GLOBAL ACTIVITY REPORT 2013

Transcription

1 GLOBAL ACTIVITY REPORT 2013

2 GLOBAL ACTIVITY REPORT 2013

3 TABLE OF CONTENTS 1 Introduction Durabilis Group Durabilis Business Units CEO & Chair message Newsflash 10 About this website / Global activity report 12 2 Durabilis Group Key Figures About Durabilis Impact and Social Responsibility Key financial information 32 3 Durabilis Business Units 35 4 FairFruit FairFruit in a nutshell Challenges and opportunities Strategy FairFruit International 48 Developments in Challenges for 2014 and beyond FairFruit Guatemala 52 Developments in Challenges for 2014 and beyond FairFruit Ethiopia 55 Developments in Challenges for 2014 and beyond SGTF 57 Developments in Challenges for 2014 and beyond SID Peru 60 Developments in Challenges for 2014 and beyond Commitment tracker 63 5 Barajii Barajii in a nutshell Challenges and opportunities Strategy Developments in Challenges for 2014 and beyond Commitment tracker 77 6 Terral Terral in a nutshell Challenges and opportunities Strategy Developments in Challenges for 2014 and beyond Commitment tracker 90 7 Durabilis Consulting 93 8 Contact us 96 DURABILIS Global Activity Report

4 1 INTRODUCTION 6 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

5 1. INTRODUCTION 1.2 DURABILIS BUSINESS UNITS Durabilis businesses combine the production, processing and distribution 1.1 DURABILIS GROUP Durabilis is an international impact investing company with headquarters in Ghent, Belgium. Through the concept of shared value, Durabilis is committed to providing local and export markets with sustainable quality products, optimising supply chains, and improving the lives of employees, farmers and other supply chain partners. of food products for local or export markets. We invest in operations positioned at bottlenecks in certain value chains, in order to support viable agri-business clusters and sustainable development. The businesses are organized in 3 Strategic Business Units: FairFruit, Barajii and Terral. Vision Rural prosperity is the motor of economic and societal growth in developing countries. We believe in a new economy based on shared value. As an impact investing company, we ensure that all stakeholders share in the value we create Mission statement We link people to formal economies by investing in and managing sustainable agro & food businesses in low income countries Strategic objectives We create good jobs and we provide farmers and other supply chain partners with a better income 8 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

6 1 INTRODUCTION 1.3 CEO & CHAIR MESSAGE Ladies and Gentlemen, This is Durabilis fifth annual report, and we re pleased to be able to look back at our developments in 2013 and to talk about opportunities and challenges in 2014 and Durabilis was 10 years old in 2013! In July, after a successful seminar, we celebrated this birthday with colleagues, clients, suppliers and others invested in Durabilis from all over the world, with a memorable boat trip on the Schelde. The event marked the successful completion of negotiations with our first external investor, ICCO Investment Fund. While we continued to talk with other institutions and individuals interested in investing in Durabilis, an exercise which concluded in bringing several new investors on board in 2014, we also focused on structuring Durabilis activities into three strategic business units: FairFruit, Barajii and Terral. At FairFruit, our aim was to bring all companies under one management and strategy. This included starting up activity in the UK to deliver directly to its retail sector, and expanding our activities in Peru for the export of vegetables. In West Africa, we are partnering with some of our clients to centralise all mango exports. And thanks to the investment by ICCO in Durabilis in 2013, we have been able to start up Koga Veg, the FairFruit subsidiary in Ethiopia. Barajii continued to grow with new product lines, and prepared itself for a successful roll-out of PET (polyethylene terephthalate) products in We are now looking at potential partnerships in new and surrounding countries like Togo, Mali, Niger and Ivory Coast. Thanks to the ContenO- BaratenO concept, we will be able to set up low-cost production facilities for pouches and PET products in other developing markets. Terral had its first break-even year and also welcomed a new shareholder: Grameen Crédit Agricole. Together, we began the construction of our own milling facility in Ndioungue Mberes, in the North of Senegal. We will inaugurate our factory in Q With this increased production capacity, we expect the business unit to become financially independent from Our challenge in is to consolidate and support our business units on their paths for growth. With the arrival of new investors and the consequent strengthening of our balance sheet, we will be able to focus both on sustainable growth and on developing the social and financial performance of all our businesses. Across all our businesses, we have the ambition to have more than 15,000 families benefiting from our activities by the end of As we grow and move forward, we connect and build relationship with more stakeholders each day and we meet and take on new challenges as they arise. More than ever, we remain committed to ensuring our impact throughout the value chain. Impact investment is not a tranquil river, but a buffeting cascade of challenges and opportunities. With the world becoming more and more connected, and also more complex, we rely on, and we are very grateful for, the experience of new investors, a highly dedicated team, and a growing number of workers, farmers and other stakeholders who share our ideas. Thank you for your interest in Durabilis Marc and Sebastiaan Chairman and CEO of Durabilis MARC AND SEBASTIAAN SAVERYS WE LINK PEOPLE TO FORMAL ECONOMIES BY INVESTING IN AND MANAGING SUSTAINABLE AGRO & FOOD BUSINESSES IN LOW INCOME COUNTRIES. MISSION STATEMENT 10 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

7 1 INTRODUCTION 1.4 NEWSFLASH First investor round successfully closed 15/08/2014 Grameen Credit Agricole Durabilis starts Koga Veg in Ethiopia FairFruit International expands sales After a long preparation and negotiation trajectory, Durabilis first enters SFA capital 27/06/2013 to the UK 31/03/2014 external investor round was closed in July 2014, when five impact 30/09/2013 In February 2013 Durabilis obtained rights to By analogy to the Belgian sales office a UK sales investors agreed to finance Durabilis through a convertible loan. After three seasons of suc- 50ha of irrigated land in the recently complet- office was established through the acquisition The deal was closed in August, contributing 4.5 M of cash to Du- cessfully testing the oper- ed Koga project near the town of Bahir Dar, of the British company Nuexo with which Fair- rabilis means as to finance the growth of its three established stra- ational processes and the Ethiopia. In May 2014, Koga Veg was formally Fruit had been dealing since FairFruit UK tegic business units. market under the brand registered as a company under Ethiopian law. will in a first stage focus on 12 month supply of Terral, Durabilis formal- Koga Veg projects in 2016 the employment of conventional, organic and specialty mangos to ized the the Senegalese 300 people on the farm and another 300 in the British retail outlets such as Tesco and Waitrose. firm Société de Filières pack house. In addition the project forsees the Alimentaires (SFA) in Jan- soon inclusion of 100 farmers in a formal ex- uary The rented old port chain. Chinese equipped factory did not cover the needs for the production of high quality long grain rice anymore and the decision was taken to invest in a new rice factory. Grameen Credit Agricole accepted to enter SFA s capital for 20% of Durabillis HQ moves offices 14/04/2014 Foreseeing a significant expansion of the team in the near future Durabilis moved its offices in April Our spacious new office the shares and provided a long term credit line for an amount of SBFA invests in more production capacity and new flavours 31/12/2013 in the Portalis building in Zwijnaarde, near Ghent, now hosts about Marketing and distribution efforts in 2013 re- 20 employees on an almost permanent basis. sulted in a resurgence of pure water market share in a market largely dominated by informal players. Additional flavours were added to the product range, such as the flavoured Citrus drink and the very popular natural tamarind juice. A major investment in capacity included a pasteurizer for juices and flavoured water. 12 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

