume and a slight average increase in the sales Operating capital fell by 23.6 million euros to 141 million prices. There was a light fall in the direct sales costs euros. This increase - on balance - in the operating per ton. The costs of raw materials and consumables capital can be attributed mainly to higher stocks and rose in terms of costs per ton of sold product. This rise receivables and higher current liabilities. The interest- can be attributed to a higher payment for the potatoes bearing debts rose from 103.3 million euros in the received and a changed mix of sold products. previous financial year to 149.4 million at the end of this reporting year. The added value - operating income less raw materials and consumables - rose by approximately 14 million Cash flow euros compared to the previous year. In relation to net Gross operational cash flow in 2017/2018 was turnover, the added value rose slightly from 43.6 per approximately 42.1 million euros lower than in the cent to 44.1 per cent. previous financial year. This can be attributed mainly to an increase in stocks and receivables. Personnel expenses rose from 99.6 million euros in 2016/2017 to 106.7 million euros in 2017/2018. This rise The cash flow from investing activities was was caused by changes to the 2017/2018 collective approximately 9.9 million euros higher in the financial bargaining agreement and a change to the composition year than in the previous financial year, mainly as a of the staffing establishment and an addition to result of higher investments in the financial year. Net the staff facilities. The depreciation costs (incl. operational cash flow therefore fell on balance by 52.0 devaluations) fell by over 1.8 million euros in the year million euros. under review. This decrease is due to the lower write- down on fixed assets.


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    9 ANNUALREPORT 2017/2018 2016/2017 2015/2016 2014/2015 2013/2014 In millions of euros Net turnover 576.6 551.3 548.6 521.1 540.7 Added value 254.6 240.5 238.9 238.7 235.7 Fixed expenses (salaries, social security charges, 237.7 224.0 226.4 219.7 207.7 depreciation, other operating expenses) 1) Impairments 0.3 2.2 -0.2 1.3 12.9 Operating result 16.6 14.3 12.7 17.6 15.1 Cooperative result after taxation 7.8 6.3 6.5 11.8 8.3 Cash flow Net operational cash flow before -40.4 11.6 25.3 -12.7 31.6 financing activities Profit and loss account ratios (as a percentage of net turnover) Added value 44.1% 43.6% 43.5% 45.8% 43.6% Fixed expenses 41.2% 40.6% 41.3% 42.4% 40.8% Operating result 2.9% 2.6% 2.3% 3.4% 2.8% Balance sheet ratios Solvency 43.6% 49.0% 48.8% 46.4% 49.3% Debt/EBITDA 3.1 2.2 2.6 3.0 2.1 Operating capital Nominal 141 118 138 157 155 As a percentage of net turnover 24% 21% 25% 30% 29% 1) Increase due to more staff, increase in collective labour agreement, addition of provision of 1.5 million, other mix of employees


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    10 COMPANY PROFILE Nearly a hundred years old and still bursting MISSION, VISION AND GOALS with ambition Together with members and customers, Avebe seeks Avebe started out in 1919 as a ‘Potato Starch Sales to innovate to create a sustainable food system with Agency’, with the company arrange the sales for healthy, nutritious and environmentally friendly several independent cooperatives. Production ingredients based on potatoes. We thus place was also added half-way through the twentieth ourselves in the global food value chain and seek to century, and this was followed by new products: create a positive impact for customers, planet and starch derivatives. These are products in which society. Over the coming years we intend to process the potato starch is treated in such a way that it the same amount of potatoes, We are not setting can be used in a wide variety of end-applications. out to grow in volume, but in value. This responsible Avebe has since developed into a multinational growth is only possible through innovation. that delivers products based on starch potatoes: grown by some 2300 Dutch and German members. Our five ingredients for responsible growth: Potato starch remains an important pillar, but • Towards more value we also consider other valuable raw products • Growth in good nutrition that the potato offers us. Avebe supplies products • Market-oriented sustainable potato cultivation based on potato starch and potato protein for use • Reduce our ecological footprint in human food. We also sell applications for paper, • Cooperation for the customer construction, textiles, adhesives and animal feed. This means that we are active throughout the whole supply chain. From the development of new potato STRATEGY types at our cultivation company Averis Seeds B.V., to the trading of our end products via our worldwide With our ingredients, we have a positive influence sales offices. on the life of more than 500 million consumers by In the financial year 2017/2018, the board of Avebe promoting their health, wellbeing, prosperity and consisted of chairman Mr B.C. Jansen and board sustainable lifestyle. We are increasing our sales member Mr R.P.F. van Laerhoven. The company by growing in food ingredients and reducing our further consists of the line departments Commerce impact on the environment. We plan to produce and Operations and the staff departments Human more products with a higher added value. We Resources, Finance, Agro, Corporate & Legal Affairs achieve that by striving for the best solution for all and Innovations. The Supervisory Board oversees the our stakeholders - our growers, our clients and our management and policy of the cooperative and its employees; we call that ‘shared value’. subsidiaries. The Supervisory Board’s responsibilities include the appointment and remuneration of board members and the adoption of the budget. Through BOARD OF DIRECTORS the Members’ Council, the members have control over important issues. They have right of say on the appointment of members of the Supervisory Board, the adoption of the financial statements and other STAFF DEPARTMENTS AVEBE AGRO decisions on subjects laid down in the articles of association. They also take part in discussions on changes to the company. The Members’ Council is composed of members elected by district. AVEBE COMMERCE AVEBE OPERATIONS


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    11 ANNUALREPORT Growth in healthy food Cooperation for the customer Avebe is growing mainly as a supplier to the food Creating value for our customers is always the industry. We do this in markets where the added value starting point and we steer by results. is greater. Our healthy, nutritious, environmentally friendly vegetable ingredients add value, for example Avebe employees put the customer at the heart as alternatives to dairy or meat. of everything they do. A shared performance is paramount in our working method. We achieve this Market-oriented sustainable potato cultivation with healthy and vital employees who all work in an Our raw material, the starch potato, is cultivated unambiguous way. Our processes are completely in by our own members. It provides us with a unique sync and we all pursue the same aims and objectives. position we aim to build on. Our attention is focused on a high-quality raw material that is produced sustainably and transparently. BRANDS Reducing our ecological footprint Avebe produces solutions based on potato starch and We are reducing our ecological footprint in the areas: protein for human food, industry and animal feed. CO2 energy and water. Our growth is responsible, We have various brands for this purpose, including based on clean production and responsible business Eliane™, Etenia™, Solanic®, Casucol™, Solvitose™ operations. and Protamylasse™. A complete overview of all of our brands is given at our website www.avebe.nl/ producten.


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    12 REPORT OF THE SUPERVISORY BOARD The financial year 2017/2018 is characterised by an abundant supply of raw materials. In addition to the average good yield from most members, the price of potatoes in neighbouring markets was low due to a good harvest in Europe. This made it possible for Avebe to achieve a performance price of 85.81 euros per ton. Another increase compared to the price of the previous financial year. This result is based on excellent sales results and Personnel changes and committees meticulous cost management in day-to-day operations.. Following the death of Mr H.L. van Roozendaal in The combination of a good starch yield and a high September 2017, Mr F. Schepers was appointed as payout price ensures an attractive financial return for temporary advisor to the Supervisory Board. our members. At the Annual General Meeting in December 2017, Mr P. Poortinga was due to step down and eligible for re- During the past financial year, a great deal of attention election. He was reappointed for a term of four years. was devoted to creating a new strategy. The Supervisory During the financial year, the Board decided to look Board has repeatedly exchanged ideas with the Board for two new Supervisory Directors. The search was for of Directors about the desired course towards the a candidate with a background in process technology future. The ‘Binding and building 2.0’ strategy builds to and a candidate with a strong financial profile. At the a considerable extent on the strategy of recent years. members’ meeting of July 2018, this resulted in the In the new strategy, the concepts of performance price, appointment of Messrs D. Kloosterboer and R. Smith. cooperative, starch potato and customer together At this meeting Mr. F. Schepers stepped down as occupy a prominent position. In addition, social issues advisor. We are very grateful to Mr. F. Schepers for his relating to good nutrition, climate and the environment, availability as an advisor and for his great dedication among other things, are emphatically more central. The during the consultancy period. Supervisory Board regards this is a realistic and positive development. At the end of the 2018 financial year, the Supervisory Board consists of ten members, six of whom are A further expansion of the production capacity of members of the cooperative. The size of ten members is high-grade proteins was realised in the financial year. temporary. At the Annual General Meeting in December These proteins are essential for a structural increase 2018, Mr J.W. Hoekman will step down. He is not eligible in the future performance price. The expansion was for re-election. No new member of the Board will be under relatively great pressure of time to ensure that appointed. The Board intends to appoint Ms M. Folkers- the new production line was to produce in the 2017/2018 in ‘t Hout as Chairman. campaign. The resilience and commitment of our employees and the availability of starch potatoes until The Supervisory Board has three committees. They late in the spring ensured that this could be achieved. are the audit committee, the selection, remuneration and appointments committee and the appeals Based on the experiences of the last few years with large, committee. During the past financial year 2017/2018, the complex investment projects, the Board of Directors composition was as follows: decided to re-examine the organisation and structure of Audit committee: K.A. de Graaf (chairman), H.W. Giere, such large projects. Based on the findings, a number of P. Poortinga, M. Folkers- in ’t Hout (until November 2017) adjustments have now been made that will improve the and J. Emmens (from November 2017). quality of project management. In contrast to the previous financial year, the harvest Selection, remuneration and appointments committee: of starch potatoes in the current financial year J.W. Hoekman (chairman), H.L. van Rozendaal (until 2018/2019 appears to be very poor. In Germany and 29 September 2017), M. Veenendaal, F. Schepers the Netherlands, a prolonged drought caused many (from October 2017), J. Emmens (until November 2017) harvests to die prematurely. Although the total and M. Folkers-in ’t Hout (from November 2017). consequences of the drought are not yet foreseeable, the Supervisory Board is aware of the fact that for many Appeals Committee: K.A. de Graaf (chairman), members the poor harvest will have painful financial J. Emmens, H.W. Giere, H.L. van Rozendaal (until consequences. 29 September 2017) and M. Möllering.


