Background
Governance, Law and Regulations

Report of the Supervisory Board

The reporting year 2015/2016 has been a year with the necessary market uncertainties during the season. After the first quarter it did not appear that the budgets could be realised due to uncertainties in the market and the particularly large seed potato crop in the Netherlands. HZPC succeeded in managing these uncertainties well and in selling a large quantity of seed potatoes from the Netherlands in particular, which resulted in an especially satisfying result being achieved.

Meetings

The Supervisory Board met seven times in 2015/2016. It should be noted that a meeting is usually held in July but this was held on 30 June 2016, meaning it was formally moved from reporting year 2016/2017 to 2015/2016. 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. 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 its setting and achieving of the company’s strategy, policies and objectives. Time was devoted to the acquisitions made in 2015/2016 in particular.

In HZPC, 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 by the shareholders, the HZPC Association. Mr. W.Sinnema was reappointed during the course of 2015/2016. Mr. B.T. Visser indicated that he will leave the Supervisory Board in October 2016. 
In May the Supervisory Board decided that Mr. M.J. Ubbens would act as chairman of the Supervisory Board. The Supervisory Board proposed Mr. M.W.C. Kester to the shareholders as a replacement for Mr. B.T. Visser. This proposal was accepted by the management of the association.

The Executive Board worked with an interim CFO on a temporary basis. Mr. J.L. Vilsteren was appointed CFO as of April 2016. The Supervisory Board was involved in the selection process and the definitive choice of Mr. Van Vilsteren as a member of the Executive Board.

The acquisition of all shares of HZPC Sadokas and various assets of KWS Potato demanded the necessary attention of the Supervisory Board. The proposals drawn up by the Executive Board with the assistance of advisors were approved by the Supervisory Board and submitted to the shareholders. The Executive Board kept the Supervisory Board informed about the progress of the negotiations.

The legal restructuring of HZPC is a decision by the Supervisory Board, taken in the spring of 2015. These decisions were implemented by the Executive Board during the course of 2015/2016 and completed as of July 2016. The Supervisory Board was kept informed of progress. The legal structure has thereby been brought into line with the management structure of HZPC.

Financial results

Turnover of 289.5 million euros was achieved in 2015/2016, a 20% increase on the year before and more in line with preceding years. The volume of sales of seed potatoes and potatoes grown under licence has increased by 6.9%. The average sale price has increased by 6.1%. Exchange rate fluctuations had a small impact on the result.

HZPC’s strategy is focused on allowing the gross margin to rise to 50 million euros or more around 2018. The Supervisory Board will see that the strategy is implemented conclusively and the results of the company develop in line with this 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 greatest change in the balance sheet is the increase in intangible fixed assets. This is caused by the purchase of the remainder of the shares of Sadokas OY and the assets of KWS Potato.

The Supervisory Board proposed paying out a dividend of 4.5 million euros to the shareholders on the recommendation of the Executive Board. This means 5.75 euros for each share certificate. This is consistent with the company’s aim to provide a stable dividend.

Governance, risk management, audit and internal control systems

During the financial year the Supervisory Board has been adequately informed regarding the company’s governance, risk management, audit and internal control systems. The processes which the Executive Board has initiated to manage risks are discussed with the Supervisory Board. The Supervisory Board has established that the risk management and control framework have been strengthened and reporting improved.

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´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 accountant audited the financial statement for 2015/2016 and issued an unqualified audit opinion concerning it.

A word of thanks

The Supervisory Board wishes to express its thanks to all HZPC employees for their commitment to achieving the eventual outcome throughout 2015/2016. The Supervisory Board is aware that policy decisions are important but that the results of a company primarily depend on the implementation of these choices by the staff of this company.

 

On behalf of the Supervisory Board,

Meerten Ubbens, Chairman
Joure, 6 October 2016