8 1 INTRODUCTION ABOUT THIS WEBSITE/ GLOBAL ACTIVITY REPORT Strongly committed to the principles of accountability and transparency, we believe that this combination of Global Activity Report and website provides the ideal platform for a dynamic and focused communication with our stakeholders. In response to the readers of our former Global Activity Reports, we have done our utmost to be concise and obtain a good balance between all aspects of the organization: strategy, objectives, actions, financial and sustainability performance. As mentioned in the Global Activity Report, we decided to temporarily focus on narrative reporting and take a step back in quantitative reporting because of three reasons: Difficulties to separate material from non-material information The rapidly growing number of businesses combined with limited resources Different stages of data management among the businesses Integrated reporting Durabilis is determined to make integrated reporting a reality. As with anything related to sustainability, this must be seen as a learning process where objectives and ambitions are weighed against the available resources. In this report we have sought to include 4 dimensions: Activity Report Description of our activities, risks and opportunities, evolutions and outlook Sustainability Report Impact and Social Responsibility performance on issues considered relevant by our stakeholders. Governance Report Structures and systems to ensure oversight and control Financial Report Basic financial structure of Durabilis NV and key financial figures of Durabilis businesses. For more information about the financials please contact Stefan Jamar (Stefan@durabilis.eu). In order to keep focus, we limit quantitative reporting mainly to our relationship with our least empowered and most important stakeholders: workers, smallholders and, where relevant, other supply chain partners. However we aim to extend this reporting towards other stakeholders in the future. Impact and sustainability commitments are expressed through commitment tracker tables at business unit level. It is there that Durabilis mission becomes reality. We hope you enjoy the reading of this report. Reporting period Unless mentioned otherwise the information in this Global Activity report/website covers fiscal 2013 ending on December 31 st. Material issues related to 2014 are included in the narrative reporting. 14 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

9 2 DURABILIS GROUP 16 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

10 Guatemala Peru, Ecuador, Colombia FairFruit Volumes Produced in own farms tonnes Sold by local facilities tonnes Distributed by FairFruit International) tonnes Sales 13 M EBITDA 0,9 M Workers (FTE) 1669 (headcount) Smallholders Incl. local sales 2 For FairFruit Guatemala extrapolated from 2012 numbers 2. DURABILIS GROUP 2.1 KEY FIGURES 2013 Senegal Burkina Faso Belgium Ethiopia Barajii Volumes 110 M pouches Sales 6.3 M EBITDA 1,5 M Workers 268 (FTE) 606 (headcount) Terral Volumes 820 tonnes (white rice) Sales 0.3 M EBITDA -0,08 M Workers 19 (FTE) 23 (headcount) Smallholders ABOUT DURABILIS History The Loquat story Durabilis origin goes back to 2003 in San Juan Del Obispo, a small colonial town in Guatemala, where Sebastiaan Saverys and Evert Wulfrank, joined efforts with a group of loquat farmers to sell to high-end export markets. That same year, a Belgian company SWEC was founded to sell the loquats. Its Guatemalan counterpart started as a home-office based loquat exporter and became one of the main pillars of Durabilis activities. In 2011 the farmers decided to continue supplying the local market but stopped their export activities while CEIS continued exporting other products. The Durabilis story Marc Saverys took the initiative to set up Durabilis Private Foundation in 2005, grouping the Fair-Fruit and Pure Water activities under Durabilis NVSO (Limited Company with Social Objective). In order to be able to attract external investors Durabilis NVSO went through a large overhaul in As Durabilis NV, an Impact Investing Company, the philosophy of sustainable development is strengthened by a dynamic investment approach. The FairFruit story In 2006 CEIS built its facility near Antigua Guatemala, from where, in addition to loquats, vegetables from small-scale farmers are shipped to the US and Europe. On the importing side, FairFruit was born and started sourcing more products from more countries and acquired a nucleus farm producing mangos through SID Peru. FairFruit International, the commercial platform within the group, started in 2011 and has become a THE PHILOSOPHY OF SUSTAINABLE DEVELOPMENT IS STRENGTHENED BY A DYNAMIC INVESTMENT APPROACH. key player in the European specialties fresh fruit and vegetables sector. The Barajii story In 2005, Durabilis Private Foundation became a partner in the Pure Water Project in Burkina Faso, which supplied pure water in little plastic bags in Africa under the Barajii brand. In 2011, Barajii moved to a brand new site in Ouagadougou. As pure water became more easily available in Burkina Faso, new beverages were developed. Today Barajii is increasingly oriented towards locally sourced, processed beverages. The Terral story When studying different options to diversify the activities of the Senegalese Barajii firm, local rice showed to be an excellent synergy between business opportunity, food security and economic development. In 2011, the company acquired around 200 tonnes of paddy (unprocessed) rice as a commercial trial under the brand Terral. Since 2012, Terral has been integrating more with its producers and their coops, establishing a head-of-class example of a demand driven, inclusive and self-sustained value chain. 18 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

11 2 DURABILIS GROUP WE CREATE GOOD JOBS AND WE PROVIDE FARMERS AND OTHER SUPPLY CHAIN PARTNERS WITH A BETTER INCOME. IMPACT AMBITIONS Timeline M capital round is finalised in July FairFruit International, FairFruit Guatemala, SID Peru, SGTF and Koga Veg are integrated into a single solid strategic business unit, FairFruit Group SBFA successfully concludes its PET container pilot 2013 Grameen Crédit Agricole joins Terral as a shareholder Durabilis businesses are consolidated A convertible loan deal is successfully presented to several impact investors Durabilis acquires nucleus farm for mangos, Fundo Aurélie, in Peru Termination of Waimanalo FairFruit partnership Durabilis NVSO (Limited Company with Social Objective) takes form 2007 Partnership between Waimanalo and FairFruit Start of SECCO in DRC Terral builds its own rice mill close to Saint-Louis in the North of Senegal 2012 Durabilis NVSO (Limited Company with Social Objective) converted into an NV (Limited Company) First trials with peas and beans from Peru and Ethiopia Launch of Terral 2011 FairFruit International is launched Barajii moves to its new factory in Ouagadougou First trails with rice in Senegal Durabilis acquires SGTF, a mango exporting company in Burkina Faso 2006 FairFruit Guatemala builds its packing hall and starts exporting peas and beans 2005 Creation of Durabilis Private Foundation Durabilis becomes a partner in Barajii in Burkina Faso Barajii expands to Senegal and Kenya Termination of Barajii activities in Kenya Start construction of new Barajii factory in Ouagadougou Termination of Barajii operations 2004 Creation of CEIS (now FairFruit Guatemala) in Senegal and DRC First trials with mango sourcing from West Africa 2003 First Loquat activities in Guatemala Creation of SWEC (now replaced by FairFruit International) 20 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

12 2 DURABILIS GROUP Team Board - Non-Executive Directors Executive Committee Marc Saverys Chairman Philippe Vlerick Vice-Chairman Stefan Jamar Chief Financial Officer Evert Wulfrank Chief Operations Officer Marc Saverys is Doctor Philippe Vlerick holds a Stefan Jamar holds Evert Wulfrank holds a in Law and has a long- Bachelor in Philosophy, a Master s degree in Master s degree in Eco- standing expertise as and a Master in Law, Economics and Cor- nomics and Business Ad- CEO of listed companies in Management and in porate Finance. With a ministration. As founder and as an international entrepreneur Business Administration. He is a director in background in financial audit services, he de- and CEO of FairFruit Guatemala, he gained in the shipping sector. various well-known organizations and CEO of veloped Durabilis corporate finance & service several years management experience of field several family-owned companies. administration. operations and smallholder inclusion. Board Executive Directors Paul Jacquet de Haveskercke Secretary Chief Strategic Officer Sebastiaan Saverys Chief Executive Officer Sebastiaan Saverys Carl Wulfrank Chief Commercial Officer Carl Wulfrank holds a Bert Sercu Chief Sustainability Officer Bert Sercu holds a Mas- With an economic back- holds a master degree in Master s degree in Legal ter s degree in Bio-en- ground, Paul Jacquet Mechanical Engineering. Sciences and Business gineering Sciences and de Haveskercke has gained extensive crisis As co-founder and CEO of Durabilis he has Administration. As Director of FairFruit Inter- International Business. Having gained field management and governance experience in many years experience of managing agro-in- national, he directly oversees all sales of fresh experience with smallholders in Guatemala, both profit and non-profit environments. With vestments in developing countries. Sebastiaan fruits and vegetables. he currently oversees Durabilis Impact and his large and influential international network currently lives in Peru. Social Responsibility strategy. Paul is dedicated to strategic advice. 22 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