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    13 ANNUALREPORT During the meeting of the Supervisory Board of The selection, remuneration and appointments 28 August 2018, Mr D. Kloosterboer was appointed vice- committee spent a lot of time during the past chairman, and also to the appeals committee and the financial year on the recruitment of two new selection, remuneration and appointments committee. supervisory directors. The committee also met four Mr R. Smith was appointed to the Audit Committee and times in a formal setting. the Appeals Committee at this meeting. Mr H.W. Giere has The appeals committee considered two cases this left the audit committee and has been appointed to the year: one from the NL/WE growing area and one from selection, remuneration and appointments committee. the KPW area. Training/evaluation Financial statements The Supervisory Board attaches great importance to The Supervisory Board confirms that it has good quality assurance. To this end, supervisory directors comprehensively discussed the financial statements, follow training courses and periodic self-evaluation takes including their assumptions, notes and presentations, place. Mr. J. Emmens and Mr. H.W Giere have followed with the Board of Directors and that it is in the course of the Director’s Training Path of Nice during agreement with the position taken by the Board of the past year. Mrs. M. Folkers-in ‘t Hout is following the Directors. programme for supervisory directors and supervisors of Erasmus University. The Supervisory Board confirms that in view of the Halfway through the year the board had a meeting at audit report, it approves the financial statements. The which she evaluated her own performance under the auditor has issued an unqualified audit report dated 1 guidance of an external expert. November 2018. The Supervisory Board approves the profit The Supervisory Board considers it important that new appropriation as proposed by the Board of Directors members of the Supervisory Board can quickly gain a and proposes to the Members’ Council: clear image of Avebe. That is why they are offered an - that the financial statements for 2017/2018 be intensive familiarisation programme. adopted accordingly; In order to ensure a smooth transfer of the chairmanship, - that the Board’s proposal concerning the Mrs M. Folkers-in ‘t Hout and the current chairman have appropriation of profits be approved; worked closely together over the past year. - that the Board be discharged for the policy it has conducted. Activities Six regular meetings were held with the Board of Directors The Supervisory Board also requests that the during the financial year. During these meetings many Members Council grants discharge for the different aspects concerning Avebe were discussed. These supervision conducted. include commercial policy, matters relating to operational management, investment and innovation projects, To conclude personnel policy, financial affairs, budget, sustainability On behalf of the Supervisory Board I would like to and energy efficiency, many agro-related subjects and thank the Board of Directors, the management team, various subjects relating to corporate governance our employees and all of our members for the efforts In the context of the development of the new strategy during the past financial year. Board of Directors and Supervisory Board met twice in the past financial year. The Supervisory Board and the Board In addition, I would like to thank everyone personally. of Directors meet informally once a year to exchange ideas Thank you for the confidence you have placed in me with the Youth Council. during the period of more than twenty-five years that I was able to be make my contribution to the A delegation of the board (M. Veenendaal, J.W. Hoekman) cooperative. An exciting and fascinating period in twice attended a consultation meeting with the company what is almost 100 years of Avebe. works council. Veendam, 1 November 2018 The Audit committee met three times during the financial For the Supervisory Board year. The external auditor attended part of all of the meetings. J.W. Hoekman


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    14 COMPOSITION OF THE BOARD OF DIRECTORS AND THE SUPERVISORY BOARD BOARD OF DIRECTORS B.C. Jansen (59) Chairman and CEO appointed on 1 September 2008 Focus areas: Operations, Commerce, Agro, Innovations, HR, Communication R.P.F. van Laerhoven (51) CFO appointed on 1 August 2017 Focus areas: Finance, ICT, Corporate & Legal Affairs, Energy Efficiency, Auditing SUPERVISORY BOARD J.W. Hoekman H.W. Giere H.L. van Rozendaal J. Emmens Chairman vice-chairman vice-chairman 1 Ms M. Folkers-in ‘t Hout K.A. de Graaf D. Kloosterboer 2 M. Möllering P. Poortinga R.P. Smith 2 Ms M. Veenendaal F. Schepers3 J.P. Russchen adviser secretary 1 to 29 September 2017 2 effective 5 July 2018 3 stepped down on 5 July 2018


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    15 ANNUALREPORT COMPOSITION DISTRICT- COUNCILS AND YOUTH COUNCIL DISTRICT COUNCIL NORTH G.J. Laarman, chairman EAST CENTRAL S. Wieringa, vice-chairman K. Bakker, chairman J.R. Oosting, chairman D.D. Bouwman L. Tammes, vice-chairman R.H. Roosjen, vice-chairman H.J. Hoiting 2 H.G. Begeman 2 A. de Boer A.H. Houwing D.P.J.R. Beuling J.A. Daling C. Kamphuis P. Boonman H. van der Horst A. Prins 1 J. Deuring H. Houwing H. van Rhee J.A. Hilvering 1 R.H. Kunst Ms J. Smant 3 H.W. Kaiser R. Otten S.P. Spanninga J.R. Kunst H.J. Prins H.J. Takens ² H. Migchels B.F.J.M. van der Sterren F. Wigchering 1 A.G. de Vries SOUTH KPW H.G. Herbert, chairman C.H. Schulze, chairman 1 WESER-EMS J.H. Kersten, vice-chairman D. Möller, vice-chairman/chairman 4 R. Bruns, chairman P.J. Evenhuis F. Schröder, vice-chairman 5 B. Specken, vice-chairman M.J.H. Koopman C. Basedau K.H. Hoesen 1 R. Kuper 2 H. Dammann C. Kaiser J.H.P. Lubberman 1 M. Dralle J. Kruse 2 W.H. Meijerink O. Glühe G. Lehmkuhl 2 D.J. Meinen H.G. Harms 2 C. Möller B. Michel B. Kaufman 2 A. Röttger A.J. van Roekel H. Saucke H. Schulte 1 D. Woestenenk S. Schwedt 1 stepped down on 9 December 2017 2 effective 9 December 2017 3 effective 27 November 2017 4 chairman effective 9 December 2017 5 vice-chairman effective 9 December 2017 YOUTH COUNCIL NORTH EAST CENTRAL H. Kammer, chairman B. Schuitema R. Buiter Ms A. Groenwold R. Speelman J. Kunst 3 S. de Haan 1 G.H. Sterenborg 2 M. Wolf A. Vegter 2 H. Wollerich 1 SOUTH KPW WESER-EMS E. Bakker M. Hennings M. Krüssel J. Klumpers 2 J. Keil G. Reinders 1 S. Riemer J. Siebring 1 stepped down on 9 December 2017 2 effective 9 December 2017 3 effective January 2018


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    16 Our decision to concentrate more and more on food has been confirmed as being the right one. Good development in food derivatives


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    17 ANNUALREPORT REPORT OF THE BOARD OF DIRECTORS In financial year 2017/2018 Avebe achieved a performance price of 85.81 euros a ton. This is another record in our history. It represents a rise of over 4 % compared to the year preceding this one (82.16 euros a ton). The year was concluded with a cooperative profit of 7.8 million euros. The result was mainly supported by good market We also invested in the replacement and developments, a good production result and cost improvement of existing production resources and control. The campaign price was set at 67 euros, 2 in the sustainability of our operation, including by euros more than in the previous year. investing in increasing the production capacity of Etenia™. 2017 harvest The various investments at the Gasselternijveen site There was a slight increase in the area available for have demanded a great deal from management and the cultivation of starch potatoes for Avebe. This employees. Thanks to their efforts, all this has been growth took place mainly in Germany. successful. The harvest was abundant and the prices in adjacent potato markets were particularly low. Strategy The campaign was exceptionally long. In The original target, as formulated in 2013, was Gasselternijveen, potatoes were processed for nine a plus on wheat per hectare of 500 euros in the months. Despite the warm weather at the end of the balance; we achieved in the past year a plus of more campaign, the potatoes were of good quality. The than 1600 euros over wheat. Later, our longer term starch content was lower than in the previous year. target was revised and set at a performance price of The combination of the potato volume and the starch 90 euros per ton under normal harvest conditions. content meant that the year was one of the best years The rise in the performance price in the past year in terms of starch yield. has brought this goal within reach. During the financial year, we continued to work on Market the implementation of our ‘Binding and Building’ The market was hesitant during the first half of the strategy. year. Market demand increased sharply in the last Good progress was made in further reducing quarter. Food derivatives developed well. Our decision customer complaints; we are approaching our goal to concentrate more and more on food has been of achieving 75 percent fewer complaints compared confirmed as being the right one. to 2013. The constant emphasis on quality and the Sales of Solanic® proteins went hand in hand with avoidance of complaints is paying off, also in the further capacity expansions at attractive prices. The production result. investments in the production facilities are high, but are worthwhile given the interest of our customers. The turnover of products with higher added value The trends in the food market, particularly in the rose, both in starch and protein and blends of both United States, fit in well with the properties of our ingredients. food protein. The further shift to food ingredients fits in with our longer-term plan, as we see more innovation Investments opportunities in this market. Total investments amounted to approximately 55 There were many activities to improve the vitality of million, 10 million more than in the previous year. This our employees, and sick leave was 4.5 percent, which increase is mainly due to the further expansion of the is a satisfactory level. production capacity for Solanic® proteins.


