Strategy

 

Supporting and transforming agricultural production for the long term

Jean-François Loiseau, Chairman, Paul-Yves L’Anthoën, CEO and the Board of Directors share an ambitious vision for the future of the cooperative, its members and its business: they aim to make Axereal the very model of a dynamic, efficient and competitive grain cooperative.

 

What is your assessment of the 2017-2018 season?

JFL : For agriculture, 2017 was a transition year, during which we saw business begin to improve. Our origination volumes came back into line with the average, boosting our agricultural results. These results convinced Axereal Board members of the need to share and put into practice an active, efficient and competitive model which will take us forward into the future, support agricultural production and therefore generate higher revenues for farmers.

PYL : Before we launch this transition, it is vital for us to be sure that agricultural volumes really are on the upturn. Total volumes for this year’s harvest were in excess of 4.5 million tonnes, so they are moving back into the range we would expect. The previous year, weather issues had pushed volumes down to 3.2 million tonnes. This capacity to deliver can be seen in our results.

We closed the year with EBITDA of €96M. Given that our target was €100M, this was an encouraging result. We were severely impacted by the French rail strike; without it we would have hit our target. Earnings before Extraordinary items and Tax (EBET) are also significantly higher at €6.7M. We set ourselves these targets to put us on the road to achieving a dual ambition. Firstly, to make sure that our agricultural business really is on the upturn, so that we know at what level to set our transformation plan for the coming years. Secondly, to give us the means to bring the business’s financial results back to far more satisfactory levels, in order to reassure all our partners.

There are also two other important factors behind these results: the performance of the malting business and the resilience of Axereal Livestock Farming.

Could you tell us a little more about the action plan that you are launching?

JFL : What agricultural model should a cooperative group like ours follow? This is the main question we have been asking ourselves throughout the year. We have set ourselves an ambitious roadmap with which to put our agricultural model in place over the coming years. It aims to create a model that is proactive, unaffected by climatic incidents and in line with cooperative members’ expectations. It also needs to be more innovative, and open to the technologies of the future; more competitive, so that farmers see the Axereal tool as an asset for development rather than
an expense; and finally, more efficient, with excellent performance in logistics, service quality and consultancy.

We shared this strategic vision with the new CEO, Paul-Yves L’Anthoën, who joined us in autumn 2017. Since the spring, he has been putting this master plan in place with the aid of a small team. Our aim is to produce traceable cereals with high-quality paths from farm to plate, for clients who are both consumers and conscientious citizens.

 

Highlights of the year

How did the 2017-2018 year go for Axereal?

JFL : In agriculture, we took the decision to put in place a new, more efficient model with lower fixed costs to make us more competitive across the whole of our area. This “Ambition 2022” plan has been created to support agricultural production and make us more agile and flexible, to meet the expectations of our farmers.

In malting, we have equipped the industrial side of the business with the resources it needs to take a big step up. The business had reached the stage where its industrial facilities were completely saturated, but by partnering with investors we have given it the resources it needs to develop internationally. It has been a tricky year to manage in milling, with a fall in demand and excess production capacity.

Milling is an essential activity for deriving value from grain, and it is down to us to adapt its model and get it fully operational in order to meet the challenges that lie ahead.

In livestock farming, we are concentrating on the client-farmer partnership. We have also begun work on traceability in the poultry business, by setting up a blockchain to boost value.

PYL : We can look back on 2017-2018 as the year we pinned down the details of the transformation plan. This has resulted in a simpler organisational structure and the appointment of a balanced and partially renewed management team to work alongside me and the Board of Directors. This new team is made up of four operational directors from the businesses, and four directors from the support functions that serve the businesses. This team will be instrumental in managing change. The roadmap it has been given will serve the entire Axereal Group. We work together, and we share our projects and our action plans, our motivation driven by the issues of transformation and market positioning for the Axereal Group as a whole.

JFL : A new team is now in place alongside the Board of Directors and has begun setting up an important system of collaborative working: the directors are involved with committee working groups each led by a manager. We have set up this system in several areas of Axereal Group. We share a variety of interests and views, driven by a need for urgent action: our cooperative members are asking us to act, and our community requires it.

PYL : The Chairman and the Board of Directors have given me the job of putting in place the new Axereal model. It’s an ambitious task, and it will take time.

We are one of France’s major grain logistics operators, and we should be very proud of that.

Paul-Yves L’Anthoën, Axereal CEO

 

What will Axereal’s future business model look like?

JFL : The Axereal business model covers agriculture and the food industry, both in France and internationally. We are highly exposed to the global economy. One tonne in every two is exported, and therefore sold at prices set by the global markets, and one tonne in every three is processed in our facilities. Our strategy is to support our farmers as their businesses transform and grow the proportion of our grain that is processed. To achieve this, we have to be extremely responsive, and we seek to add as much value as we can to the grain that we originate and trade in France, in both our agricultural operations and our industrial processing operations.

To this end, we have presented to our members an agricultural plan involving massive cost reductions. This plan requires us to review our internal processes in terms of sales policy, regional structure and origination management. We are sharing the plan and progress with our cooperative members and staff regularly at local meetings.

 

Outlook

What is your strategic vision for the future of Axereal?

JFL : We are moving from the old world to the new world. Over the last fifty years, French agriculture, and grain farming in particular, has at all levels quite rightly benefited from an agricultural policy that offered massive support not only to farmers but also to associated organisations, processors, transporters and exporters. The new common agricultural policy which will be approved by 27 or 28 countries in the near future will focus more on the requirements of civic-minded consumers, and the budget framework will be completely different. Those are the facts, and we cannot ignore them. We now work within a worldwide system, competing on both a local and a global level, and operations both upstream and downstream are increasingly concentrated. The system obeys a wide range of rules (governing food safety, the environment and taxes).

We are determined to adapt so that, in the future, Axereal’s model will be the right one: the model that sustains and supports farmers in a rapidly changing world.

PYL : To create this new system, we need to work with both current and future production facilities, with today’s technologies and the technologies of the future, by building structured, organised agriculture channels.

 

How are you going to go about developing these channels?

PYL : Axereal’s primary mission is to create value from grain. We are one of France’s major grain logistics operators, and we should be very proud of that. To boost the value of grain, we are developing four sustainable, competitive channels (in addition to commodities): production under contract for local and national clients; production for the group’s internal clients (milling, malting and livestock farming), that play a stabilising role and provide local outlets for grain; organic farming; and, lastly, the production of specialities, which will ultimately represent 4 to 5% of our volumes.

The aim of these channels is to develop sustainable agriculture in line with our "CultivUp" criteria, with specific technical briefs based on customer requirements. We aim to encourage 80% of our farmers to commit to channel production, to add qualitative value to what we produce.

JFL : It is thanks to these high-performing channels that farmers can see their expertise reflected in the end product that will be processed and delivered to a client either in France or abroad. We must always remember that if we are producing wheat, barley, soybeans, corn or lentils, it is because we have clients.

 

 

 

We are determined to adapt so that, in the future, Axereal’s model will be the right one: the model that sustains and supports farmers in a rapidly changing world.

Jean-François Loiseau Chairman
 

Our choices, our commitments

We are fully aware of our social footprint and committed to a voluntary continuous improvement as a good corporate citizen.

Céline Montauriol, Axereal CSR manager
 

CultivUp, our sustainable agriculture strategy

To optimise the solutions we offer our clients, in time for the 2018 harvest we are developing a production charter encompassing a vision of sustainability shared by our industrial customers.