13 2 DURABILIS GROUP Governance GUATEMALAN FARMER, GROWING PEAS ON THE SLOPE OF THE AGUA VOLCANO Governance Principles We aim to adopt the following guidelines for organizational governance and reporting: Recommendations for the governance of social profit organizations, issued by the King Baudouin Foundation Corporate Governance guidelines, issued by the Report Leadership Initiative ISO 26000:2010 guidelines on Social Responsibility Impact Reporting and Investment Standards (IRIS), issued by the Global Impact Investment Network (GIIN) Global Reporting Initiative (GRI) Guidelines for Sustainability Reporting Governance Charter Our Governance Charter defines key organizational and other governance elements. Beyond legal requirements, it describes how Durabilis ensures an effective and responsible decision making process in line with the company s Mission Statement. Impact, Social Responsibility and Sustainability Positioning ourselves as an Impact Investing Company, we take up the challenge to make a really good job of controlling our Impact, Social Responsibility and Sustainability. Our Governance Charter is therefore complemented with our Impact Charter our Social Responsibility Charter The Impact Charter and Social Responsibility Charter are applicable to: all Durabilis NV employees every business where Durabilis holds a shareholding majority every business where Durabilis has management control Governance Charter & implementation status Governance charter Status Achievements Commitment Due Date See also Structure General assembly Board of directors Executive Committee Steering Committees Durabilis businesses Auditing Impact, Social Responsibility, Sustainability Evaluation of governance performance Conflicts of interest Risk management ACHIEVED ACHIEVED WORK IN PROGRESS RECONSIDERED WORK IN PROGRESS RECONSIDERED ACHIEVED NEW Competences reviewed on the occasion Durabilis first investment round STEERCOs are functional. As from 2014 they will form part of the Durabilis businesses Management changes in many businesses have overruled former initiatives. To be reactivated. Auditing procedures have been formalized and applied on the occasion of investment round in Systems of (non-) economic incentives for performance on Social Responsibility are gradually being implemented in the businesses Put on hold until receiving input from new investors Annual review of risk management systems is embedded Evaluate and formalize functioning of Steering Committees Develop authorization table based on RACI principles Have consolidated accounts audited according to the agreed upon auditing procedures Include sustainability in the balanced scorecard of every business Analysis of political risk insurance for countries other than Burkina Faso 2014 Board of Directors and Executive Committee FairFruit BaraJii Terral 2014 Key financial information 2014 FairFruit BaraJii Terral Reporting NEW Durabilis Consulting executing data management improvement projects in SBFA and FairFruit Guatemala Streamline reporting with (semi)automated dashboard Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

14 2 DURABILIS GROUP Investors and other financial partners 2013 was a year of business plan reviews, communication efforts and intense negotiations with financial institutions and Impact Investors. Fortunately our efforts have been rewarded: four icons in the world of Impact Investment have joined our capital in July FOUR ICONS IN THE WORLD OF IMPACT INVESTMENT HAVE JOINED OUR CAPITAL IN JULY Investors Saverys Family The Saverys Family is one of the oldest shipping related families in Belgium. It controls the CMB group, Bocimar, Delphis, ASL Aviation, Euronav and Exmar companies. We have been honoured to have Marc Saverys as Durabilis main shareholder and Chairman of the Board since Sebastiaan Saverys, initiator and CEO, and his brother Michael Saverys personally contributed to the capital in the first investor round which was closed in July Exclusa Exclusa is an initiative of the Dutch family Van der Sluijs. The 6 Van der Sluijs brothers grew up in the entrepreneurial environment of the Van der Sluijs Group, the largest independent player in the Netherlands and Belgium in the field of sales, storage and transport of mineral oils until its merger with FNR+ into the North Sea Group (today known as Argos). Since 2011 the family has been the main shareholder of Interstream Barging. Each brother has his own experience and background in profit and non-profit organizations. Exclusa started in 2011 and was officially founded in EcoEnterprises Fund EcoEnterprises Fund has served as a nature-related ventures fund since A pioneering investment tool, it provides growth capital to community-based sustainable companies to achieve scale-generating lasting results that help address the critical environmental and social challenges of our time. First launched under the umbrella of The Nature Conservancy, EcoEnterprises Fund became an independent investment manager in Its second fund, EcoEnterprises Partners II, L.P., builds on the success and track record of the first. Other financial partners responsability Investments AG Alterfin Incluvest Root Capital Argidius Grameen Crédit Agricole ICCO Investment Fund ICCO Investments is the impact investment vehicle of the ICCO Cooperative. The ICCO Cooperative is a leading Dutch NGO for development cooperation that has been active in fighting poverty and injustice in developing countries for the last 50 years. It works in over 40 countries in Latin America, Africa and Asia with a total staff of about 300 people and an annual budget of around 80 M. Responsibility management - Cofimatra Between 1982 and 2002, Roland Vaxelaire held senior management positions at Nestlé USA, Sopad-Nestlé France, Danone group (Kronenbourg, Evian, Alken-Maes) and GIB. Until the end of 2008 Roland Vaxelaire was Quality, Responsibility & Risk Management Director for the Carrefour Group and President of Carrefour Belgium. For 8 years he was also member of the board of EFSA (European Food Security Agency). Since 2009, he has managed his own consulting firm Responsibility Management where he develops the principe of Tensegrity. He manages his own Impact Investment Company Cofimatra. Chambre de Commerce Burkina Faso BNP Paribas Fortis Banco Agromercantil Bank of Africa Banque Atlantique Pamecas 26 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

15 2 DURABILIS GROUP 2.3 IMPACT AND SOCIAL RESPONSIBILITY Impact In line with the concept of Shared Value, we rely on the premise that social change and economic development are not independent issues, but inter-related goals that can be effectively realized simultaneously. Social Responsibility While our impact objectives provide focus, the concept of Social Responsibility reflects the need to identify all relevant stakeholders and integrate their interests into the business model. Implementation Status Despite our full commitment to sustainability, we consider it the end-goal of a continuous improvement process on which we aim to report transparently. WE BELIEVE IN A BALANCED COMBINATION OF SMALL AND MIDDLE SIZED FARMS. MALINESE AGRONOMISTS BEING TRAINED BY PERUVIAN MANGO EXPERTS Impact Rural prosperity as a motor for economic and societal growth Vision Two-thirds of the world s agriculture value added is created in developing countries. 2.5 out of 3 billion rural inhabitants in developing countries are engaged in agriculture. With much of the world s extremely poor population in rural areas, rural agriculture is uniquely positioned as a multi-faceted motor for development; it contributes as an economic activity, a livelihood, and as a provider of environmental services. There exists a huge opportunity to generate positive financial returns while breaking the cycle of poverty among farmer communities and the related predation of natural resources. We link people to formal economies by investing in and managing sustainable agro & food businesses in low income countries Mission Statement We believe that economic development requires creating both opportunities and stability, that fostering entrepreneurship and generating employment are important, and that economic development must be environmentally sustainable in order to last. But most importantly we believe in people and our relationship with our employees and supply chain partners. Respecting their rights and interests requires a formal economy that not only creates work and trade, but also respects contracts, creates safe working conditions and guarantees the payment of fair wages and prices. By creating the right conditions for production, work and trade, we believe we can make a difference. By investing in and managing agribusiness value chains, we have maintained a strategy of seeking economic opportunities that produce benefits for the communities in which we work. Shared Value Strategy We need to think in terms of Creating Shared Value 3 to guarantee that work and trade have a positive impact on all people involved. We rely on the premise that social change and economic development are not independent issues, but inter-related goals that can be effectively realized simultaneously. If we succeed in conceiving products and markets that permit a long-term perspective, impact can be embedded in business models that achieve financial results. The markets for the products of all our business units demand consistent quality, transparency, efficiency, social responsibility and respect for the environment. We target close collaboration with our key stakeholders in order to maximize the total value we create. RURAL PROSPERITY AS A MOTOR OF ECONOMIC AND SOCIETAL GROWTH VISION ETHIOPIAN WOMEN WERE TRAINED IN PEA PROCESSING FOR OUR FIRST COMMERCIAL SCALE TRIAL 3 Coined by Michael Porter in 2011, Creating Shared Value has gained prominence as a model for capturing the power of business to induce significant social change 28 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

