COMMENT: Vion focuses on core with Oerlemans sale
The news that Dutch food group Vion has entered into a deal to sell its Oerlemans Foods business may have come as little surprise to many in the industry given the "vigorous" strategy to streamline its portfolio, outlined last summer.
The firm revealed this morning (14 January) that Baltussen Holding will purchase the company and be supported in the deal by its strategic partner Rijko. Baltussen specialises in the production and processing of fresh vegetables, while Rijko is involved in the sourcing of these raw materials.
The deal is in line with the firm's plans to dispose of its non-core assets and will allow Vion to focus on its core meat businesses, where it clearly sees potential to improve its performance.
In June last year the company set out plans to focus on its core implement investments in a "more vigorous manner", which began with the axing around 340 jobs in the Netherlands and around 290 in Germany.
The divestment of frozen vegetables, fruit and potato products firm Oerlemans follows the Vion's exit of the UK market altogether.
Vion's problems in the UK are no secret. The company was at the centre of one of the more controversial plant closures in the country last year when it shuttered its Hall's of Broxburn site.
Intense competition and over-capacity in the meat sector overrode a series of attempts to reshape the UK business. But its decision to completely exit the UK market where it has 38 sites and employs 13,000 people came as a surprise to many in the industry.
The company put its UK units on the block in November and, before Christmas, announced an MBO of its UK pork arm. Last week Vion revealed that it may close simply its lamb processing business due to the loss of its contract with Asda.
It's problems go beyond the UK though. The meat processor has been looking to reinforce its competitive position in the strongly contested Dutch food market. It's decision to leave the UK will allow it to focus on its Dutch and German operations as well as its global food ingredients arm.
In May last year, economic conditions and increased prices for raw materials hit the firm's full-year profits, pushing EBITDA down 53% to EUR90m (US$113.2m).
This may have been what let to an urgent call for a new strategy, which followed shortly afterwards - the objective: to further enhance the company's productivity and product quality, while lowering costs.
Vion has certainly been true to its word in implementing its plans at an accelerated pace. As for which business will be next, we may not have a long wait to find out.
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