Highlights

These events had an additional impact on the already high raw material, commodity and energy prices, the ongoing supply chain disruptions, the rising inflation, as well as the extremely tight labour market.

Our immediate focus was on safeguarding our colleagues in the region as much as possible, then on assessing whether and how we could continue operating in the Ukraine and on how we could retract from Russia. We also put an immediate halt to new investments, new projects, and new exports in and to Russia. The Ethics & Compliance departments at SHV Holdings, Mammoet and Nutreco  put a huge amount of time into making sure we remained compliant with the frequently changing rules and regulations.

After selling its livestock feed operation to local management in June, Nutreco no longer has any presence in Russia. Therefore, the exposure to Russia is driven by Mammoet’s remaining in-country presence, comprising an operational company and the contractual commitments associated to the Arctic LNG project as all other contractual obligations have been fulfilled within the limitations of applicable sanctions. SHV’s and Mammoet’s main priority now is the full reduction of its exposure to Russia. Managing this is complicated due to the dynamic sanctions and intricate stakeholder landscapes. SHV is prioritizing the speed of execution and despite the complexity, progress has been made.

For Makro, the process of strategic reorientation has been ongoing after the sale in 2021 of Makro stores outside the São Paulo region. This entailed another period of reflection and analysis to assess the best possibilities to ensure future growth. In January of 2023 this has resulted in two transactions, in Brazil and in Venezuela. In Brazil, an agreement has been signed with Grupo Muffato for the sale of 16 stores in the area of São Paulo, pending approval of CADE, the Brazilian competition authority. The remaining 8 Makro stores will be sold or rented out to other interested parties. Once all finalised, Makro will no longer be present in the Brazilian market. In light of the successful cooperation of Makro Venezuela with Redvital, where they are offering not only food but also medicines, medical supplies and equipment in the stores, an agreement was signed to rent all Makro stores to Redvital for them to operate. Redvital will buy the Makro name and will remodel all the remaining stores to the new concept.

Decisions are based on the fact we feel that with both Redvital and Muffato as new owner, Makro Venezuela and Makro Brazil will have better possibilities to strengthen and further grow the business.

The increase in income from operations before exceptional items and amortisation to € 691 million (2021: € 633 million) was offset by an increase in amortisation of intangible assets, mainly as a result of the acquisitions by Kiwa and lower exceptional items. Furthermore, NPM Capital generated a lower income from its private equity investments. The increase in the operational performance of our investments in affiliates, which mainly represents the result of One-Dyas, was offset by an increase in the total tax charge for the year, mainly due to the additional tax levies in the oil & gas industry within ONE-Dyas. Interest costs increased because of new additional financing at Corporate and the Groups and rising interest rates. Loss on the sale of subsidiaries, mainly reflecting the divestment of Nutreco’ s Russian activities and the impairment of our investment in Lightyear resulted in negative other financial results.  Overall, this resulted in a decrease in net income to € 400 million compared to last year (€ 979 million).

The challenging market circumstances also required that we kept looking ahead and stay alert in order to respond quickly if and when needed. Next to that, numerous other issues, be it internal or external took time and attention.

To reflect the increased focus on cash preservation and cash generation, additional efforts have been deployed to improve relevant cash flow insights as well as to increase the transparency regarding working capital levels within Groups. This is a broad and shared effort which will require further progress to enable a more detailed and integrated view to support improved decision making.

Looking forward, other priorities are related to the improvement of data flows between Groups and SHV Holdings to support the quicker generation of better insights in the business. Additional emphasis will furthermore be put on automation projects to reduce current required reporting efforts.

The internal audit department continued to add value by identifying new opportunities to improve operations; prevent issues such as fraud, corruption, and avoidable losses; and support management in making balanced, risk-based decisions. An SHV-wide safety audit generated valuable insights to help reinforce the culture of safety across the organisation. In order to smoothen the integration of SunSource into SHV Energy, a so called welcome review was conducted.

Conducting business with integrity, and in full compliance with all applicable laws and regulations, ultimately depends on the conduct of individual colleagues. The subject of ‘Culture and Behaviour’ was frequently addressed during 2022, with management teams across all Groups acting upon the outcomes of their compliance culture assessments. Workshops were organised to improve insights in human rights-related risks.