16 2 DURABILIS GROUP Our 7 investment principles reflecting our notion of Shared Value: the starting point for successful & sustainable investment Our principles for successful & sustainable value chain investment provide focus and consistency. They guide us in evaluating new investments and in managing existing businesses. Each pillar represents an opportunity that aligns with both our social and financial strategic objectives. 1 Investment in agribusiness 4 Inclusive value chains Strengthening the agricultural sector Targeting smallholders, middle sized farmers by strategically and locally investing in and other base of the pyramid businesses production and processing chains Contract farming, combined with knowledge Connecting smallholder and midsize transfer to improve quality, food safety, social farmers to global markets compliance and sustainable operations 2 Demand driven 5 Value added and local return Streamlining procurement, production Adding value through innovation, and distribution in function of both local competitiveness and professionalism and global markets Local sourcing and recruitment with fair Responding to growing demand compensations to workers, smallholders for sustainability, transparency and other local suppliers and accountability 6 Sustainable production 3 Unleashing entrepreneurship Ensuring the productivity of our farming Creating opportunities for local community areas through sustainable management by building formal value chains and of the natural environment transferring know-how, with spillover Implementing sustainable procurement effects resulting from economic growth policies and practices 7 Responsible products Creating responsible products that satisfy demand in high-end markets Strict quality control of own and suppliers production, processing and distribution processes We create good jobs and we provide farmers and other supply chain partners with a better income Our impact ambitions After a long and windy road along several sustainability reporting and certification approaches, we decided to align the formulation of our impact ambitions with the Impact Reporting and Investment Standard (IRIS) of the Global Impact Investment Network (GIIN 4 ). Our global impact ambitions apply to all operations Employment generation Investing in agribusiness and expanded markets foster job creation and increase employment opportunities that maintain fair wages and safe working conditions Income/productivity growth Working directly with producers and smallholders allows them to benefit from higher wages and income, the assurance of stable prices and expanded foreign markets Secondary ambitions serve as catalysts to achieve primary impact goals Access to information Farmers are trained in optimized production techniques in order to maximize crop yields Agricultural productivity Fine-tuned production practices ensure crop productivity Sustainable land use Farming operations aim to adopt sustainable production processes Food security Localized value chains target strategic sectors to support regional food security STRENGTHENING THE AGRICULTURAL SECTOR BY STRATEGICALLY AND LOCALLY INVESTING IN PRODUCTION AND PROCESSING CHAINS Together, these objectives provide a framework for seeking out and measuring impact. We develop measures tailored to country and activity; this process involves identifying key stakeholders, evaluating their needs, and determining measurable goals. Readers can find out more about impact in the respective Durabilis business unit sections FairFruit Trimmed and washed peas and beans from smallholders in Ethiopia and Guatemala for high-end markets Ready-to-eat mangos from smallholders and medium-sized farms in Peru and Burkina Faso for high-end markets Barajii Healthy, affordable and high quality beverages for the base of the pyramid market in Burkina Faso and neighbouring countries. Terral Fresh long grain rice from smallholders in Senegal for Dakar s urban base of the pyramid market Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

17 2 DURABILIS GROUP Social Responsibility While our impact objectives provide focus, the concept of Social Responsibility - as formalized by ISO reflects the need to identify relevant stakeholders and integrating their interests into the business model. Durabilis implements this idea from inception to operational phase in every business. During due diligence, we evaluate projects adhesion to our principles; stakeholder mapping identifies groups most effected by our businesses; issues found to be of most importance to stakeholders are then targeted and linked to Key Performance Indicators (KPIs) to track progress in order to direct strategic decisions. Our Social Responsibility Charter identifies core values that dictate our business relations. In addition to the ISO guidelines, we incorporate more standards for ethical behaviour where possible. OUR SOCIAL RESPONSIBILITY CHARTER IDENTIFIES CORE VALUES THAT DICTATE OUR BUSINESS RELATIONS. Sustainability management Due diligence YES Due diligence, of new investments, including a wide range of sustainability aspects, has become part of Durabilis DNA Stakeholder mapping YES In all sites, a stakeholder mapping exercise has been performed with the local management Implementation Status Investment Principles UNLEASHING ENTREPRENEURSHIP INVESTMENT IN AGRIBUSINESS VALUE ADDED AND LOCAL RETURN YES YES PARTIALLY All activities trigger economic activities in their respective community The synergy between impact and market opportunities stimulated Barajii to direct its strategy increasingly towards drinks based on raw materials locally sourced from smallholders While SGTF and SFA technically support their farmers and offer transparent contracts, prices paid are still close to the market average. Better logistics and/or financial results should allow better prices in the future. Stakeholder engagement Materiality mapping PARTIALLY PARTIALLY Stakeholder engagement is common at Durabilis businesses. Especially farmers are well represented by their farmer group in supply program negotiations. Stakeholder consultation forms part of the start-up of every new business (cfr. Koga Veg and SFA in 2013) However the approach could be more formalized. First steps have been the establishment of a workers committee in FairFruit Guatemala, SGTF and SBFA. The largest companies, FairFruit Guatemala and SBFA, underwent a materiality mapping exercise together with the local management. The younger/smaller companies still await such an exercise All businesses adhere to the Social Responsibility and Impact Charter. DEMAND DRIVEN INCLUSIVE VALUE CHAINS SUSTAINABLE PRODUCTION RESPONSIBLE PRODUCTS YES PARTIALLY PARTIALLY YES All activities are organised in function of a proven market demand Several activities (e.g. FairFruit International. Qualipack, SID Peru mangos) do not include small-scale entrepreneurs. However we consider them indispensable for the functioning of other activities that do target them. We see sustainable production as a process of continuous improvement. In all operations measures are implemented year by year in order to minimize social impact. We consider all our products to be responsible products Policies, plans & responsibilities Sustainability reporting YES NOT (YET) As a result of the materiality mapping exercise, both SBFA and FairFruit Guatemala have embedded a sustainability action plan in their management by objectives approach A FairFruit International sustainable sourcing policy has been established for external sourcing Due to limited resources and fast growth, we are still in an experimental phase regarding sustainability reporting and still prefer to restrict ourselves to qualitative reporting SBFA and FairFruit Guatemala are working closely together with Durabilis Consulting to improve their data and resulting reporting quality Certification and other voluntary initiatives PARTIALLY All exporting companies participate in BSCI, however not all comply with all requirements yet. Fairtrade (FLO) and GLOBALG.A.P. are progressively implemented throughout the farmer base. Own Guatemalan farms are Fairtrade USA certified 32 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

18 2 DURABILIS GROUP 2.4 KEY FINANCIAL INFORMATION After the capital raise and conversion from NVSO (limited company with social Net Sales and EBITDA prove that social impact and profitability can go hand in hand objective) to NV (limited company) in 2011, 2013 was a year of getting prepared FAIRFRUIT BARAJII TERRAL DURABILIS NV TOTAL for the imminent investor round Consolidation of all activities for better overview Net Sales (M ) ,3 13,1 15,2 19,4 21,7 For the sake of more overview for better understanding and managing flows of working and investment panies. Today FairFruit activities are sub-consolidated into one Strategic Business Unit as well, consisting of 10 10,1 capital, the step was taken to fully consolidate all operations Three Strategic Business Units While the Barajii and Terral Strategic Business Units up to today both represent one single legal entity, Fair- production, processing and marketing units Durabilis Holding The holding activities have been placed in Durabilis NV and represent all activities that do not form part of its Strategic Business Units, including Durabilis Consult , ,4 6, , ,3 1,7 2, Fruit had been a group of individually managed com- ing and financing (debt/equity). FAIRFRUIT BARAJII TERRAL DURABILIS NV TOTAL Limited finance reporting due to changes in auditing policy In order to provide aspirant investors a more detailed all local legal entities have been audited. Net Sales and picture, a stricter auditing policy was formulated in de- EBITDA presented in this report are based on these EBITDA (M ) 2,5 2,0 2,1 liberation with the statutory auditor as from Durabilis NV statutory accounts: audited and certified by the statutory auditor partly-audited, available financials. Fully audited and certified consolidated accounts are 1,5 1,5 1,6 Durabilis NV consolidation practices and set-up: re- ambitioned for the future. 1,1 viewed but not certified by the statutory auditor 1,0 0,9 Participations where Durabilis NV has the majority of the shares and where annual turnover exceeds 5M: audited and certified by the local statutory auditor 0,5 0,6 0,7 0,3 0,6 For 2013, FairFruit Guatemala (CEIS) accounts are au- 0 dited by a local auditor and Durabilis NV and SBFA accounts by KPMG audit team. The consolidation set-up is reviewed by KPMG audit team but the consolidated accounts are not yet certified due to the fact that not DURABILIS IS NOW MANAGED THROUGH DURABILIS NV AND THREE STRATEGIC BUSINESS UNITS -0, , ,4-0,2-0, Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

