Background
COMPLIANCE

Report of the Supervisory Board

The year under review 2017/2018 has been a year in which we have made further investments in the international development of HZPC Holding. The season was characterised by low prices for ware potatoes in Europe. As a result, the marketing of seed potatoes was more difficult than usual. In the first quarter, it looked as though the volume in tons of seed potatoes from the preceding (record) year would not be equalled. HZPC Holding, however, was ultimately successful in further honing their record and sold more than 800,000 tons this year. A minor reduction in Europe was offset by increased sales and licence income in North and South America and Asia. By keeping costs under control, a very satisfying result was ultimately achieved.

MEETINGS

The Supervisory Board met six times in 2017/2018.

The meetings took place either fully or partially with the Executive Board. The chairman of the Supervisory Board and the CEO prepared the meetings. The agenda items for the various meetings are placed on the agenda on the initiative of the Supervisory Board or on the initiative of the Executive Board. The Supervisory Board is confident that all members made adequate time available to give sufficient attention to HZPC Holding. A member of the Supervisory Board was absent on two occasions due to external circumstances. This did not delay the progress of the discussions and decision making.

 

SUPERVISORY BOARD ACTIVITIES

The Supervisory Board is in charge of supervising and advising the Executive Board in determining and achieving the company’s strategy, policies and objectives. It also takes the role of employer and sets the remuneration levels for the Executive Board.

In HZPC Holding, a two-tier corporate structure under Dutch law, the Supervisory Board is a separate body operating fully independently of the Executive Board. Members of the Supervisory Board are appointed and reappointed by the Shareholder; that is, by the ‘Vereniging HZPC’.

In October of the 2017/2018 season, the term of Mr Ubbens as Chairman of the Board was extended for four years.

Over the past year, the Supervisory Board and the Executive Board have held comprehensive discussions about the new strategy for the coming five years. In this context, there have been various information sessions organised with the Supervisory Board. On 5 July 2018, the new strategy for the HZPC Group was approved. The Board also approved various   investments, including the renovation of the R&D facilities. Annual investments in R&D have meant the facility has become too small and was also due for some modernisation. In the coming years, extra investments may be required in order to maintain the technological level of the R&D facility. The Board has also discussed the joint venture in India, which has faced difficult conditions due to a volatile market, in great detail. Next year, the Board expects to discuss this matter in more depth with the Executive Board.

 

FINANCIAL RESULTS

Turnover of 300 million euros was achieved in 2017/2018, a 5% decrease on the year before. By contrast, the volume of seed potatoes sold and of seed potatoes grown under licence, has increased by 2%. Exchange rate fluctuations had little impact on the result.

HZPC Holding’s strategy is focused on allowing the gross margin to rise. The Board will ensure that the strategy is implemented effectively and that the company results develop in line with the strategy. The Supervisory Board is fully aware that HZPC works with a natural product and that results are heavily influenced by the demand and availability in that year. Therefore the strategic results must not be judged over one year and the trend over several years must be used. The results of the HZPC Group this year are in line with the long term goals. The Board is satisfied, since this confirms the company’s strategy.

A major change has taken place in HZPC’s balance sheet this year. Last year, the acquisition of the cultivation lands around the R&D facility increased fixed assets by a significant amount.

This year, the company paid back the growers’ deposits and transferred to financing the business via bank credit. As a result, the security in the financing balance sheet increased.

The Supervisory Board proposed paying out a dividend of 3.1 million euros to the shareholders on the recommendation of the Executive Board. This means 4.00 euros for each share certificate. This is consistent with the company’s aim to provide a stable percentage of the profit.

 

GOVERNANCE, RISK MANAGEMENT, AUDIT AND INTERNAL CONTROL SYSTEMS

Over the year, the Board was kept informed about general management, risk-management, accountancy audits and the internal control systems within the business. The processes which the Executive Board has initiated to manage risks were discussed with the Supervisory Board. The Supervisory Board established that the risk management and control framework have been further strengthened and that reporting has improved. Twice a year, the Board uses a ‘risk matrix’ to discuss the most significant risks facing the business with the Executive Board.

One of the members of the Supervisory Board had discussions with KPMG, HZPC’s external group auditor. KPMG Accountants reported to the Supervisory Board on the agreed scope of the audit and the outcome. HZPC Holding’s financial statements, the report and management letter of the external auditor were discussed with the auditor in the presence of the CEO and CFO. The auditor audited the financial statement for 2017/2018 and issued an approving auditor’s report thereon.

 

A WORD OF THANKS

The Supervisory Board would, once again, like to express its thanks to all HZPC Group employees for their commitment during the year 2017/2018 and their contribution to the realised result. The Board realises that policy decisions are important, but that the results of a company primarily depend on the implementation of these choices by the staff in the company.

Joure, 4 October 2018

 

On behalf of the Supervisory Board,

Meerten Ubbens, Chairman