With this in mind, SHV will implement ‘Pillar Two’, a new G20/OECD initiative aimed at ensuring all multinationals pay a minimum of 15% tax in the countries in which they operate. As the Pillar Two rules are complex, an impact and readiness assessment based on the model rules published by the OECD was conducted. The implementation of a Pillar Two model into the financial reporting processes will be the next step, before the rules coming into effect at the start of the 2024 financial year.

In 2022, SHV also endorsed the Tax Governance Code issued by VNO-NCW (the Confederation of Netherlands Industry and Employers). SHV’s tax strategy has been updated accordingly, although most of the principles outlined were already being applied. From 2023 onward, SHV will start publishing more tax information in accordance with the Code.

SHV Procurement started to implement a more structured approach to commercial projects within the Groups, consolidating indirect spend, lowering costs, and aimed at achieving significant annual savings. A new Cross-Group Spend Dashboard, connecting SHV and the Groups, has been instrumental in generating additional savings across categories such as IT, temporary labour, professional services and insurance. A Value Tracking Tool was also deployed across all the Groups to increase the efficiency of project management and reporting. Together, these initiatives will provide a solid base for additional future cost savings.

This evolution in cybercrime, in addition to current geopolitical circumstances, have shaped a landscape of diverse threats from criminals, hacktivists, and even nation states. The situation calls for an agile and resilient defence based not on if an incident will occur, but on how and when. With this in mind, the focus is not just on protecting SHV from attacks, but also on detecting and responding to threats. A number of simulations have been organised across the Groups to practice and enhance the response and also a SHV wide audit related to ransomware readiness has been conducted. All this has resulted in SHV wide improvements of security measures related to prevention, detection and response to attacks.

Innovation has and always will play a key role in finding new ways to grow. The SHV cross-Group Innovation Community, sponsored by the EBD, has matured into a self-managed one, where the Innovation Leads from the Groups organise quarterly meetings with different innovation themes. Additionally, two successful SHV-wide Innovation Days were organised focusing on ‘Business value through Innovation’ and ‘How to create value out of Data’. Over 100 colleagues from the management boards, innovation-, data-, communication- and IT teams joined from all Groups, collaborating together to scale up innovation throughout the SHV Family of Companies.

Adaptfy, SHV’s global Data & Analytics (D&A) organisation, took a significant step to becoming the SHV Family of Companies’ designated data analytics solution provider by doubling its team to 100 colleagues, and opening a hub in India to better service its clients. 55 projects have now been completed with another 18 ongoing. This allows Adaptfy to not only focus on ad hoc use cases, but to cross-pollinate and deploy scalable solutions across businesses.

As part of the drive to promote an inclusive learning culture, ‘Management Essentials’, a programme based on scientific research and designed to increase the basic leadership skills of managers was introduced. The programme covers topics such as the growth mindset, trust and psychological safety, and developmental feedback.

Going forwards, we will focus on a more structured collaboration between the Groups; an internal coaching and mentoring framework; and the gamification of our leadership values as part of the SHV onboarding process. Other initiatives include a ‘Young SHV’ community and an internal, cross-Group job site accessible to all SHV colleagues.

So once again, we want to take this opportunity to thank each and every one of them for the remarkable job they have done. People have always been at the heart of SHV. And over the last few years, our people have shown that SHV is in their hearts as well.

Supply chains will remain complex due to ongoing sanctions and other restrictions brought on by the geopolitical situation, increasing the need to secure supplies from different regions and sources. There are no signs of the labour shortage coming to an end. Energy prices will remain high and volatile. The unstable geopolitical situation, not only caused by the Russia Ukraine conflict but also by the growing tension between the US and China will have an impact as well.

Operational improvements across the entire SHV organisation will need to be driven by a disciplined execution of short term strategic initiatives, combined with an unwavering focus on cost control, working capital management and margin improvement. Now more than ever, the EBD will prioritise support for the Groups in managing these circumstances in the most effective ways possible.

J.P. Drost
CEO