Report of the Executive Board

Message from the CEO

Dear reader,

The year 2014/15 will be remembered as an exceptional and challenging one. Despite lower European demand for seed potatoes, HZPC has maintained its market position in Europe and secured competitive prices for our growers. Outside Europe we have, as hoped, been able to achieve good exports. ‘Growing with our potatoes’ is our fundament. As a company, team and supply chain partner, we are therefore continuously striving to develop and improve. This ambition and growth is characterised by investing in new markets, adding to our portfolio of varieties, introducing new concepts, and developing our organisational structure. Publishing this Annual Report only in digital form being just one example of such improvements. Confidence in the HZPC certificate last year appears to be undiminished and this gives us confidence as we continue on our current course into the future.

The cyclical market lived up to its name and delivered a large amount of ware potatoes thanks to the excellent growing conditions in 2014 in Northwest Europe. This led to very low prices for ware potatoes across the entire European market. With such low prices, the demand for certified seed potatoes was significantly less than in an average year. This resulted in lower sales and slightly lower sales prices for seed potatoes in the European market. This has been especially noticeable in sales of seed potatoes for the processing industries. In the fresh produce market in southern Europe, the acreage of potatoes dropped sharply as a result of the lower potato prices.

Though HZPC had a lower turnover in Europe, it has maintained its market share and in some market segments this has even expanded slightly. Europe is a very important continent for HZPC. However, a wider geographical spread is reducing this dependence on the European market, and we expect that dependence to decline even further in the future.

HZPC encourages a reduction in the number of generations of seed potato growing and this year has again seen that number decrease. This has in turn increased the demand for minitubers. The production of minitubers by both HZPC and third parties on behalf of HZPC has risen as a result. In our research we work on innovative products as well as new breeding techniques, the latter being an area that we have focused on a great deal in the past year.

Our capital position and operating cash flow remain solid. With a net revenue of EUR 241.6 million and a profit after tax of EUR 4.5 million, our result is lower than in the very successful year 2013/14. However we are very aware of market movements and of the potato as a natural product. Given the circumstances in the year 2014/15, we are satisfied with the results.

With our diversification strategy, we spread risks and serve geographically dispersed markets in a range of sectors through a broad portfolio of varieties. We also focus on creating added value for our chain partners. Even in the challenging season 2014/15, we held on to our strategy in terms of sales focus and pricing. It is one of our objectives to only allow moderate cost increases. Nevertheless we see a need to invest in new R&D technologies, new markets, and new commercial activities in order to maintain our strong position in the potato chain.

Looking ahead to 2015/16, we expect the European market to recover. At the start of the season, the prices of ware potatoes were much higher than a year ago. HZPC assumes that the demand for seed potatoes in Europe will therefore recover slightly. We anticipate a stable demand from the regions outside Europe. HZPC expects to achieve its growth objectives for 2015/16.

On behalf of the Executive Board, I would like to thank all our colleagues and growers around the world for their extraordinary commitment throughout this exceptional season, and for their ongoing contribution to the development and growth of HZPC. Let’s continue working on a successful season 2015/16 and building a healthy future together with our market partners.

Yours sincerely,

Gerard Backx, CEO

Joure, October 8, 2015