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    18 We were not satisfied with regard to energy; the In summary, it was a year with a good harvest and long campaign combined with the start-up of a a rising performance price. new production line and the distribution of the raw Although we have not yet been able to achieve all material across the factories was not optimal. We the goals in the strategy, good progress has been learned from this. made in a general sense. The safety index was similar to that of the previous We believe that our members’ clear focus on year; we are not far from the target, but the final steps starch potatoes, coupled with innovation, has are taking a lot of effort. It takes a lot of discipline to taken and will take us further. maintain a sharp focus all the time, but that is what it takes to be among the best in the industry. It is gratifying to note that, despite our drive for innovation, we keep fixed costs well under control. The strategy was reviewed and adjusted during the financial year. The big picture remains relevant. However, sharper choices are being made with regard to the concentration on innovation in combination with our long-term sustainability goals.


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    19 ANNUALREPORT REVIEW OF THE FINANCIAL YEAR & INVESTING IN THE FUTURE


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    20 REVIEW OF FINANCIAL YEAR & INVESTING IN THE FUTURE Agro department The 2017 harvest was characterised by above-average yields and ample availability of potatoes. Regionally, there were a few specific circumstances that influenced the harvest. For example, part of the growing region in Germany had to contend with flooding in the spring. In the Netherlands fields and parts of fields were not harvested owing to excessive rainfall. The quality of the raw product was good. Problems with storage of starch potatoes have been kept to a minimum. A good operating result calls for a high starch yield per hectare. Avebe’s ‘Optimeel’ cultivation optimisation programme aims to increase the yield of starch potato cultivation and to strengthen the value chain. This is achieved by gaining a clear understanding of the crop, comparing the members’ results, sharing knowledge and applying ‘best practices’. The programme consists of four parts: demonstration fields, crop registration, study groups and the introduction of new starch potato varieties. We use the demonstration fields to compare and show the effects of cultivation measures in practice. Cultivation activities are compared with each other by means of crop records. Knowledge is also exchanged between members of the study groups. Cultivation information and knowledge are gathered on the introduction of new starch potato varieties. Cultivation advice is formulated on this basis. This allows maximum benefit to be derived from the characteristics of the variety. The results show that Optimeel participants achieve higher returns than non-participants. The crop optimisation programme is offered to members both in the Netherlands and in Germany. An important part of Optimeel is the registration of the crop. This gives the grower more insight and ways of making improvements, and supports Avebe with the sale of our products in cases where transparency and traceability play an increasingly important role. A higher yield per hectare generally has a favourable effect on the income of our members and the continuity of the crop and raw product supply. It works both ways. A higher yield per hectare is also good for the environment. After all, using the same resources will achieve more, thus reducing the CO2 footprint per ton of potatoes. Optimeel is therefore also an important instrument in making potato cultivation more sustainable. The CO2 footprint per ton of starch will be reduced this way by 10 percent in the coming years. One way of doing this is to reduce usage and increase the effectiveness of additives such as chemical crop protection agents and fertilisers. Our subsidiary Averis Seeds B.V. concentrates intensively on the development and breeding of new starch varieties with resistance against various potato diseases. The number of Averis varieties with improved Phytophthora resistance will increase significantly in the coming years. These new varieties can do with less Phytophthora spraying, which also makes a relevant contribution to making the crop more sustainable. Commerce Department Last year we saw the global market for food ingredients grow by 2 to 3 percent. Larger consumer groups are showing an increasing preference for all-vegetable food products. Arguments about health, animal friendliness and ecological considerations play a role in this. We have seen this segment grow in the past year in North America and Europe in particular. ‘Millennials’ make conscious choices for healthy eating with a smaller ecological footprint, for example. In this context, we are also increasingly hearing that ‘the climate on your plate’ will play a role in the eating patterns of flexitarians. In addition to the market for food ingredients, a large part of Avebe’s sales volume still goes to the European paper market. Here we are seeing a decline of around 1 percent per year due to falling paper consumption.


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    21 ANNUALREPORT In the past year we have responded to developments in the food segments with our innovative approach. This enables us to offer customers distinctive ‘plant-based solutions’ based on potato starch and protein. These include replacements for animal products such as dairy and meat, but also complete vegetable sweets. Another development we see in the food sector is the need for allergen-free food. Here too, Avebe has an important advantage with potato starch and protein compared to a number of other food ingredients, which often come from raw materials with allergenic properties. Consumers are consuming more and more consciously. We also see a trend when it comes to a growing need for ‘clean label’ products. Consumers want a comprehensible list of ingredients on their food products. A list that is also ‘clean’ and free of E-numbers, for instance. Avebe focuses on this in its product development. Avebe’s mainstream business remains focused on serving more traditional food sectors such as bakery, dairy, meat, snacks and soups. In addition, we focus on promoting developments aimed at texture applications, healthier and cleaner products. Over the past year, we have further strengthened our global sales presence. We focus on providing our customers with know-how about the use of our products. This enables us to establish strong and lasting relationships with customers in the markets in which we operate. Our direct presence offers opportunities to respond to regional markets and translate the latest trends into market opportunities. Operations department Our members’ potatoes find their way to our production facilities in the Netherlands (Gasselternijveen and Ter Apelkanaal) and Germany (Lüchow and Dallmin). This is where we extract the starch and protein from the potato for processing in food, animal feed and industrial applications. The good harvest meant that the processing of potatoes could continue for longer. The Ter Apelkanaal location has processed the largest volume of the harvest. At the Gasselternijveen location, a great deal of time and energy was invested in the preparations and the start of the new protein production line. As a result, this location had a longer production period and potatoes were processed until mid-May. Germany was also characterised by a long campaign in which the harvest could be processed. We will continue to optimise the new protein production line, especially in the area of sustainability. We are looking to drastically reduce the consumption of water and chemicals, the flow to the wastewater treatment plant and the amount of energy, while at the same time increasing protein production. We do this in close cooperation with the Innovations department. This financial year we again received fewer complaints from customers. Our goal is of course to deliver the right product at once, which we call ‘first time right’. Most of the ‘not first time right’ is reprocessed (rework) to ultimately limit losses as much as possible. Last financial year we performed less well in terms of ‘first time right’. But we score well when it comes to rework. We are seeing an increase in sickness absence, which is why we are focusing on themes such as vitality and sustainable employability. When it comes to health and safety, we also see that we can improve further. Operational excellence is a spearhead. The programme ‘World Class Operations Management’ (WCOM) is the method we are using to achieve this. At the Ter Apelkanaal and Foxhol sites, the WCOM programme has been launched and multidisciplinary improvement teams are working on reducing losses and improving output. These teams will work for a period of twelve weeks (in a ‘wave’) to improve a certain aspect of the production process. WCOM will also be rolled out in the coming years at the other production sites of Avebe.


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    22 At present, everything is focused on controlling the impact of the disappointing harvest due to this year’s uniquely dry summer with high temperatures. This means, among other things, that we cannot make optimal use of the production lines during the campaign. The campaign in Ter Apelkanaal and in the factories in Lüchow and Dallmin will be shorter. This will have a major impact on the results and the organisation within Operations. We have a clear strategy with clear operational objectives. The emphasis is on multidisciplinary cooperation and we critically consider our product portfolio. We consider which products to develop further, but also which products can be removed from the portfolio in a responsible manner. The challenging conditions of the 2018 harvest may act as a catalyst in this respect. Human Resource Management department Avebe is developing rapidly and is working on its future. One of the ways we do this is by continuing to work on a vital, learning, performing and sustainable organisation. The Human Resources Management (HRM) department contributes to this by creating conditions that encourage managers and employees to take control of their own careers. HRM thus contributes to the realisation of the Avebe strategy and the personal goals of our employees derived from it. We are working towards a future-proof collective labour agreement. To this end, a benchmark was carried out last year and employees were informed of the results. We are also in discussion with our employees about how to shape the collective labour agreement differently. Avebe has to deal with four generations of employees at the moment. The current collective labour agreement is a ‘one size fits all’, while we know that young people have different needs than someone who has the end of their career in sight. The changes in the collective labour agreement must support Avebe’s strategy. New technologies, for example, will require different skills and knowledge in the future. Other jobs will be created. This calls for employees who are stimulated and willing to continue to learn and develop. This is how we are and remain sustainably employable. A logical next step is therefore to bring our annual interview cycle of setting objectives, interim evaluation and assessment, more into line with these developments. In this interview cycle the emphasis will be more on clearly formulated objectives, career direction and ongoing development. The core of HRM within Avebe is and remains our HR Services division. The staff there are HRM’s first point of contact and offer us a solid basis on which we can confidently contribute to the realisation of Avebe’s strategy. HRM is the management’s business partner. Together, we ensure that Avebe’s objectives are achieved with optimal employee commitment.


