AGRAVIS Annual General Meeting 2018
AGRAVIS paving the way for the future with “Hanse” strategy
AGRAVIS is moving on to pastures new and paving the way for a successful future with its strategy programme entitled “Hanse”. At this year’s general meeting of the agricultural trade and service company, Andreas Rickmers, Chairman of the Board of Directors at AGRAVIS Raiffeisen AG, left no room for doubt among the roughly 850 shareholders and guests that with Hanse, AGRAVIS is set for greener pastures. “With Hanse, we commit to ambitious growth targets that go well beyond the current turnover and profit targets of our mid-term planning. We are convinced that at the end of the consolidation process, there will be only a handful of high-performing companies shaping the agricultural business in Germany,” Rickmers emphasised: “We want to be one of them.” He demonstrated the necessity for the change of course by quoting the 2017 business targets, which Financial Director Johannes Schulte-Althoff had earlier explained.
With a turnover of approximately €6.4 billion, AGRAVIS closed the 2017 business year with a surplus of about 3.8 per cent. This was mainly due to agricultural trade, the compound feed and machinery business, as well as the markets and energy sectors. Overall, AGRAVIS improved EBIT by 7.3 per cent to €74 million. Investments increased to €87 million – compared to the initially planned €63 million. “We invested in our performance, impact, and future projects – meaning we invested first and foremost in customer benefit. This is also an indicator of growth and respectability;” Financial Director Schulte-Althoff explained.
Strategy process focuses on customer orientation and sustainable growth
AGRAVIS Managing Director Andreas Rickmers provided a clear assessment of the pre-tax results: “I am not satisfied with our pre-tax earnings of €25.3 million. Because even though this result is mainly due to one-off liabilities, we have not achieved what we had set out to achieve in 2017.” Nevertheless, Rickmers emphasised: “2017 was a growth year for AGRAVIS, during which we have laid important groundwork for our future success,” referring to not only EBIT growth, more investments, and forward-looking acquisitions, but also to the newly introduced systematic strategy process, “Hanse”. “We are standing on a firm foundation, we have a solid balance, and we have continuously invested in the market – we want this to translate into customer benefit, closeness, and success. This is also part of the reason why my bottom-line assessment of the 2017 business year is a positive one,” the AGRAVIS Managing Director told the shareholders and guests in Bockenem.
Conservative plans for 2018
Plans for 2018, Rickmers and Schulte-Althoff both emphasised, are deliberately conservative. “The market and overall conditions have not changed significantly.” Turnover should therefore settle at around €6.5 billion, the balance sheet total at roughly €1.9 billion, pre-tax results at about €42 million, and the equity capital ratio at about 30 per cent. Building on these figures, Rickmers then pointed out the challenges that necessitate change – “and do not spare the AGRAVIS Group.” The AGRAVIS Managing Director explained this by means of four points:
- Agriculture in Germany is facing a dramatic consolidation process. “The number of agricultural businesses will decline substantially in the coming years. At the same time, we know that the amount of farm land will decrease – that means, operations will keep getting larger.” In the long term, this also indicates a departure from the centuries-old model of the family farm, independent farmers, small operations, and family workers. The future of the sector will still be owner-managed, but characterised by large, capital-intensive, and business oriented agricultural companies. The new generation of agricultural entrepreneurs will use state-of-the-art technology. As such, the overall human labour force will be reduced, with these positions filled increasingly by skilled workers outside of the family.
- Ecological farming will continue to gain importance – driven by changing nutritional habits, environmental protection efforts, state subsidies, improved economic conditions compared with conventional farming operations, and political regulation. “Even if the currently high rate of increase of ecological farms levels off, the number of eco-farmers should grow to about 45,000 by 2040, and the proportion of ecologically farmed land should increase from today’s 10 per cent to about one fifth of agricultural land in Germany,” quotes Rickmers from a current study commissioned by DZ Bank.
- “Digitalisation in the agricultural sector will gain momentum,” – the AGRAVIS Managing Director named another incisive change. Forecasts are expecting the worldwide market for digital agriculture to nearly double from €3.5 billion to €6 billion by 2020. “These figures alone illustrate the imminent transition facing agriculture and agricultural trade.”
- The demographic transition is making the competition for qualified staff even more fierce. “We are all aware of the challenges of the demographic shift, which results in less and less talent or high-performing employees being available. And we must not forget that we are not competing only against our direct competitors, but against market players from totally different industries. That means we have to be attractive enough to satisfy our customers’ needs even at remote locations, and use our highly-qualified employees and sound know-how to win them over.”
The agricultural market is changing quickly
In summary, Rickmers conveyed that the agricultural market is changing ever more quickly. As a result, margins and quantities in Germany will decline. “This is why, consolidating markets, customer focus, strong offers and processes, as well as implemented synergies and scaling effects will become crucial competitive factors – even for us. And they will be coupled with high demand for investment and capital in agriculture and agricultural trade, concurrent with increasing social and political requirements.”
Rickmers thus pioneered the ongoing Hanse strategy process, which is based on a new AGRAVIS mission. The central message of that mission, formulated as a vision, is: “AGRAVIS customers are more successful than others.” Ultimately, the customer will have to decide in favour of AGRAVIS and the cooperative services. “We have to offer the right solutions to the farmers as well as to the cooperatives. Those solutions should not be limited to merely offering the best price, but should be comprehensive packages of price, performance, delivery reliability, consulting, dependability, and speed.”
Hanse, the AGRAVIS Director clarified, stands for consistent implementation of customer orientation and sustainable growth. With Hanse, AGRAVIS is creating a strategy for its entrepreneurial activities in the future. It is a concept with a clear framework, which now has to be defined in more detail. “We are setting out on a journey that will require a lot of time and willingness to change.”