1. Productivity improvement
Flour Milling Consolidation Process in the EU and Strategic Options to grow profitably!
Siegfried Meyer, SGS-Geneva

2. Disclaimer
The information provided by SGS does not represent an offer, investment advice, or any kind of financial service.
Although SGS has obtained the information provided from sources that should be considered reliable, it cannot guarantee its accuracy or completness. The information provided is purely of an indicative nature and is subject to change without notice at any time.
The information provided does not confer any rights. SGS cannot guarantee that this presentation does not contain errors and does not accept any liability for the information contained in this presentation.

3. Challenges for EU Flour Milling
Export market
Domestic demand
Margin profitability
Productivity
EU flour exports declined, because lost price competiveness in the last 15 years to Turkey and Kazakhstan who are the main exports now. Decline from 2.2 Mio. mt in 2005/06 to 1.1 Mio. mt in 2016/17, which is only 6% of global flour exports. In the same period Turkey increased to 30% and Kazakhstan to 18%.
Just for comparision – French flour was exported at an average price of USD 400/mt, Turkish for USD 300/mt and Kazakh for only USD 220/mt
Domestic demand for EU flour was constant between 2005 and 2017 and is expected to remain stable.
Margin in the EU flour sector is volatile mostly dependent on wheat price fluctuation and dropped from 5% in 2006 to 1% 2011
Productivity is still not sufficient, since capacities too small and not efficient enough

4. Consolidation
The number of mills in the EU is constantly decreasing
The structure of the flour milling industry is changing and shows accelerated consolidation The number of mills continue to decline, however, production volumes are stable.and market share of large companies is increasing.
When production capacities of large companies get bigger, the OPEX can be better distributed on a bigger quantity and hence margin is increasing
In 2015 the top 12 companies controlled 34% of the whole market, whereas in 2007 it were only 26%.
Source: European Flour Millers 2016, Rabobank 2017

5. Margin
Weighted average EBITDA margins of key European flour millers,
Driving force for consolidation is the margin erosion!
The margin dropped from 5 percent in 2006 to 1% in 2011 and increased slightly further to It becomes more difficult to pass on wheat price increase to customers
The reaction was discussed before, since the pressure on the market is rising and thus actions are necessary to survive.

6. Strategic options for growth
Expand into EU
Specialize on niche products with added value
Improve Productivity

7. Expand into EU
Flour-milling capacity density in 2017 and average soft-wheat surplus by country, 2014/ /17
Expanding provides the option to benefit from a very fragmented industry where the largest miller only controls 5% of EU flour, which is very small compared to Us or China.
Not to forget, the EU is the largest wheat producing region worldwide.
-bigger Capacity gives vast procurement power and supply chain cost optimization
-network of mills close to consumers
-redundant when breakdown
-synergies overall the pan-european company

8. Specialize on Niche Products
Weighted average EBITDA margins in wheat-flour milling below most of those in niche or specialty segments,
Entering into niche milling segments is a possibility to improve margins.
e.g.: durum wheat, rice, corn and oat milling are four interesting segments, which have better profitability compared to wheat flour milling.
However a degree on specialisation is required to be successful in the niches

9. Improve Productivity
Capacity utilisation and market share of top 3 millers in selected countries, 2015
It is paramount to maximise the position on the domestic market, optimal sourcing strategy, adapting quickly to market changes and most importantly improve your productivity of your own mill
There is a North-South Divide

10. Productivity of your Flour mill is key
Utilisation rate
Yields and losses
Energy consumption
Headcount
Maintenance
Quality
Monitoring, reporting and record keeping
Safety

11. Our Expertise is Hands-On!
Experience
25 Years Comprehensive Experience in the Food Industry
Experts
Trading-, Procurement-, Market-, Technology-, Production Experts,....
Success
Holistic Approach with Success Guarantee
We have developed over the last 25 years a successful methodology to improve the productivity sustainably

12. Increasing Productivity?

13. Turn Around Management
Our 5 Steps to Success!
Initial Fact Finding
< 1 day visit at the Client‘s Plant, proposing possibel Solutions
Pre-Diagnosis
2 days visit at the Client‘s Plant, with rough Evaluation and Final Report, proposing possible Solutions
Diagnosis
Detailed Action Plan, which is the Blueprint for the Turn Around Management, >20 mandays
Turn Around Management
During 2-6 months, on-site, Implementation of Action Plan
Audits
Verification of Actions implemented, over a period of 12 months, with Audits every 4 to 6 weeks.

14. 2 days visit at the Client‘s Plant, with rough Evaluation and Final Report, proposing possible Solutions
Visit of the Production Plant
Review of Production-, Maintenance- & Quality-, Records
Review of Input/Output Balances – Products/Utilities
Review of Job Descriptions & Organisation
Review of Yields/Losses and Benchmark
Qualified Meetings with the Management & Operators & Summarize with possible Savings Potentials
Preparation of Final Report, addressing Savings Potentials

15. Report
Client
Expert Pool
Field Expert

16. Our Show Case Projects

17. Task: Supply Chain Optimization
MEASURES
INPUTS
SAVINGS
Evaluation of Transport Logistics
Assessment of current Procedures <20md
Analysis of Warehouse Logistics
-15%
€450k/anno
€80k costs
Payback 2,1 months

18. Task: Increasing Productivity of Workforce
MEASURES
INPUTS
SAVINGS
Assessment of Job Descriptions and Application
Assessment of current Procedures <5md
Restructuring
<30md
-50%
€600k/anno
€70k costs
Payback 1,4 months

19. Task: Reducing Energy Input
MEASURES
INPUTS
SAVINGS
Evaluation of Energy Input & Savings Potential
<10md
Implementation
Extended Maintenance <40md
-30%
€700k/anno
€200k costs
Payback 3,4 months

20. Amortisation of our Costs in about 6 Months!

21. Thank you! For more information contact us : Siegfried Meyer
Productivity Improvement Consulting
Phone:   
The part you can influence is the OPEX with Productivity Improvement Management.
The market is given and hence no influence.