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    23 ANNUALREPORT


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    24 Avebe succeeded in performing in a stable manner in INNOVATIONS an agricultural setting in which many crop prices were under pressure. The cultivation conditions resulted in lower payments on the performance components (starch content, quality, etc.), which made it even more important for us to make a good contribution to our members' income by means of a higher campaign price. 2015 harvest The 2015 harvest was notable for the highly variable conditions. The campaign got off to a difficult start owing to the poor weather conditions. During the campaign there were problems with the power supply at various points, caused by the formation of ice on the power lines which resulted in power cuts. The ultimate result was an average quantity of available potato starch. Compared to the pivotal crop wheat the competitive strength of starch potatoes once again increased. The balance of starch potatoes is almost 1000 euros higher per hectare than wheat. Market Avebe’s innovative strength reaches The reduced availability of potato starch in Europe led to higher market prices, especially for native beyond product innovation alone. starch. The market for protein also developed well. We are seeing that the demand for vegetable protein is We are working on new developments gaining from the growing demand for foods that are gluten-free, halal and/or kosher and do not contain any even regarding matters to do with animal ingredients. The price of the dollar remained favourable, although the effect declined somewhat sustainability. during the course of the financial year. Following the end of the partnership with Ingredion new sales offices were opened in North America and Dubai in order improve the sales support in these regions. Investments


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    25 ANNUALREPORT INNOVATIONS Innovation is one of the strategic pillars of our Binding & Building strategy. We aim to add maximum value to the potato. The new Avebe Innovation Centre was opened In our strategy we focus not only on the world outside, just before the summer of 2018. The Innovations but we also ensure a clear internal course. department is one of the departments housed here. In this way, the Commerce, Operations and The Innovation Centre is an important impulse for Innovations departments effectively coordinate their our innovative strength. objectives. That starts with laying out the building. The design These strategic objectives revolve around of the Innovation Centre invites cooperation and potato protein and starch in particular. Our innovative meeting. strength is focused on healthy food, with particular This creates a natural way of cooperation and attention being paid to high nutritional value. For interaction. Creating new ideas will be easier, we example, for groups that have difficulty eating healthy can serve our customers more effectively and new food because of physical limitations, but also for innovations can be introduced to the market more sportsmen and sportswomen or people who need quickly. The Innovation Centre also encourages the extra nutrients. This also fits in with the general trend strengthening of partnerships. Space has been set towards healthier eating. aside for start-ups in the Innovation Centre. These start-ups can rent a space for a short or longer Avebe’s innovative strength reaches beyond period to further develop their own initiatives. Our product innovation alone. We are working on new commitment and expectation is that this cooperation developments even regarding matters to do with will also give an impulse to innovation. sustainability. This is how we look at what we can improve in our own operational processes. Moreover, When it comes to product development, it’s all about we are able to make a difference to the chain in which growing in good food. we operate by adding sustainable elements to it. For The growing world population and prosperity mean example on land together with our members. that the demand for food is increasing. At the same In 2018, we won not only phase 1 but also phase 2 time, there will be more focus on health. Themes of the New Food Challenge, an award of the that fit in with this are high nutritional value, anti- Ministry of Agriculture, Nature and Food safety. In allergenic and completely vegetable-based. 2017, we won phase 1, which was a feasibility study into the development of Texturized Potato Protein (TPP). The protein and starch from Avebe perfectly matches We then showed the further elaboration in phase 2. We this profile. Our healthy, nutritious, environmentally also won that phase. With the money we won in 2018, friendly and vegetable ingredients add value and are a multidisciplinary team will take the development of used as an alternative to products of animal origin, Texturized Potato Protein to the next level. TPP can such as dairy and meat. be used as a meat substitute. Our long-term goal is to develop a healthy vegetable-based meat substitute that our customers can use and that finds its way to the consumer.


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    26 RISKS & UNCERTAINTIES Pursuing our strategy involves certain risks. For this reason, risk management is an integral and explicit part of Avebe’s business operations. We therefore use a well-defined process with various standardised methods to identify strategic, tactical, operational and compliance risks in a timely manner, to analyse them thoroughly and to manage them effectively. Gaining an insight into these risks makes it possible for Avebe to make well-considered choices about which risks it is willing to take, which must be organisationally managed and which are financially covered wherever possible. This section sets out the main risks and the accompanying control measures identified in the risk management process. This selection was made on the basis of estimates of the probability that the risk will manifest itself and the possible impact if it does. STRATEGIC RISKS Risk Cause and consequences Measures Failure to achieve • Less supply of starch potatoes • Drawing up a management plan based on strategic objectives (70-80 percent of expected volume) due to scenario analyses (such as extreme drought) weather influences (failure of harvest due to • Increasing the physical yield per hectare/ drought during the growing period or extreme growing optimisation rainfall during the harvest) • Customer focus and steering at customer • Insufficient or untimely connection to market/ satisfaction level products • Market-drive approach to innovations • Insufficient investment in sustainability and • Monitoring of key objectives and derived (joint/ innovation cross-functional) objectives This could lead to the failure to (timely) achieve one of the strategic objectives, reputation damage, loss of turnover, customers, members, suppliers and employees. TACTICAL RISKS Risk Cause and consequences Measures Growth in the number • Staff sickness, effect of aging employees • Interventions by company social work of staff who are not • Changing (work) conditions (process, • PME (Periodic Medical Examination) (sufficiently) able to work organisational, technological) • TTC (Time Task Competence; methodology for Avebe • Insufficient concretisation of the performance to clarify the underlying cause of absence- objectives performance-cause) • Assessment interviews not held on time • Setting up strategic staff planning and using it • Insufficient reporting possibilities on as a control tool competencies and training requirements • Implementation of LMS (Learning Management System; digital learning platform) • Monitoring status of interview cycles • Extension of Talent Management programme This can lead to lower productivity, an increase in production errors and limited insight into educational requirements and wishes, inappropriate need for training and education employee versus organisation and ultimately incorrect strategic formation planning.


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    27 ANNUALREPORT Risk Causes and consequences Measures Failure of data centre/IT • Disaster at data centre location (power failure, • Fire extinguishing facilities systems explosion, flood) • Backup power supply • Power supply at data centre is cut off due to • Redundancy in data centre technical or process causes • Data centre maintenance • Backups of office data in a location other than This can lead to the full or partial failure of a data centre operational production, networks at office locations • Disaster Recovery Plan and network connections to foreign locations. Cyber security risk • Theft of critical data • Strengthening firewalls • Hacked system • Raising staff awareness of risks • Check for abnormal behaviour • External security controls OPERATIONAL RISKS Risk Causes and consequences Measures Personal safety • Open production processes: e.g. maintenance/ • Company emergency service organised per cleaning of washing drums and vacuum dryers location • Risk assessment is not up-to-date which creates • Avebe has installed safety zoning at the possible causes for injuries production sites and introduced procedures for • Changes procedure is not always (correctly) PPE and periodic safety rounds. implemented • Safety instructions to contractors and suppliers • Risk culture with regard to hazardous chemicals • Reporting and monitoring unsafe situations in and machinery is low Primecase • HAZOP studies for most critical machinery and This can lead to personal accidents, sanctions by explosion safety documents the Labour Inspectorate (and related reputational • Safety awareness programme damage), business interruption or (civil) lawsuits. • Staff presence analysis at the sites Contamination of products • Insufficient food safety in the production of our • Avebe is AEO and FSSC (food safety) certified (in production process or products (testing through external and internal audits) storage) • Limited security of external silos can allow • Investments in guaranteeing food safety. criminals to access external silos. • A ‘food fraud’ risk assessment has recently • Terrorists or criminals contaminate or poison been carried out. our products (‘food fraud’) Contamination can lead to the loss of Various standard procedures (such as recall full value of Avebe product, reputation damage and procedures, complaints procedures) have been in the worst case scenario that contaminated Avebe set up product is used in food products. COMPLIANCE RISKS Risk Causes and consequences Measures Avebe works with foreign • In countries without their own sales • renewal of contracts including ‘right to audit’ agents organisation, Avebe uses foreign agents. This • commission in accordance with the activities can lead to higher risks of corruption as the carried out by the agent agent's activities fall outside the direct (internal) • imposing the Avebe anti-corruption policy on management environment of Avebe. agents; • conducting background investigations into agents;


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    28 Risk Causes and consequences Measures Fraud and corruption • Theft of resources and knowledge from the • Sharing all codes with employees (Corporate organisation (e.g. tools, buyers, patents, Governance - Code, Whistleblower Procedure, information in relation to products under Internal Code of Conduct and Competition development) Handbook) • Reporting fraud • Workshops for employees who represent the • Fraud relating to products within the food company externally industry (‘food fraud’). • Appointment of an IT Security Officer • Division of tasks between management and decision-making positions Non-compliance with laws • ATEX (dust explosion): • Cleaning procedures and regulations - backlog of required ATEX-adaptations • Safety inspection rounds - no ATEX-based design/materials/tools for • Increase Atex awareness through training and changes/maintenance specific internal audits • Major Accidents Risk Decree: failure to meet the • Maintenance and changes in the production requirements set out in the Decree process aimed at reducing dust formation This can lead to (temporary) loss of the user license at the production sites. Changing legislation and The potato waste stream that Avebe provides to • Bringing all critical problems to the attention of regulations farmers to use as manure for their land no longer the authorities in a timely manner and agreeing meets the permit requirements. with them on the permit conditions over time. • Agro account management will, in cooperation with the farmers, draw up an optimal planning for the potato waste stream (supply/delivery). This will increase the costs for processing and, in extreme cases, may result in loss of the user license. FINANCIAL RISKS Risk Causes and consequences Measures Financial risks* Avebe faces a variety of financial risks, such as • Use of forward exchange contracts and currency, interest and credit risks arising from currency call options to hedge the company's normal business operations. risks involving the buying and selling of foreign currency. Use of financial instruments that extend the interest instalment on short-term debts • Taking out credit insurance to reduce the credit risk on sales • Intensive monitoring of the requirements of the bank agreement related to external financing *See also page 46 ff. of this report for a detailed explanation of the financial risks.


