Message from the EBD

2023 saw global circumstances remain as unpredictable as ever. The Russia/Ukraine conflict is reaching the end of its second year with no end in sight. The situation in Israel/Gaza has shaken the international geopolitical climate further still. And the degrading security situation in a number of South American countries over the last twelve months has exacerbated the general feeling of instability. 

From a business perspective, the global economy has been characterised by a sustained period of high interest rates and high inflation – and this looks set to continue. Tight labour markets continue to play a part in restricting growth, while supply chains have still not recovered to normal levels.   

Times of such uncertainty call for constant adjustment, fast adaptation, and strong decision-making. Even so, our purpose remains unchanged. We endeavour to display the courage to care for people, for the planet, and for our performance in every aspect of our business.

Diversity, Equity & Inclusion (DEI) remain high on the agenda as we continue to build a highly engaged workforce that represents the makeup of the societies in which we operate. As we will discuss in the following chapters, we launched a wide range of initiatives to ensure the topic remains front and centre of our thinking.

Safety also remained a non-negotiable priority throughout the entire organisation, although we still need to improve to reach the level at which we expect – and need - to operate. Over the year we have taken action to improve the scale and scope of our reporting and launch us on the journey to realising our ultimate ambition of zero harm.

It is with the deepest regret that we report four fatalities at SHV Energy during 2023, all relating to road and traffic safety. Our deepest sympathy goes out to the families of those involved. 

As we will discuss later in this report, the organisation continued to focus on our three key ESG-related themes: DEI, Safety, and the reduction of greenhouse gas (GHG) emissions – the latter to meet key objectives including full compliance with the EU’s Corporate Sustainability Reporting Directive (CSRD).

In 2023 we saw a vast array of initiatives aimed at reducing GHG emissions across individual Groups, and across the organisation as a whole. Particularly Scope 3 emissions remain the most significant challenge to SHV. Furthermore 2030 emission targets will be updated early 2024. These initiatives included Double Material Assessments (DMA), which have identified the key areas on which each Group can focus to minimise its impact on people and the environment. 

Additional non-financial KPIs, next to the ones mentioned above, will be added under the CSRD legislation and will specifically provide transparency on additional environmental, social and governance topics within SHV and the extended value chain. Examples include KPIs on circular economy, consumers and end-users and business conduct. These KPIs will be included in the 2025 annual report which will be compliant with CSRD legislation. 

2023 has been a dynamic year, during which the organisation has acted upon a number of significant strategic decisions. Most notable among these is a planned reduction in the number of Groups within our Family of Companies, which will allow us to focus on SHV Energy, Nutreco, Kiwa, and NPM.

The sale of ERIKS is nearing completion and we are pleased to report that a Share Purchase Agreement has been signed. We expect to close the transaction in the first half of 2024, and intend to direct the proceeds into supporting growth at the remaining Groups.

Makro Brazil finalised the gradual divestment of stores in the São Paulo region. Associated to the reduction of its activities it also scaled down its head office to a minimum, with the aim to support the remaining administrative wind down which will still take a couple of years. Furthermore, the brand and its operations in Venezuela were sold to Redvital, with SHV retaining ownership of the premises to generate a predictable stream of rental income.

We continue to search for a suitable buyer for Mammoet. In the meantime, the business will be prepared for divestment, which we hope to take place within the next few years.

In line with our stated objectives announced immediately after the start of the Russia/Ukraine conflict, we put an immediate halt to new investments, projects and exports in and to Russia. Next to this we initiated the process to fully wind down our business activities in Russia. This was achieved by Nutreco in 2022 with the sale of its Russian company to local management, followed by Mammoet which sold Mammoet Russia and repatriated remaining equipment in 2023.

To optimise our focus on core activities even further, individual Groups divested a range of operations. SHV Energy sold its activities in China, and Kiwa its loss-making operations in Poland. Nutreco signed an agreement to divest part of its business in Indonesia. Mammoet continued to reduce its footprint in Asia and the Middle East, where it will now conduct projects on an in-and-out basis. The Groups also continue to make progress on a large number of initiatives designed to drive growth, control costs, and improve long-term performance.

SHV Energy launched the Horizons programme, which divides operating countries into three clusters based on their individual market characteristics. Tailored bottom-up initiatives aim to ensure that each individual country achieves its full potential over the coming years. The programme will also help to direct the focus on future investments, while at the same time ensuring existing activities are optimised and able to generate the required financing.

Nutreco retained its focus on adjusting business activities in response to new market realities. The company bolstered a range of programmes focused on successfully protecting margins, controlling production costs, reducing organisational complexities, and minimising overheads.

Kiwa has enjoyed a period of strong expansion that saw the acquisitions of Vinçotte and Intega. The Group will now focus on preparing a detailed long-term strategy to support the next wave of growth, with priorities including the strengthening and harmonising of financial systems and key support functions such as HR and IT.

