The global environment was challenging and volatile, with both positive and negative conditions. The world economy as a whole grew by approximately 3%, but regional disparities resulted in different growth levels in various countries, and several faced unsettling political conditions. The ongoing trade dispute between the US and China negatively influenced business sentiment and confidence globally. In addition, the uncertainties concerning Brexit had a negative effect on growth in the UK and the rest of Europe, with businesses postponing investments.
All these developments had an impact on the operating environment of the Groups. In addition, Group-specific local, operational and internal issues affected performance. In Brazil, a tax issue related to Cesta Basica that began in 1994, reached a final ruling by the Supreme Court, and had a significant negative financial impact on the cash-and-carry sector, including Makro. Competition in the Brazilian market was intense and the situation in Venezuela remained extremely difficult. Warmer weather in Europe and economic slowdown in Brazil and Turkey negatively influenced the volumes of SHV Energy. However, due to higher margins, net customer creation and acquisitions, results were higher. Mammoet, operating in a late cyclical business environment, continued to experience severe pressure on sales and margins. Difficult market circumstances combined with loss of market share resulted in a lower sales for ERIKS, the impact of which could not be fully compensated by efficiency measures. At Nutreco, difficult market circumstances in Spain and severe competition in salmon feed impacted the business. However, the shrimp feed market remained strong. Results of NPM Capital were higher as a result of divestments. Lower oil & gas prices made the upstream business environment for ONE-Dyas challenging.
The challenging situation for Makro in the Brazilian market required us to consider our options and find the best way forward. This resulted in the decision to sell or rent-out a number of stores, so enabling management there to focus on the further development of the operations in the State of São Paulo and set a new strategic direction towards sustainable profitability. The divestment process will be executed and finalised in 2020.
Throughout the year, a wide range of operational, organisational and efficiency focused actions were taken to improve performance. Unfortunately, this also meant we had to let go of over 4,000 colleagues. Despite these steps, the performance continued to be below desired levels. For SHV, this resulted in an income from operations, adjusted for exceptional items amounting to € 236 million, of € 541 million. Efforts to address the aforementioned issues are ongoing and will continue to be the main focus of attention in 2020.
A significant achievement was Mammoet’s agreement, that was closed in 2020, to acquire British heavy lifting and transport specialist ALE, so creating a leading global company in the heavy lifting and transport sector. The merger between Dyas and Oranje Nassau Energie was finalised in April 2019, creating ONE-Dyas, the largest privately-owned Dutch Oil & Gas exploration and production company of which SHV owns 49%.
The world is increasingly digital, a development SHV follows closely. During the year, we began a programme to develop tools, processes and culture that will turn SHV into a more insights driven organisation. Several systems were installed to efficiently capture financial data and an analytics platform was developed to capture non-financial data. This platform will support automated reporting, advanced analytics and insights generation through artificial intelligence and machine learning capabilities.
Digital insights provide valuable and relevant information to further strengthen performance management. A start has been made with designing data-based models that provide more insights into the present and future performance of the Groups. These models combine both internal and external data such as commodity prices, weather forecasts and macro-economic variables. Visualisations of these insights in dashboards support informed operational and strategic discussions on how to improve and further optimise the businesses.
Becoming more digital also requires us to pay more attention to information security. Hence, we further enhanced global security through the stricter follow-up and monitoring of security improvement. A global security awareness campaign was rolled out to the Groups to further educate users on the risks associated with using information and systems. Furthermore, we founded a global Security Operations Centre, to monitor and proactively identify cyber risks, threats and vulnerabilities. This enables us to take immediate action when necessary.
People are always at the heart of SHV and we designed a new Emerging Talent Strategy that includes the creation of several career tracks and relevant developmental positions. On executive level the clear majority of roles were filled by internal candidates, as a result of our structured succession planning and leadership development. In addition, two new leadership development programmes for senior leaders were implemented, amongst others focusing on digital innovation. In line with our values, Diversity and Inclusion has always been an important topic and is sponsored with full engagement and commitment from the Executive Board. Together with the management of the Groups, a strategy has been designed that will improve gender and nationality diversity to broaden thinking styles and to foster and encourage inclusive behaviour to realise the benefits of the different thinking styles.
While sustainability has always been high on our agenda, the SHV Sustainability strategy was made more explicit. In close cooperation with the Groups, we defined three focus areas that contribute to the United Nations Sustainable Development Goals. Our approach is further explained on the sustainability pages of this report.
The Ethics and Compliance department put particular effort into improving periodic risk identifications. The goal is to monitor changes that arise from new and existing national and international laws, regulations, industry standards, norms and shifts in society that apply to our businesses. The investigation by the Dutch public prosecutor into alleged non-compliance with laws and regulations at ERIKS and Mammoet, is ongoing.
Looking ahead, all the topics that mattered to SHV in 2019 will continue to be important in 2020. Geopolitical issues will dominate global developments. The US will have a presidential election, the UK has left the EU but the future relationship remains to be settled. As for economic developments, growth expectations for Latin American countries and the Middle East are optimistic, but the prognoses for Europe, China and the US are less positive and could result in lower global economic activity. Trade restrictions will impact world economies and the restrictive measures following the outbreak of the Corona virus will significantly affect global growth. Discussions about measures to reduce environmental impact will become more heated and influence business.
Together with the management of the Groups, we will remain focused on finding solutions to solve their operational and internal issues and optimise overall operational performance. At the same time, we will closely monitor global geopolitical developments to make sure that we can take the right actions to address situations as they occur.