19 3 DURABILIS BUSINESS UNITS 36 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

20 3 DURABILIS BUSINESS UNITS We see attractive business opportunities in sustainable agro-value chains with a major positive impact on people s lives FairFruit Trimmed and washed peas and beans from smallholders in Ethiopia and Guatemala for high-end markets Ready-to-eat mangos from smallholders and medium-sized farms in Peru and Burkina Faso for high-end markets Smallholders benefit from tailor-made technical and financial assistance programmes Food quality and social impact ensured through GLOBALG.A.P. and BSCI compliance Barajii Healthy, affordable and high quality beverages for the base of the pyramid market in Burkina Faso and neighbouring countries Terral Fresh long grain rice from smallholders in Senegal for Dakar s urban base of the pyramid market NEW PEAS AND OTHER VEGETABLES PRODUCTIONS ARE DEVELOPED IN ETHIOPIA IN ORDER TO COMPLEMENT YEAR-ROUND SUPPLY 38 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

21 4 FAIRFRUIT 40 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

22 4 FAIRFRUIT FairFruit is an integrated producer-exporter-importer of fresh fruit and vegetables, especially peas, beans and mangos Transparent and reliable supply chain partner, offering supply throughout the year with stable volumes, prices and quality and a strong focus on shared value and social impact 4.1 FAIRFRUIT IN A NUTSHELL Product range FairFruit has 10 years expertise in fresh vegetables, especially peas, beans and mangos. These are interesting cash crops for small scale farmers because there is a strong demand in high-end markets in Europe and the USA. Farmers get good prices from contract farming combined with technical assistance and certification: value added vegetables for retail programs ready-to-eat ripened mangos READY-TO-EAT MANGOS FETCH A PREMIUM PRICE FOR THE PRODUCERS. Providing technical assistance and fair trading conditions to smallholder farmers in order to unlock their potential for sustainable rural economic Peas & Beans Mangos Exotics development FairFruit grows, packs and exports FairFruit has its own mango grow- FairFruit through its sister compa- for the European and North Amer- ing and/or export activities in Peru ny FLP sources exotic fruits such as ican market in Guatemala, Ethio- and Burkina Faso for the European physalis, passion fruit, baby banana pia and Peru. Volumes are com- market. Strategic mango sourcing and pitahaya in Peru, Ecuador and plemented for year-round supply in Mali, Ivory Coast, Brazil, Israel Colombia for export to the Europe- Belgium FairFruit International peas & beans / mangos / exotics Mali Mangos with strategic sourcing in Zimbabwe. Main crops are snow peas ( mange touts ), sugar snaps and green beans. The production of these crop generates a high value & Senegal complements for yearround supply. Ready-to-eat mangos are ripened upon arrival to produce a very high quality fruit for the consumer and fetch a premi- an market. These fruits are traded in small quantities for relatively small but interesting niche markets. Israel Mangos per hectare, offering a competitive advantage for small scale farmers. um price for the producers. Guatemala FairFruit Guatemala - peas & beans Peru SID Peru - peas & beans / mangos Senegal Mangos Ethiopia Koga Veg - peas & beans Zimbabwe Peas & beans GREEN: own sourcing/processing PINK: strategic suppliers Brasil Mangos Ivory Coast Mangos Burkina Faso SGTF mangos 42 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

23 4 FairFruit Main markets Europe UK USA Main challenges Integrating all FairFruit activities under a single holding structure Expanding external sourcing in order to deliver close to year-round Safeguarding the Durabilis values of social impact and social responsibility Impact Income/productivity growth Providing a stable market to smallholder farmers, who have a competitive advantage when it comes to labour intensive and high quality niche crops Progressive implementation of Fairtrade certification in Guatemala with higher prices to certified farmers Above market prices in Guatemala Employment generation All own FairFruit production sites participate in the Business Social Compliance Initiative (BSCI) External suppliers receive in-the-field support with respect to social compliance Agricultural productivity Technical support to Guatemalan and Burkinese farmers for improved yields and quality Own mid-size nucleus farms for commercial, trial and demonstration purposes Access to information Transparent contracts, quality reports and payments to farmers Sustainable land use Implementation of GLOBALG.A.P. in all farms ensuring the responsible use of agrochemicals and soil and biodiversity protection 2013 key figures Volumes 5364 Workers 5 tonnes Sales 13 0,9 417 / M EBITDA Smallholders M Fair Fruit Volumes (Tonnes) Other suppliers - Other veggies Other suppliers - Beans Other suppliers - Peas Other suppliers - Mangos FLP - Exotics FLP - Mangos SGTF - Mangos SID Peru - Peas SID Peru - Mangos CEIS - Other veggies (FTE) 5 For FairFruit Guatemala extrapolated from 2012 numbers 44 Global Activity Report 2013 DURABILIS headcount Produced in own farms Sold by local facilities (inc. local sales) Distributed by Fair- Fruit International CEIS - Beans CEIS - Peas DURABILIS Global Activity Report

24 4 FairFruit 4.2 CHALLENGES AND OPPORTUNITIES A SUSTAINABLE INTEGRATED SOURCING SOLUTION FOR QUALITY FRUIT AND VEGETABLES Consumers Food safety remains customers highest priority, while many pay growing attention to social compliance and environmental sustainability Increasing demand for value added and convenience products Progressive commoditization of FairFruit s current product range (vegetables and mangos) Customers Supermarkets increasing demand for transparency, year-round supply and lower costs is reshaping the fragmented and competitive fruit and vegetables sector Customers view sustainability more and more as a must have rather than a niche aspect, and include sustainable purchasing in their sourcing strategy Potential for reduction of supplier risk and price volatility by negotiating sales programmes with fixed prices and volumes Workers Workers benefit from certification schemes like BSCI (Business Social Compliance Initiative) covering wages, health and safety, employment security and other themes, that are less evident in developing countries Good employment conditions are only partially enforced by law in FairFruit s producing countries Smallholders Smallholder farmers have a competitive advantage for labour intensive crops Increasingly strict requirements regarding quality, food safety, social compliance, and environmental care combined with a perishable product and consignment sales pose important challenges to smallholder farmers participating in the global market Smallholders find themselves at the upstream end of the chain with little negotiating power. As a result they use to suffer from extremely long payment terms, very often with only partial or no pre-financing support. The tendency of supermarkets sourcing directly, i.e. without intermediaries, affects small farmers position even more Environment Increased customer focus on sustainable production methods translates into more management buy-in for the protection of the environment and easier implementation of environmental sustainability measures Community Contracting farmers can boost their communities economy and create spill over effects, however when payments are delayed the social fabric is under pressure Farmer organizations are an excellent stepping stone for new rural enterprises Investors The market is increasingly less prepared to offer pre-financing for sales programmes. This, combined with a large pre-financing demand by the producer base, inflates working capital needs. Other financing solutions are time consuming and often more expensive. This has a significant impact on profitability and creates difficulties to pay good prices in a timely fashion to farmers, with side selling as a result CUSTOMERS VIEW SUSTAINABILITY MORE AND MORE AS A MUST HAVE RATHER THAN A NICHE ASPECT, AND INCLUDE SUSTAINABLE PURCHASING IN THEIR SOURCING STRATEGY 46 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