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    29 ANNUALREPORT CSR & SUSTAINABILITY Sustainability occupies a central position in Avebe’s Binding & Building strategy. Sustainably binding means connecting people, planet and profit together and entering into sustainable relationships. Sustainably building means working sustainably on a solid and future-proof cooperative with products that offer added value for our customers. In 2012 we formulated seven subjects on the basis of which we intend to become considerably more sustainable in 2018. Our sustainability topics are: safety, energy, vitality, cultivation, logistics, water and sustainably binding. Accident-free workplace Everybody who works at Avebe has to be able to return home safe and well after a day’s work. We operate according to the safety rules in the processing industry. To measure safety we use an accident frequency index, which is an international standard for the registration of accidents. The accident frequency index is used to set off the number of accidents involving lost working days against the number of hours worked. Last year a lot of attention was paid to personal protection equipment and the identification of safety zones. We have also made a start with a safety campaign aimed at making employees aware of their behaviour. For this purpose we organise sessions intended to make employees aware of the risks of certain, often routine, work. Safety meetings were also organised specifically for contractors who carry out work at the Avebe locations. To further increase security awareness, short security animations have been created that can be viewed on the intranet and information screens. Vital employees Fit and healthy employees feel good and are sustainably employable. We measure their vitality on the basis of the factors commitment & enthusiasm and sickness absence. We measure the commitment of our employees every two years by means of what is known as the Best Employers survey. This survey asks questions about the degree of pride in the organisation, the extent to which employees support the organisation’s objectives, the space and opportunities given to employees to perform to the best of their ability, the extent to which they feel appreciated, satisfaction with the organisation and job satisfaction. The second factor is sickness absence. We want everybody who works at Avebe to be fit and to feel good at work. The raising of the age of retirement has added a new challenge. Avebe seeks to keep all of its employees fit and healthy and employable. For this purpose we offer all sorts of activities, such as the company fitness programme. Two programmes have been added aimed at women who have become mothers for the first time and women in menopause. Vitality is also about how you do your job. Do you have the right knowledge and skills? The Workability Index measures the way in which employees feel well-equipped to continue working sustainably. Avebe has introduced a clear interview cycle in which personal annual plans are formulated and evaluated with employees. That way we keep talking to each other and everybody remains sustainably employable. In September Avebe was singled out as the Most Vital Company in the province of Groningen, which made it eligible to take part in the national elections. In November Avebe was awarded fourth place in the elections for Most Vital Company in the Netherlands, with a special mention about how we give shape to vitality at our company.


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    30 Save energy and become greener To reduce our CO2 emissions we have chosen to save energy on the one hand and make it greener on the other. We purchase solar energy for the greening aspect. This applies to Avebe’s total electricity consumption, with the exception of the locations Ter Apelkanaal and Gasselternijveen; at these locations we produce our own electricity with our combined heat and power plants. In 2017 Avebe signed the government’s long-term energy efficiency agreement that contains agreements on improving energy efficiency. This yields cost savings, process innovations and the achievement of our own sustainability objectives. We are drawing up an energy efficiency plan for each location in order to work on the sustainability of our energy consumption over the next four years. In 2017/18 work was carried out on the implementation of the plans for the first year. Despite this, energy consumption increased in 2017/18. This is due to increased water and energy consumption in the realisation and start-up phase of investments in Gasselternijveen. In addition to the measures already taken to reduce this consumption, a great deal of attention is being paid to further process optimisations. Increased yield from the field With our crop optimisation programme Optimeel we are looking to increase our yield from the field. Increasing the yield of a hectare of land is in principle good for the earnings of our members and contributes to reducing the environmental impact per unit of product. We see that the yield per hectare is gradually increasing and encourage our members to participate in the Optimeel programme, among other things by means of an incentive contribution. In 2017, substantial progress was made from 15 percent to 50 percent in the participation of the Dutch members in Optimeel cultivation registration. By increasing the number of participants, we gain more insight into the crop, which can contribute to optimising the crop and transparency in the chain. Also, the Optimeel Crop registration system has been offered actively to our German members since 2017. Reduction in road transport kilometres We seek to reduce CO2-emissions and reduce road transport kilometres by replacing road transport with alternative transport by train or boat. Road transport is one of the most CO2 intensive ways of transporting goods. Transport between the German and Swedish factories and the Netherlands has changed from road to rail transport. A direct train connection was put in place for this purpose. In addition, the transport to a number of customers in Sweden has also been converted to train transport. A reduction in the number of transport kilometres has been achieved by using a logistics hub in the Rotterdam area since June 2018. As a result, less product needs to be transported back and forth to the northern Netherlands.


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    31 ANNUALREPORT Reducing water consumption Avebe uses biorefinery to extract components from the starch potato. Flushing these components out of the potato involves using a great deal of water. The application of membrane technology makes it possible to use water from the potato as process water and thus reduce water consumption. This is already being applied in Gasselternijveen. Sustainably binding Finally, sustainably binding is all about chain responsibility and transparency: showing who you are and what you stand for. Avebe takes part in various registration systems, including the Supplier Ethical Data Exchange (Sedex), the MEE agreement of the RVO and Sustainable Agriculture Initiative (SAI). Our crop optimisation programme meets the requirements for the SAI qualification Silver. Our sustainability performance has also been validated in accordance with the EcoVadis standard. We have also been awarded silver status for this standard. We are also transparent with regard to our products. A life cycle analysis (LCA) provides an insight into the impact of our products on the environment. We continued to chart this during the year under review, and the LCA is ready for all of our products. Sustainably binding is also about people, about social connections. Avebe occupies a central position in society and contributes not only by ensuring the safety, wellbeing and health of its own employees, but also by communicating on this subject transparently and in a dialogue with its neighbours on subjects such as liveability and regional developments.


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    32 FORECAST OF THE BOARD OF DIRECTORS It’s all about creating more added value.


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    33 ANNUALREPORT FORECASTS OF THE BOARD OF DIRECTORS The 2018/2019 financial year will be dominated by the extreme drought combined with very high temperatures in July and August. Never before have there been such conditions during the growing season in our growing regions in the Netherlands and Germany. But there was also extreme weather in other parts of Europe where (starch) potatoes are grown. It is inevitable that much less raw material will be available. Avebe will do everything in its power to perform The new Innovation Centre at the Groningen Campus as well as possible despite the limited raw material opened on 28 September 2018. The Innovation Centre available. Compensation must be found in sharply is located in the vicinity of the University of Groningen rising sales prices and cost reduction. Nevertheless, and Hanze University of Applied Sciences. This is an it will be a very difficult year for our members. The important step for the future. picture in the fields is highly varied. Depending on the quality of the soil and the possibilities for irrigation, We will again invest heavily in the year to come. the harvest is moderate to very poor. In consultation In addition to the usual investments in improving with the Council of Members and the Supervisory existing production resources, the emphasis will be on Board, Avebe has now decided to distribute the entire sustainability and further increasing the capacity for cooperative result in the financial year 2018/2019 to food protein. the members. Avebe does not expect any major changes in the On the one hand we will therefore work hard to limit number of employees for the financial year 2018/2019. the consequences for our members in the coming financial year, while on the other we must continue to The challenge in the financial year 2018/2019 is on the work on the implementation of our strategy: Binding one hand to perform as well as possible in the short & Building 2.0. The title of the strategy indicates that term in order to be able to pay the highest possible we are building on the previous strategy, especially price to the members and to alleviate as much as in terms of sustainability and innovation, in order to possible the suffering caused by the extreme weather ensure a stable rise in the performance price. It’s all conditions. On the other, the challenge is not to lose about creating more added value. sight of the medium to long term. Armed with this knowledge, we will therefore continue to focus on the The sustainability objectives have been formulated implementation of the strategy. more ambitiously for the company, including with regard to CO2, water and residual flows. A new item is For the board the sustainability objective for the members. B.C. Jansen Avebe wants to work together with its members on R.P.F. van Laerhoven programmes in the field of CO2 reduction and crop protection products. We are also working as hard as ever on the development of new potato varieties that yield more and are more resistant to diseases. In order to meet the requirements with regard to tracking and tracing, crop registration will ultimately be used by all members. We are also developing new products for our food customers Avebe can make a significant contribution by providing healthy food ingredients on a vegetable basis with a better ecological footprint compared to animal ingredients.


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    35 ANNUALREPORT FINANCIAL STATEMENTS 2017 / 2018 All amounts are in thousands of euros unless otherwise stated.