Finally, NPM continued to successfully build on its theme-based approach to investments, as well as provide operational support to participations in the form of ESG and Corporate Financing expertise. 

We launched the Pulse Programme to establish a robust data framework across the organisation. By breaking down silos, modernising infrastructure, and organising data, Pulse lays the foundations that will allow us to fully exploit the potential of data and AI. We will continue to explore the latest technologies, empowering our customers, employees, and partners to optimise decision-making, comply with our values, and meet our regulatory obligations.

Cyber-related criminal activity continues to become smarter, stealthier, more sophisticated – and is taking place at a larger scale than ever. As our reliance on digital technology grows, so too does the risk of cyberattack. Security is no longer a new concept. Protecting ourselves against such threats has become a routine part of everyday business. Yet despite our best efforts, we cannot guarantee 100% prevention. That is why we follow the principle of protect, detect, and respond. 

Beyond taking proactive action to avoid incidents, we have also put in place measures that will allow us to quickly detect and respond to any incident and minimise any potential damage. We are also committed to continuously reinforcing all related strategies and operations. In 2023, for example, we increased employee awareness and enhanced our security operations centre to increase resilience against evolving threats.  

During the second half of 2023, we began work on redefining the specific responsibilities of SHV Holdings and the Groups, as well as the current challenges we face and the solutions to them. The process will continue into 2024, increasing the effectiveness of our decision-making and maximising efficiency. Initiatives designed to leverage the scale of SHV in support of the Groups also continued, with an emphasis on IT Procurement: IT contracts and purchases have been harmonised to reduce the cost and increase the quality of relevant services.

Finally, we have taken the decision to move our accounting framework from Dutch Accounting Standards to International Financial Reporting Standards (IFRS), as this will better reflect the results of the Groups. This will make our financial figures easier to benchmark against those of similar global companies and ease access to broader sources of financing if needed. The first annual report under IFRS will be published in 2025 over 2024.

In 2023 SHV Energy, Mammoet, Kiwa, and ERIKS all delivered strong growth in IOBEA. Nutreco remained stable, but if corrected for the loss of the Russian business, the sale of the Spanish poultry activities in 2022 and the impact of Ecuador, remaining activities showed a rise in operational performance in 2023. Although market circumstances remain challenging, we are optimistic about the continued upward trend of this performance metric.  

Aqua operations in Ecuador, by far Nutreco’s largest business unit, did not contribute as significantly as expected. This was due to the worsening economic and political conditions in the country. In addition, the discovery of accounting irregularities also made an impact. We acknowledge the risks associated with fraud and irregularities and prioritise full compliance and transparency. A robust framework of internal controls and strong checks and balances at every level are supplemented by a broad set of Ethics and Compliance policies and guidelines. Please refer to the dedicated Risk Management section to understand the top 10 risks we face and the measures we have put in place to address them. 

Focusing on non-operational Groups, NPM aims to grow participations to achieve their maximum potential before selling at the right time. This means that income can vary widely from year to year. In 2023, NPM realised a single partial exit (Kramp), resulting in a lower contribution to overall results compared to previous years. Following a record year in 2022, ONE-Dyas also saw a decline in earnings due to lower oil & gas prices and the associated impairments of oil & gas assets. 

Moving on to exceptional items, different one-off events made a net positive impact amounting to € 73 million in 2023 (2022: € 56 million). This is composed of the net positive contribution of the sale and wind-down of Makro stores in Brazil and the revaluation of Venezuelan stores. Furthermore, the partial impairment of SHV Energy’s US business, swings in pension deficits, claims & other disputes and restructuring costs contributed negatively, and were offset by the decrease of the special risk provision.

Amortisation costs increased due to goodwill from recent acquisitions in Kiwa and SHV Energy. Interest expenses also increased due to increasing cost of borrowing in 2023, associated to gains from the sale of SHV Energy’s activities in China and no material book losses or write-offs. Tax costs, whilst remaining high, reduced slightly compared to 2022.

Resulting from these effects, Net income amounted to € 380 million in 2023, remaining at a similar level as 2022. We view this performance as satisfactory, yet emphasise the need to structurally increase it going forward, supported by the ongoing execution of performance improvement programmes across all Groups.

A continued emphasis on cash generation and preservation has achieved good progress, with SHV generating a positive free cash flow of € 175 million, the result of a slightly lower operational cash generation more than offset by significantly reduced investments. Overall SHV remains resilient, supported by a strong, conservatively financed balance sheet.

Particular mention goes to our colleagues at Mammoet and ERIKS for their patience during a prolonged divestment process. And to Paul Hesselink at Kiwa for two decades guiding Kiwa on their journey of growth as the company’s CEO and Paul van Gelder, being the CEO of Mammoet for more than six years.

Last but not least, we want to thank Eelco Hoekstra, who stepped down from the EBD as of January 1, 2024, for his contribution to the EBD and SHV.

J.P. Drost
CEO