25 4 FairFruit 4.3 STRATEGY In the run up to the first investor round, it became crystal clear that in order to achieve its mission, FairFruit needed to keep on specializing in peas, beans and mangos and provide its customers with reliable volumes, sales prices and quality, always putting a strong focus on shared value and social impact. In order to live up to this value proposition two important steps are being taken 1. Expanding external sourcing in order to deliver close to year-round peas, beans and mangos where own productions are limited in terms of their production window or growth Outlook for 2014 In 2014 the focus is on the integration and further development of the current FairFruit production, sourcing and sales activities: Further market analysis and fine-tuning FairFruit s value proposition and branding Bringing the currently Durabilis-owned FairFruit activities in Guatemala, Peru, Burkina Faso and Ethiopia under the FairFruit holding umbrella Rolling-out the Ethiopian Koga Veg farm, establishing the FairFruit UK sales office and preparing the set-up of a FairFruit USA sales office Continued testing of solutions to the logistical challenges of West African mangos FARMERS RECEIVE TRAINING IN EROSION CONTROL AND SOIL CONSERVATION 2. Integrating all FairFruit activities under a single holding structure, where until recently FairFruit has been a heterogeneous cluster of Durabilis-owned companies The integration of FairFruit at once makes it possible to tackle the other main strategic challenges: Entering the market as a single, well-branded producer-exporterdistributor Matching own and externally sourced volumes to market demand Bundling global know-how in supplier support and standardizing training in and certification of quality, food safety, social compliance and environmental care Minimizing overhead and streamlining financial, operational and sustainability reporting Centralizing working capital needs and building one solid case for financing IN ORDER TO LIVE UP TO ITS VALUE PROPOSITION FAIRFRUIT ACTIVITIES ARE GROUPED UNDER A SINGLE HOLDING STRUCTURE Outlook beyond 2014 Scaling up peas, beans and mangos volumes on current own sites while exploring business for more sophisticated, high-end market, value added products (veggie blend, mixed packs etc.) on a smaller scale Consolidating West African mango export logistics and global sourcing of peas, beans and mango from external suppliers Geographic market expansion to 4 arena s: Europe, UK, USA and Middle East 48 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

26 4 FairFruit Uk Belgium 4.4 FAIRFRUIT INTERNATIONAL Demand-driven marketing and sales platform supported by long-term partnerships with key importers and retailers Thanks to FairFruit International s close relationship with other Durabilis subsidiaries and export partners, Fair- Fruit is able to provide an attractive supply solution to its customers: supply over extended periods throughout the year with reliable volumes, prices and quality and a strong focus on shared value and social impact. INCREASED EFFORTS ARE NEEDED TO DIRECT SALES EFFORTS TOWARDS CUSTOMERS THAT VALUE THE INCLUSIVE APPROACH 1578,5 MARKETING & SALES 964,3 Volumes sourced by FairFruit International per supplier (Tonnes) 3232,6 Own companies CEIS Own companies SGTF Own companies SID Peru External companies FLP External companies Other suppliers PEAS, BEANS, MANGOS, EXOTICS 2323,5 512, ,4 Peas Volumes sourced by FairFruit International per product (Tonnes) 93,7 Beans Other veggies Mangos 3187,2 20,6 Exotics 50 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

27 4 FairFruit Developments in 2013 Establishment of a UK sales office African suppliers. Logistics proved to be the largest bottleneck. As soon as the 2013 season was finished prepa- By analogy to the Belgian sales office a UK sales office was established through the acquisition of the British rations for a larger scale 2014 season with try-out of a company Nuexo. FairFruit UK will in a first stage focus logistical solution started. on 12 month supply of conventional, organic and specialty mangos to British retail outlets such as Tesco and Collaboration with FLP International on hold Waitrose. The joint marketing with FLP International was put on hold as a result of differences in product portfolios First external West African mangos sourcing and strategic considerations. Both companies are now In 2013, FairFruit marked year-round supply as an essential factor for successfully bringing its own produce one another covering their own products but continue supplying to the market, and started sourcing mangos from West Challenges for 2014 and beyond Consolidating strategic relationships with external suppliers Since FairFruit s own companies do not cover 12 months of production, external sourcing is needed to fill the gaps. First steps were taken in 2013, but the relationships with strategic suppliers are to be strengthened during the coming years. All external suppliers must comply with a minimum set of social responsibility requirements. Strategic alliances are being built progressively with suppliers that fully match the Durabilis philosophy. Ensuring timely payments to farmers Despite its best intentions and commitment to the Durabilis philosophy, FairFruit has had difficulties in paying its suppliers in a timely fashion in 2013 and the beginning of Underlying causes were amongst others rapid expansion in volumes, quality problems and delayed payments from customers. Closer attention to cash planning, payment terms and the consolidation of working capital financing will largely minimize the issue. Matching markets with value proposition Realizing that FairFruit s value proposition requires a large investment in supplier support, increased efforts are needed to direct sales efforts towards customers that value the inclusive approach and are prepared to collaborate in sustainable supply chains. In the USA, vegetables sales to Wholefoods have been a huge step. Strategic review of Qualipack Qualipack is a joint venture investment between Fair- Fruit International and one of its strategic customers in an automated washing, grading and packing machine with which bulk-packaged products are processed and repacked for retail. Qualipack is operational but could be exploited more strategically. A strategic analysis is foreseen with Durabilis Consulting when resources are available. ALL EXTERNAL SUPPLIERS MUST COMPLY WITH A MINIMUM SET OF SOCIAL RESPONSIBILITY REQUIREMENTS. Expanding team to reinforce supplier control and support In order to live up to its value proposition, FairFruit is progressively taking up responsibilities that used to belong to Durabilis or the suppliers themselves. Due diligence of new suppliers, quality control and quality management, production, social compliance, logistics, and infrastructure support all require a highly skilled dedicated team, to be formed in 2014 in preparation of future growth. FAIRFRUIT HAS FOR THE FIRST TIME SOLD ORGANIC AND SPECIALTY MANGOS TO BRITISH RETAIL OUTLETS SUCH AS TESCO AND WAITROSE. 52 Global Activity Report 2013 DURABILIS

28 4 FairFruit Guatemala 4.5 FAIRFRUIT GUATEMALA 8 years experience in trimmed and washed peas & beans from Guatemalan smallholders for high-end markets FAIRFRUIT GUATEMALA WORKS WITH APPROXIMATELY 1500 SMALLHOLDER FARMERS. FairFruit Guatemala is located in Antigua Guatemala and works with approximately 1500 smallholder farmers that are organized in farmer organizations (cooperatives and associations). The company provides technical assistance Worker salary and training to these farmers, and pre-finances agricultural inputs such as seed, fertilizers and pesticides. In its packing plant the company employs up to 300 workers, mainly women. Vegetables are graded, trimmed, washed and packed for export. Workers (FTE) Lowest salary ( /month) * PRODUCTION, SOURCING, PACKAGING, EXPORT PEAS, BEANS, OTHER VEGETABLES * Wages were recalculated using historical exchange rates, leading to small differences with former reporting Farmer revenue Smalholders Average revenue ( ) Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