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    36 CONSOLIDATED BALANCE SHEET AT 31 JULY 2018 (after proposed profit appropriation) ASSETS 31-7-2018 31-7-2017 Ref Fixed assets Intangible fixed assets 514 863 2 Tangible fixed assets Buildings and land 35,475 32,948 3 Plant and machinery 159,102 126,068 Other tangible fixed assets 7,639 3,727 Assets under construction 21,721 37,075 223,937 199,818 Fixed assets Other participating interests 1 1 4 investments Other loans 1,227 1,186 1,228 1,187 Current assets Stocks Starch 45,834 40,338 5 Derivatives 83,763 71,076 By-products 5,689 3,392 Other stocks 21,474 20,830 156,760 135,636 Receivables Trade debtors 75,766 67,737 6 Taxation and social security contributions - 1,952 Other debtors 7,512 5,141 Prepayments and accrued income 19 144 83,297 74,974 Cash at bank and in hand 934 969 7 Total assets 466,670 413,447


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    37 ANNUALREPORT LIABILITIES 31-7-2018 31-7-2017 Ref Group equity Capital and reserves 203,634 202,389 8 203,634 202,389 Provisions Reorganisation 3,098 1,665 9 Deferred taxation 223 420 Pensions 1,392 1,792 Other 9,161 9,799 13,874 13,676 Current liabilities Banks 149,440 103,323 10 Trade creditors 54,208 62,643 Current account members - 134 10 Pensions 3,675 667 Taxation and social security contributions 993 - Other debts 30,188 23,069 11 Accruals and deferred income 10,658 7,546 249,162 197,382 Total liabilities 466,670 413,447


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    38 CONSOLIDATED PROFIT AND LOSS ACCOUNT 2017/2018 2016/2017 Ref Gross turnover 613,851 588,210 12 Direct selling costs 37,242 36,898 Net turnover 576,609 551,312 Movement in stocks of finished goods 20,480 -9,090 Capitalised production 1,671 2,818 Other operating income 3,477 5,654 13 25,628 -618 Total operating income 602,237 550,694 Raw materials and consumables 347,685 310,158 Salaries and wages 81,447 74,759 14 Social security charges 25,242 24,844 Depreciation and other impairments 30,710 32,576 15 Other operating expenses 100,566 94,020 Total operating expenses 585,650 536,357 Operating result 16,587 14,337 Interest and similar income 116 77 Interest expenses -7,531 -7,074 Balance of financial income and expenses -7,415 -6,997 Result on ordinary activities 9,172 7,340 before taxation Taxation -1,343 -1,071 16 Cooperative result after taxation 7,829 6,269


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    39 ANNUALREPORT CONSOLIDATED CASH FLOW STATEMENT 2017/2018 2016/2017 Ref Operational Cooperative result after taxation 7,829 6,269 cash flow Adjustments for: Depreciation and other impairments 30,710 32,576 15 Movements in Movements in stocks -21,124 8,013 working capital Movements in receivables -8,324 3,328 Movements in current liabilities 5,137 7,886 -24,311 19,227 Additions to provisions 1,502 563 Withdrawals from provisions -1,161 -1,960 Movement in provisions 341 -1,397 9 Gross operational cash flow 14,569 56,675 Fixed assets Investments in fixed assets -54,953 -45,113 2 3 4 cash flow Disposals of fixed assets - 58 Other movements in financial fixed assets -41 - -54,994 -45,055 Net operational cash flow before financing activities -40,425 11,620 Financing Final payment to members -2,223 -2,283 21 cash flow Movement in loans to member-suppliers -134 -2,842 Repayment of share premium -1,522 -1,522 21 Return on share premium -620 -711 21 Received share premium 197 31 Others 50 419 21 -4,252 -6,908 Net cash flow -44,677 4,712 Exchange and conversion differences -1,475 -1,337 Movement in net debt -46,152 3,375 Composition of the net debt Net debt to banks at 1 August 102,354 105,729 Movement in net debt 46,152 -3,375 Net debt to banks at 31 July 148,506 102,354


  • Page 40

    40 NOTES GENERAL 1 ACCOUNTING POLICIES CASH FLOW STATEMENT OBJECTIVE The cash flow statement is drawn up using the indirect method. The net debt in the cash flow The objective of Coöperatie AVEBE U.A. is to meet the statement consists of debts to banks less the cash at needs of its members in accordance with the contracts bank and in hand. Cash flows in foreign currency are entered into with the enterprises they conduct or have converted at an estimated average exchange rate. conducted for that purpose. Coöperatie AVEBE U.A. Exchange rate differences affecting financial resources sets out to achieve this objective by processing raw are stated separately in the cash flow statement. products into starch and other derived products. Receipts and expenditure from interest, received dividends and profit taxation are shown under the cash CONSOLIDATION POLICIES flow from operational activities. Paid dividends are shown under the cash flow from financing activities. The consolidation includes the financial data of Transactions in which no cash flows in or out, including Coöperatie AVEBE U.A. together with its group financial leasing, are not shown in the cash flow companies and other legal entities over which it can statement. Investments in fixed assets are based on exert dominant control or which it centrally manages. the statement of changes in the fixed assets and not in Group companies are legal entitles in which Coöperatie cash flow form. This is due to the fact that amounts at AVEBE U.A. can exert direct or indirect dominant supplier level cannot be traced back to investments or control because it holds the majority of the voting costs. rights or is able in any other way to control their financial and operational activities. This includes FOREIGN CURRENCY potential voting rights that can be directly exercised on the balance sheet date. The group companies and other FUNCTIONAL CURRENCY legal entitles over which Coöperatie AVEBE U.A. can exert dominant control or which it centrally manages The items in the financial statement of the group are included in full (100%) in the consolidation. companies are valued on the basis of the currency The share of third-parties in the equity capital and of the economic setting in which the group company the results are stated separately. Intercompany primarily pursues its activities (the functional transactions, intercompany profits and mutual currency). The consolidated financial statements are receivables and debts between group companies and drawn up in euros; this is both the functional and the other legal entitles included in the consolidation are presentation currency of Coöperatie AVEBE U.A.. eliminated if the results are not achieved through transactions with third-parties outside of the group. CONVERSION OF FOREIGN CURRENCY Unrealised losses on intercompany transactions are also eliminated other than in cases where a special Assets and liabilities shown in foreign currency are devaluation has taken place. The valuation principles converted at the prices on the balance sheet date. of group companies and other legal entitles included in Transactions shown in foreign currency the consolidation have been altered where necessary to are converted at the price on the transaction date. place them in line with the Group's valuation principles. Exchange rate differences arising from the conversion Reference is made to page 58 for a list of consolidated are charged to or debited from the result. Assets and group companies. liabilities of foreign participating interests are converted at the rate on the balance sheet date; the items in the profit and loss account are converted at the average exchange rate for the financial year. Exchange rate differences related to converting the


  • Page 41

    41 ANNUALREPORT equity of foreign participating interests and loans to or If necessary to providing the insight required by debts of participating interests in the nature of equity Article 2:362, paragraph 1, of the Dutch Civil Code, the are charged to the equity as a statutory reserve. nature of these judgements and estimates, including the underlying assumptions, is given in the note to the AFFILIATED PARTIES relevant financial statement items. Affiliated parties are defined as all legal entities over which predominant control, joint control or significant INTANGIBLE FIXED ASSETS control can be exerted. Legal entities that are able to exert dominant control are also deemed to be affiliated Intangible fixed assets are valued at their acquisition parties. Also, the Board of Avebe is included among the price, less depreciation. affiliated parties. Account is taken of impairments, which are entered if Significant transactions with affiliated parties are the book value of the asset (or the cash-flow generating disclosed to the extent that they were not concluded unit to which the asset belongs) is higher than its under normal market conditions. The nature and size realisable value. To establish whether there is any of the transaction and other information required to impairment on intangible fixed assets, reference is made provide insight into the transaction are given. to the section on impairments. VALUATION POLICIES AND RESULT RECOGNITION Research and Development expenditure Expenditure on research into new products and new COMPARISON WITH THE PREVIOUS YEAR production techniques is accounted for as costs. Development expenditure is only capitalised if it is The principles used to determine the results remain incontrovertibly demonstrated that an identifiable unchanged compared to last year. asset has been created that will yield a future economic benefit for Coöperatie AVEBE U.A.. GENERAL Goodwill The (consolidated) financial statements have been Goodwill resulting from acquisitions is capitalised at the compiled in compliance with the statutory provisions acquisition price and depreciated over the anticipated of Title 9, Book 2 of the Dutch Civil Code and the firm useful economic life up to a maximum of twenty years. requirements of the Directives Governing Annual Reports and Financial Statements as issued by the Goodwill is calculated as the difference between Annual Reporting Council. the acquisition price and the share in the value of Assets and liabilities are generally valued at the the capital and reserves according to the valuation acquisition or manufacturing price or the current value. principles operated by Coöperatie AVEBE U.A., taking If no specific valuation principle is stated, valuation into account market value, reorganisation costs and takes place at the acquisition price. References are given corresponding taxation. Internally created goodwill is in the balance sheet, the profit and loss account and the not valued by Coöperatie AVEBE U.A.. cash flow statement. These references are made to the explanatory notes. Software Software is valued at the acquisition price less ESTIMATES depreciation based on the anticipated useful economic life. Software is depreciated over a period of five years. To apply the principles and rules for drawing up the financial statements, the management of Coöperatie TANGIBLE FIXED ASSETS AVEBE U.A. has to form a judgement on various matters and to make estimates that could be of paramount Tangible fixed assets are valued at the acquisition importance to the amounts shown in the financial price plus accompanying costs or manufacturing statements. price, less depreciation. No amortization is applied to land. Government subsidies granted for investments are deducted from the acquisition price. Annual straight-line depreciation is based on the estimated


  • Page 42

    42 useful life of buildings, which is twenty-five years IMPAIRMENTS for buildings and ten years for plant and machinery. Other tangible fixed assets are amortized over five Coöperatie AVEBE U.A. ascertains on each balance sheet years or less, depending on the type of asset. There date whether there are indications that an asset could is no depreciation on tangible fixed assets currently be subject to a special downward value adjustment. under construction. Spending on major maintenance If such indications are present, the realisable value is accounted for as expenses in the year in which it of the asset is established. If it proves impossible to occurs. Spending on major maintenance on assets ascertain the realisable value of the individual assets, that have been fully depreciated is capitalised and the realisable value of the cash flow generating entity depreciated according to the depreciation period to which the asset belongs is ascertained instead. A for the type of asset in question, provided that this special downward valuation is applied if the book extends the life cycle. value of an asset is higher than its realisable value; the realisable value is the higher of the sale value and the FIXED ASSETS INVESTMENTS going-concern value. The sale value is calculated with the aid of the active Participating interests in group companies and other market. In cases where there is a lack of clarity about participating interests in which significant influence is market data and/or future cash flows, the book value exerted are valued using the net asset value method. of assets is set as zero. A special downward valuation Significant influence is considered to be present if loss is charged directly as a loss to the profit and loss a shareholding of more than 20% is held. The net account. If it is established that impairments shown asset value is calculated on the basis of the same in the past no longer exist or have decreased, the principles applied for these financial statements; in increased book value of the asset in question is not set cases where there is not enough information about higher than the book value that would have been calcu- the participating interests to apply those principles, lated if no impairment had been shown for the asset. the valuation principles of the participating interest in question are applied. Participating interests that A discount rate based on the current long term market yield a negative valuation result according to the risk is used to determine the value in use when convert- net asset value method are valued at nil. In cases ing cash flows into net present value. where Coöperatie AVEBE U.A. stands surety in full or in part for the debts of participating interests in the Also in the case of financial instruments, the company situation described above, or has resolved to enable checks on each balance sheet date whether there are the participating interests to pay its debts, a provision any objective indications for impairments to be applied is created for that purpose. Participating interests to a financial asset or a group of financial assets. If over which no significant influence can be exerted are there are objective indications of impairments the valued at their acquisition price or their fair value if company determines the extent of the loss based on the lower. impairments and immediately incorporates this in the The receivables under the financial fixed assets profit and loss account. comprise issued loans and other receivables. These receivables are initially valued at their fair value. STOCKS These loans are then valued at the amortised cost price. If there is any discount or share premium when Raw materials and consumables are valued at their the loans are issued, this is charged to or from the acquisition price as calculated on a 'first-in, first-out' result as part of the effective interest during the term basis, less a provision for obsolescence or, if applicable, of maturity. Transaction costs are also incorporated in at their lower realisable value. Starch, derivatives and the initial valuation and charged to the result as part by-products are valued at cost price, if necessary less a of the effective interest. Impairments are charged to provision for obsolescence or, if applicable, at the profit and loss account. their lower realisable value. The realisable value is the estimated selling price less the directly attributable


  • Page 43

    43 ANNUALREPORT selling costs. The share of the potatoes included in the estimate of the amounts needed to settle the commit- overall cost price is based on the long-term average ments on the balance sheet date. In the absence of procurement price of the pivotal wheat crop, for which statement to the contrary, the provisions are valued Avebe has made estimates of the average production at the nominal value of the expenditure that will per hectare and the variable costs. The fixed-cost probably be required to meet the commitments. mark-up incorporated in the cost price is based on a standard production level for each financial year. Reorganisation The reorganisation reserve relates to the estimated RECEIVABLES costs of reorganisation plans incurred before the end of the financial year and approved by the Supervisory Receivables are valued at the fair value of the Board concerning certain sections of the organisation, consideration upon being processed for the first time. which have been communicated before the financial Trade receivables are valued at the amortised cost statements were drawn up. In addition, this relates to price after being processed for the first time. employees with whom agreements are being or have If the receivable is deferred on the basis of an agreed been made at individual level. extended payment term, the fair value is based on the cash value of the anticipated receipts and interest Deferred taxation income is written to the profit and loss account on Deferred taxation is calculated on the basis of the the basis of the effective interest rate. Provisions difference between the fiscal valuation of the assets for bad debt are deducted from the book value of and liabilities and the commercial book value at the the receivable. Other securities shown under the end of the financial year at the applicable tax rates. receivables are valued at their fair value. Active and passive deferred taxation can be set off within the same fiscal unit. Deferred tax claims CASH AT BANK AND IN HAND are included if it is likely that future profits will be available to compensate losses and set-off options. Cash at bank and in hand consists of cash, bank Deferred tax claims are shown under the financial credits and deposits with a term of less than twelve fixed assets and deferred tax commitments under the months. Current accounts at banks are shown under provisions. debts to banks under current liabilities. Cash at bank and in hand is valued at its face value. Pensions Dutch pension schemes are subject to the provisions REVALUATION RESERVE of the Dutch Pensions Act and the compulsory, contractual or voluntary premiums are paid to The revaluation reserve relates to unrealized exchange pension funds and insurance companies by Coöperatie results on net investments in foreign group companies AVEBE U.A.. The premiums are shown as personnel and issued loans, as well as exchange results on expenses as soon as they are payable. Prepaid forward exchange contracts concluded to hedge the premiums are shown as prepayments and accrued exchange risk on the aforementioned investments and income if this leads to a refund or to a reduction in loans. future payments. Premiums not yet paid are shown in the balance sheet as a commitment. Coöperatie AVEBE PROVISIONS U.A. has processed all pension schemes in accordance with the obligation approach. The premiums payable General over the reporting year are included as a charge. Provisions are formed for legally enforceable or actual Changes to the pension provision are also processed commitments existing on the balance sheet date for in the profit and loss account. The amount shown as which it is likely that an outflow of resources will the pension liability is the best estimate of the not be required and the level of which can be reliably yet financed amounts required to settle the relevant estimated. The provisions are valued at the best commitments on the balance sheet date.


  • Page 44

    44 Pension schemes of foreign subsidiaries that are RESULT RECOGNITION comparable with how the Dutch pension system is organised and operates are also processed according General to the obligation approach. For foreign pension The result is determined as the difference between schemes that are not comparable a best estimate is the realisable value of the delivered goods or services made of the commitment on the balance sheet date, and the costs and other expenses over the year. The based on an actuarial valuation method generally proceeds of transactions are shown in the year in accepted in the Netherlands. which they were realised. Other Sale of goods The other provisions pertain to the provision for Proceeds from the sale of goods are entered as soon as anniversary bonuses; demolition costs and other all important rights and risks related to the ownership liabilities and risks that are related to the operational of the goods have been transferred to the buyer. activities. The anniversary provision is accrued on a straight-line basis over the 15 years preceding the Net turnover anniversary. This does not give rise to any material Net turnover is the proceeds of goods supplies less differences with the calculation based on actuarial discounts, etc., freight charges and tax on sales, principles. The provision for demolition charges following the elimination of group transactions. is based on the anticipated costs of the planned demolition of buildings and machinery during the Operating result next 5 years. The other provisions are formed for The operating result consists of net sales, the costs of commitments and risks related to the business raw materials and consumables, personnel expenses, operations and are shown at their face value. depreciation costs, the costs of outsourced work and other external costs. LIABILITIES Liabilities are valued at the fair value upon being Raw materials and consumables processed for the first time. Transactions charges This concerns the costs of raw materials and that can be directly attributed to the acquisition of consumables of the sold products, or the costs of the liabilities are included in the valuation upon obtaining the sold products. The costs of raw materials being processed for the first time. After being initially and consumables are calculated on the basis of the processed liabilities are valued at amortised cost FIFO (first-in, first-out) method. The amount shown price, which is the amount received taking account of under this item for the purchase of starch potatoes share premium of discount and less transaction costs. is based on the campaign price plus the bonuses and plus or less the effect of the calculation of the potato The difference between the book value determined and component in the finished product. Reference is made the ultimate repayment value is incorporated in the to the stocks item on page 42/43 for the valuation profit and loss account as an interest charge based on principle. the effective interest rate during the estimated term of Personnel expenses the debts. Wages, salaries and social security charges are shown in accordance with the employment conditions in the LEASING profit and loss account to the extent that they are Lease contracts in which a large proportion of the payable to employees. advantages and disadvantages of ownership are not borne by Coöperatie AVEBE U.A. are shown Exchange rate differences as operational leasing. Commitments based on Exchange rate differences arising on settlement or operational leasing are processed on a straight-line conversion of monetary items are shown in the profit basis on the profit and loss account over the term of and loss account in the period in which they arise the contract. unless hedge accounting is applied.