29 4 FairFruit Ethiopia Developments in 2013 Guatemalan farm Fairtrade USA certified In September 2013, FairFruit Guatemala s own 12ha nucleus farm received Fair Trade USA certification. Although 90% of the volume exported by FairFruit comes from smallholder groups, the farm is important for supply maintenance when weather conditions hamper smallholder production. The farm has also served as a centre for experimentation and extension. The Fairtrade premium is destined for a better housing project. Continued support to smallholder farmers through NGO ADISAGUA FairFruit Guatemala is increasing efforts to train and certify farmers through ADISAGUA, which offers a wide range of services in management support and institutional reinforcement. Collaboration with the Guatemalan Ministry of Economy and other donors has provided funding for the construction of 3 local processing facilities with 2 more following in ADISAGUA s budget was $ in 2013 of which $ was funded by FairFruit Guatemala. Proportion of certified farmers keeps growing So far 8 producer groups have succeeded in obtaining Fairtrade Labelling Organisation (FLO) certification, covering about 100ha. Farmer groups received in total $ above conventional payments. The number of GLOBALG.A.P. certified farmers went up from 247 to 499 in 2014, covering about 120ha. A better price policy was introduced for food safety certification. Optimising margins FairFruit Guatemala has been experimenting with new processing, packing and transporting protocols in order to improve product quality upon arrival. Improved temperature control and new packing protocols have made it possible to reduce the percentage of product graded out by clients, contributing directly to better sales margins Challenges for 2014 and beyond Investment in capacity A new round of investments in a flume washer, more cold storage and an infrastructural reorganisation of the production lines will lead to increased production capacity. Boosting USA revenues While sales to Europe demonstrate a healthy profitability, the sales to the USA - a natural market for Guatemala - struggle to generate the required margins. Renewed efforts, in collaboration with FairFruit International, are planned in order to improve marketing to the USA and to boost the profitability of the US sales programme. 4.6 FAIRFRUIT ETHIOPIA Koga Veg brings new crops and markets to smallholder farmers in Ethiopia Koga Veg was founded in 2013 to boost rural economic development in the area around Bahir Dar. The area is characterized by smallholder agriculture and the production of crops for own consumption or sale into the local market. Koga Veg introduces peas and other export crops as a means of increasing farmer income. Farmers in the area have little experience in producing for international markets, and lack access to modern production techniques. Therefore, farmer training, capacity building and the setup of a contract farming scheme are key components of the company s strategy to include farmers in this new supply chain. Koga Veg has started by establishing a nucleus farm that serves as a production basis and farmer training centre. This way, farmers get the opportunity to work on the farm and to become familiar with new crops and production techniques before producing these new crops themselves as an outgrower. PRODUCTION, PACKAGING, EXPORT PEAS, OTHER VEGETABLES KOGA VEG WILL BRING NEW CROPS AND MARKETS TO SMALLHOLDER FARMERS IN ETHIOPIA AS AN ALTERNATIVE TO LARGE SCALE AGRICULTURAL INVESTMENTS. 56 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

30 4 FairFruit Burkina Faso Developments in 2013 Land lease agreement In February 2013 Durabilis obtained a concession on 50ha of irrigated land in the recently completed Koga project near the town of Bahir Dar, Ethiopia. In May 2014, Koga Veg was formally registered as a company under Ethiopian law. Promising results from first agro- trial A first small-scale test of different pea varieties in collaboration with Amhara Region Agricultural Research Institute (ARARI) showed very promising yield and quality. Gradual start-up While the initial plans entailed a single large scale investment in infrastructure, the implementation strategy was revised to a more gradual approach in order to mitigate risks, even though this means that the Koga Veg operations will take longer to reach a profitable scale Challenges for 2014 and beyond Initiatives to embed sustainability into the operations Several initiatives have been taken to incorporate sustainable production methods on the Koga Veg farm. A master thesis student was engaged to perform soil fertility trials and recommend soil protection and integrated pest management practices in collaboration with a Belgian expert. Crop rotation is under investigation in collaboration with a neighbouring farms that work with complementary products and markets, potentially allowing for a wider diversity in a rotation scheme on all collaborating farms.. The BSCI code of conduct is implemented in the daily operations and procedures. GLOBALG.A.P. standards have been implemented and will be audited in October SGTF SGTF has been processing and exporting mangos from small Burkinese farmers for FairFruit since 2012 In 2011, just before start of the mango growing season, Durabilis acquired Société de Gestion de Terminaux Fruitiers (SGTF) which holds the concession of a World Bank financed mango processing hall in the Bobo-Dioulasso region. Its activities include the sourcing, processing and export of high quality mangos from around 50 smallholders. The packing station has a capacity to process over 15 containers of mangos per week. SOURCING, PACKAGING, EXPORT MANGOS Commercial trial Koga Veg will perform two production and export trials, one every semester, on about 10 ha of own land with minimal investments in order to better understand the dynamics and parameters of a medium-sized vegetable farm in the local context. The evaluation of pre-defined success factors will determine the approach for further upscaling. Smallholder inclusion As soon as production and export trials are up and running, farmers will be invited to participate in onfarm training programmes. Demonstration plots are prepared to showcase good agricultural practices and new production techniques (e.g. small scale drip irrigation). A farmer field school approach will be adopted to provide practical training on crop management, quality standards for export produce and relevant certification schemes. All of this will prepare farmers to become independent outgrowers in future years, complementing the production volumes from the nucleus farm, and creating a cash income for their families. SGTF HAS A CAPACITY TO PROCESS OVER 15 CONTAINERS OF MANGOS PER WEEK. 58 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

31 4 FairFruit Worker salary Workers (FTE) Lowest salary ( /month) Developments in 2013 Tumultuous times came to an end SGTF s financial results have been negative due to the combined effect of several factors. In 2012 and 2013 the unrest in Burkina Faso and war in Mali had a significant impact on logistics and therefore the volumes and quality of exported mangos. The exceptionally humid weather in 2013 reinforced the problems. Third party processing services When Durabilis acquired the concession on the packing hall, other Burkinese exporters were concerned Building on these lessons learned, a recovery plan was established in 2013 for 2014 and beyond in collaboration with Durabilis Consulting Challenges for 2014 and beyond Progressive focus on service delivery According to the recovery plan, 2014 service delivery will mount to 78 containers while own exported volumes are limited to 15 containers. In future years FairFruit sourcing and exporting activities might even that the World Bank had built it for all actors and that be transferred to a new company with SGTF deliver- Farmer revenue Smallholders Average revenue ( ) they would lose access to these facilities. In response to these concerns, SGTF in 2013 delivered processing services to other exporters in the region, providing a genuine win-win solution. The company has more capacity than what its trained and certified farmer base can produce for and the processing services represent low-risk extra income. Recovery plan Since 2011, the SGTF team has gone through a significant learning curve: ing only packaging services. The final set-up will be defined in deliberation with the Burkinese mango export sector, the World Bank and SGTF s co-shareholder the Chamber of Commerce. Improving cold chain An inadequate cold chain is the largest threat to product quality and export revenues. Two factors will be addressed: an overhaul of the pre-cooling system and a review of the logistical process. The latter will be part of a West Africa wide FairFruit mango sourcing project, Building a network of mango, materials and logistics service suppliers Gaining knowledge of the agricultural production process and technical network with a first trial in Farmer support funding Smallholders receive assistance to ensure productiv- Training and certification of a loyal group of ity, quality and compliance with market requirements producers (GLOBALG.A.P. and BSCI). During the past years, Dura- LOCAL INVOLVEMENT IN QUALITY ASSURANCE, FOOD SAFETY AND SOCIAL COMPLIANCE Control of packaging process for both organic and conventional crops Building a network of customers for the provision of processing services Compliance with increasingly stringent quality and social responsibility standards bilis has financed this farmer support with operational losses. Experience in Guatemala however has shown that donors are willing to financially support these technical assistance programmes. The agronomy team is establishing a farmer support plan and budget to be presented to potential donors. 60 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

32 4 FairFruit Peru 4.8 SID PERU SID Peru runs the 124 ha Farm Aurélie where best quality mangos are produced for export markets. Since 2013 SID Peru has been developing peas production with smallholder farmers in order to complement the Guatemalan season. Worker salary Workers (FTE) Lowest salary ( /month) SID Peru runs the 124 ha Farm Aurélie where best quality mangos are produced for export markets. Farm Aurélie is located in Perues Piura province, one of the best regions for mango production worldwide. For the first time, a peas production trial has been carried out with outgrowers in PRODUCTION, PACKAGING, EXPORT MANGOS FARM AURÉLIE IS LOCATED IN PERUES PIURA PROVINCE, ONE OF THE BEST REGIONS FOR MANGO PRODUCTION WORLDWIDE. 62 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