  • Page 45

    45 ANNUALREPORT Interest income and expenses Board of Directors is aimed at hedging currency Interest income and expenses are shown in proportion positions related to buying and selling in foreign to time, taking account of the interest rate and the currency. relevant assets and liabilities. The transaction expenses and borrowings are taken into account for Currency call options and currency futures contracts the incorporation of interest expenses. are used as hedging instruments. It is not permitted to adopt speculative positions. Derivative financial TAX ENTITY instruments (such as futures transactions, currency Coöperatie AVEBE U.A. forms a tax entity for call options and interest swaps) are taken out corporation tax with its 100% Dutch participating exclusively from financial institutions that issue credit interests. Under the standard conditions the company to Coöperatie AVEBE U.A.. and its affiliated subsidiaries are jointly and severally liable for the tax payable by the consortium and When shown for the first time in the balance sheet its incorporation within the tax entity. The parent derivatives are shown at their actual price; the company settles on the basis of the subsidiaries subsequent valuation of derivatives depends on taxable results with due observance of the assignment whether what underlies the derivative is listed. If what of the benefits of the tax entity to the various group underlies the derivative is listed, the derivative is companies forming part of it. shown at its fair value. If what underlies the derivative is not listed, the derivative is shown at its cost price or TAXATION lower market value. The method used to show changes Taxation on the operating result for each country is to the value of derivatives depends on whether hedge calculated over the result before taxation in the profit accounting is applied with the derivative. and loss account, taking account of the losses from previous financial years that can be set off against Coöperatie AVEBE U.A. operates hedge accounting. tax (if not included in the deferred tax receivables) Records are kept as soon as a hedge relationship and exempted profit components, and following the is entered into. Coöperatie AVEBE U.A. periodically addition of non-deductible costs. Account is also establishes the effectiveness of the hedge relationship taken of changes to the deferred tax receivables by carrying out a test. and deferred tax liabilities resulting from changes to the tax rate being operated. Tax adjustments are This can be done by comparing the critical features processed within the tax entity in Coöperatie of the hedge instrument with those of the hedged AVEBE U.A.. position, or by comparing the change in the hedge instrument's fair value and the hedged position. RESULT ON PARTICIPATING INTERESTS This item shows the profit on the other participating Conversion hedging interests. Coöperatie AVEBE U.A. hedges the currency risk on net investments in foreign group companies and GOVERNMENT SUBSIDIES issues loans by means of forward exchange contracts Subsidies on investments in tangible fixed assets are where this is possible in view of the associated costs. deducted from the relevant asset and included as part These forward exchange contracts are subject to cost of the depreciation in the profit and loss account. price hedge accounting, with exchange differences being incorporated in the revaluation reserve for the FINANCIAL INSTRUMENTS effective component of the hedge relationship. The The treasury activities, including currency and non-effective component of the hedge relationship is interest management and the financing of the group accounted for directly in the statement of operating and its operating companies, are centrally coordinated income and expenditure. from the Netherlands. The policy approved by the


  • Page 46

    46 Transaction hedging Currency risk Positions not shown in the balance sheet are hedged by Currency risks related to procurement and sales means of options and forward contracts. Coöperatie are hedged on the basis of the anticipated period in AVEBE U.A. applies cost-price hedge accounting which they will take place. Currency risks based on for these derivative financial instruments. Hedge investments in foreign group companies established instruments are not revalued until the hedged outside of the euro region are also covered by means position has been incorporated in the balance sheet. of financial instruments in the currency of the country For the options, the difference between the cash price where the foreign group company is established. applicable when the derivative is concluded and the forward price at which the derivative will be settled is Interest risk capitalised and will be amortised over the term of the The purpose of the interest policy is to limit the risk of contract. The non-effective component of the hedge interest rate fluctuations. Coöperatie AVEBE U.A. uses relationship is accounted for directly in the profit and financial instruments (interest swaps) to convert the loss account. Paid option premiums are capitalised interest on short-term debts into a fixed interest rate. under trade receivables and amortised over the term of the options contract. The amortisation costs of Credit risk the option premium are shown in the profit and loss Coöperatie AVEBE U.A. has taken out credit insurance account under gross turnover. Forward contracts are with a reputed insurance company to mitigate its sales valued at the price applicable on the balance sheet credit risk. Sales are for the most part made to custom- date. Profits or losses on derivative instruments used ers who meet the credit worthiness requirements. to hedge positions not shown in the balance sheet are This rule can be deviated from in individual cases, but deferred until the time at which the profits or losses additional security will generally have to be obtained on the hedged positions are accounted for in the profit in those cases. and loss account. Interest risk hedging Coöperatie AVEBE U.A. operates cost price hedge accounting for the interest swaps used to ensure that the interest paid on variable interest-bearing credit facilities are converted into fixed interest. The non-effective component of the change of value in the interest swaps is accounted for in the profit and loss account under the financial income and expenses.


  • Page 47

    47 ANNUALREPORT


  • Page 48

    48 NOTES TO THE CONSOLIDATED BALANCE SHEET AT 31 JULY 2018 Fixed assets 2 Intangible fixed assets Movements in the value of the intangible fixed assets over the year under review are as follows: Book value at 31 July 2017 863 Depreciation -349 Book value at 31 July 2018 514 Purchase price at 31 July 2018 4,405 3 Tangible fixed assets Movements in the value of the tangible fixed assets over the year under review are as follows: Plant Other Assets Buildings and tangible under and land machinery fixed assets construction Total Book value at 31 July 2017 32,948 126,068 3,727 37,075 199,818 Investments 5,075 58,954 6,177 -15,253 54,953 Exchange differences -137 -231 -4 -101 -473 37,886 184,791 9,900 21,721 254,298 Permanent impairments - -344 - - -344 Depreciation -2,411 -25,345 -2,261 - -30,017 -2,411 -25,689 -2,261 - -30,361 Book value at 31 July 2018 35,475 159,102 7,639 21,721 223,937 Purchase price at 31 July 2018 93,228 543,707 49,145 21,721 707,801 Based on developments in the potato starch market and price developments in the energy market, some of Coöperatie AVEBE U.A.’s assets in this financial year or previous years have been devalued to their realisable value.


  • Page 49

    49 ANNUALREPORT 4 Financial fixed assets 31-7-2018 31-7-2017 A Other participating interests 1 1 B Other loans 1,227 1,186 1,228 1,187 Movements in these items are as follows: A B Totaal Book value at 31 July 2017 1 1,186 1,187 Interest - 41 41 Book value at 31 July 2018 1 1,227 1,228 The other loans relate to mortgages issued in connection with the sale of land for the building of solar parks. The term is 20 years. The interest rate is 0%. Mortgage and pledge rights have been established in these areas. The amounts are given for the cash value. The discount rate ratio is 3%. 5 Stocks The stocks valued at a lower realisable value had a book value of EUR 7.0 million on the balance sheet date. The provision on stocks is EUR 7.6 million (last year EUR 9.7 million). 6 Receivables All receivables have a remaining term of less than one year. A provision of EUR 4.4 million (last year EUR 4.5 million) for bad debt has been deducted from the trade receivables. This provision is determined on the basis of the age of the outstanding receivables. The receivable related to tax and social security premium relates in full to the VAT. The fair value of the other receivables approaches the book value owing to their short-term character. 7 Cash at bank and in hand Cash at bank and in hand consists of cash, bank credits and deposits with a term of less than twelve months. Current accounts at banks are shown under debts to banks under current liabilities. Cash at bank and in hand is valued at its face value. The cash at bank and in hand are placed at the free disposal of the Cooperative. Group equity 8 Capital and reserves For notes on the group equity reference is made to the individual financial statements.


  • Page 50

    50 9 Provisions The provisions are long-term unless otherwise stated. Movements in the provisions over the year under review are as follows: Deferred Reorganisation taxation Pensions Other Total Position at 31 July 2017 1,665 420 1,792 9,799 13,676 Movements charged to the 2,124 -142 -312 -168 1,502 profit and loss account Withdrawals -691 - - -470 -1,161 Exchange differences - -55 -88 - -143 Balance at 31 July 2018 3,098 223 1,392 9,161 13,874 The current part of the provisions amounts to EUR 2.9 million. Pensions provision Based on the administration agreement with the pension fund and the pension agreement with the employees, there are no extra commitments in the context of extra payment, back service commitments, extra administration charges, extra pension claims, losses on individual value transfers. Neither are there any reimbursement undertakings concerning interest, profit appropriation or gains on individual value transfers in the favour of Coöperatie AVEBE U.A. Pension is accrued under the average salary system, with a maximised payable contribution based on the Collective Defined Contribution. The coverage ratio of Stichting Pensioenfonds Avebe on 31 December 2017 was 121.7%. (The policy-based coverage ratio is 120.6%) The provision for the foreign companies relates to a 'reserve deficit' and schemes for which undertakings have been given. This concerns commitments to be financed in the future. The amount involved in this is EUR 1.4 million (last year EUR 1.6 million). Other provisions The other provisions are specified as follows: Anniversary Demolition bonuses costs Total Position at 31 July 2017 3,869 5,930 9,799 Movements charged to the profit and loss account 511 -679 -168 Withdrawals -422 -48 -470 Balance at 31 July 2018 3,958 5,203 9,161 The anniversary bonuses are provided for in the internal scheme for that purpose. The provision for demolition and asbestos clearance costs is formed for the anticipated costs of the planned demolition and asbestos clearance of a number of buildings and machines at Avebe locations in the Netherlands in the next 5 years. The cost estimate for this is based on standard rates and quotations received.

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