33 4 FairFruit Developments in Challenges for 2014 and beyond 4.9 COMMITMENT TRACKER Good harvest from the season With an average exportable yield of 20 tonnes per ha, was a good season for SID Peru. For the season similar results were expected, how- Resuming farm management and taking export into own hands In response to complex transfer pricing discussions, FairFruit decided to resume control over the farm s exploitation and set up its own export chain. The produc- Stakeholder Investor Commitment Implement an impact inspired Balance Score Card in every company Former due date Status NEW Comments An impact inspired BSC has been implemented in FairFruit Guatemala, now other companies must follow New due date 2016 ever a problem of a different nature presented itself. Farm rented to FLP del Peru during season For years Farm Aurélie has sold its mangos to FLP del tive area of the farm will gradually be sized down to 65 hectares in order to respect irrigation restrictions and improve infrastructure so as to boost produce quality. FairFruit s experience in West African should contribute to the success of the export challenge. Improve transparency on impact data regarding the commitments below 2013 WORK IN PROGRESS Data management has progressed a lot in FairFruit Guatemala and SGTF. SID Peru and Koga Veg await a Durabilis Consulting project in Data management emphasis will be put on the reporting regarding the commitments below Peru, part of FLP Holding of which Durabilis is a minority shareholder. As a solution to transfer pricing negotiations, the farm was rented to FLP del Peru which would exploit it and export the mangos. As a premium mango exporter however FLP del Peru was not used to dealing with second category mangos and volumes exiting the Roll-out of the peas programme After the 2013 trials by the Guatemalan team, SID Peru is taking more ownership of the peas production and export programme. Guatemalan experts continue to participate with technical advice. Workers Be fully BSCI compliant for all worker-related issues 2013 WORK IN PROGRESS Despite many improvements in the past years, the production units have not achieved full compliance yet. We strive for 100% compliance on all issues that are worker related farm dropped 50% compared to the previous year, with consequential disappointing financial results. Peas Peru development In order to complement the Guatemalan season, the Guatemalan team set up a Peruvian peas production and export trial. The results were good and SID Perues management team will be more involved in this new activity. Eliminate the use of subcontracted labor entirely Limit overtime hours to the legal maximum WORK IN PROGRESS WORK IN PROGRESS Subcontracted labor has been practically eliminated at FairFruit but was still used to a small extend in FairFruit Guatemala in In order to achieve full control over worker conditions, subcontracted labor will be quantified and fully eliminated in all production units. Overtime hours have almost been reduced to the legal minimum but exeptions still occur. Overtime hours form part of the BSCI commitment, but the topic will be reported on separately Fair Trade USA certification of the nucleus farms 2013 WORK IN PROGRESS The FairFruit Guatemala farm has been certified. The next step is the certification of the SID Peru mango farm. Fair Trade USA allows the certification of farms with the aim to improve worker empowerment and working conditions Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

34 4 FairFruit Stakeholder Commitment Former due date Status Comments New due date Stakeholder Commitment Former due date Status Comments New due date Smallholders Consumers and customers Source at least 80% of smallholder volumes through a formal, contracted relationship 2014 WORK IN PROGRESS Formal contracts are established between farmers and FairFruit, ensuring transparency and accountability. Yet, volumes of contracted farmers are still complemented with volumes of other farmers. First step is to obtain clear reporting on contracted vs. sourced volumes Have 80% of own smallholders GLOBALG.A.P. certified NEW Supplier rotation dynamics require continuous training of new farmers. A solid certified supplier base of 80% is considered attainable in the mid term. The first step is obtaining clear reporting on the number of farmers certified Ensure timely payments for at least 90% of purchases Set up a technical assistance programme with learning farms for the entire FairFruit Group 2014 WORK IN PROGRESS NEW In 2013 and 2014 working capital shortage has continued to lead to delays in the payment of farmers. The integration of FairFruit Group will allow better planning and allocation of working capital. The first step is to obtain clear reporting on payment delays. Smallholders still have limited technical know-how. Our goal is to improve technical assistance and use own farms as a learning centre and proof of concept in every production unit Community Maximize local employment in FairFruit Guatemala 2013 ACHIEVED FairFruit Guatemala has been working with 'Mi primer empleo' on the integration of local community members as employees. Building further on that experience, a similar approach will be elaborated at FairFruit Group level Launch outgrower programme at Koga Veg 2014 RECONSIDERED We aimed to include the first farmers in an outgrower programme by the end of 2013, or early However we decided to perform more commercial trials before including smallholders Environment Develop an environmental protection plan for all own factories NEW This new objective gathers many former initiatives at production unit level. FairFruit Group will group all initiatives in a more coherent approach Develop a sustainable production plan for all own farms NEW This new objective gathers many former initiatives at farm level. FairFruit Group will group all initiatives in a more coherent approach (includes consideration of Rainforest Alliance and Tesco's Nature Choice certification in SID Peru and FairFruit Guatemala) 2016 Integrate soil conservation and integrated pest management in all smallholder and technical assistance programmes NEW Both topics have been addressed by certification schemes during the past years, however special attention will be given to the technical assistance programmes on FairFruit Group level in the years to come Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

35 5 BARAJII 68 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

36 Burkina Faso 5 BARAJII Barajii offers low-price qualitative, healthy and affordable beverages to over small shops and over 50 wholesalers in West Africa Highest quality beverages in the pouches market Continuous diversification with a progressive focus on healthy local products Socially responsible employment and economic activity in one of the poorest countries in the world. PRODUCTION MARKETING - DISTRIBUTION BASE OF THE PYRAMID DRINKS SAVEUR ET VIE Worker salary Workers (FTE) Lowest salary ( /month) Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

37 5 Barajii 5.1 BARAJII IN A NUTSHELL Product range Pure and natural water The high degree of infectious diseases in Burkina Faso is for a large part caused by food or waterborne pathogens. Barajii offers pure and natural water in small and large pouches and PET for street, home and high-end consumption. Main markets Burkina Faso (Ouagadougou & Bobo-Dioulasso) Export to: Togo Ivory Coast Mali Ghana Niger Flavoured water Flavoured water thirst quenching drinks include Energy and Apple, and since 2014 also Citrus in pouches, with natural sweetener stevia replacing 20% of sugar. Juices and teas Juices and teas based on locally sourced raw materials are Bissap, Tamarind, Mango and Ginger in pouches and PET. In juices and teas 30% of the sugar content is replaced by stevia. Main challenges Growing competition and complex legislation in water pouches sector Fast extension of product portfolio with large opportunities in healthy beverages Geographic expansion Introduction PET products 2013 key figures Volumes 110 M drinks Sales EBITDA 6,3 1,4 M M Workers 606 /268 (headcount) FTE 72 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

38 5 Barajii Impact Employment generation Barajii creates direct and indirect employment in Burkina Faso, where formal employment is scarce Striving to become an examplary employer meeting national and international standards for social responsibility Income/productivity growth Over 1000 small-scale boutiques account for more than 50% of the sales, the remaining sales passing through about 50 larger local distributors Maintaining close relationships with distributors and retailers and providing assistance with stock management and sales, the company contributes to many base of pyramid livelihoods Orienting towards beverages from locally sourced raw materials, representing a growing market for smallholder producers. In 2013 all natural raw materials were sourced in the local market. Food Security Stimulating the local economy with highly popular low-cost healthy beverages BARAJII CREATES DIRECT AND INDIRECT EMPLOYMENT IN BURKINA FASO, WHERE FORMAL EMPLOYMENT IS SCARCE. 5.2 CHALLENGES AND OPPORTUNITIES Consumers Demand for low cost/high quality beverages exceeds production capacity Young population and rising middle class. Interest for juices and infusions is growing. Stevia is highly appreciated as a replacement of sugar New market opportunities in restaurants, households etc. Workers With employment in Burkina Faso scarce, the establishment of formal employment means a lot to the community Despite strict, French inspired labour law, the country s employment traditions are not entirely in line with national or international legislation Community Strong lobby groups The formal private sector is still small. The inclusion of suppliers and distributors can make an important contribution to development through value creation and the contribution to taxes. Customers Customers are tapping into neighbouring countries opening the door for Barajii to enter new markets in Mali, Niger, Ivory Coast, Ghana and Togo Customers prefer Barajii to competitors since consumer preference is considerable. Competitors Competition from copycat low-cost low-quality mineral producers pouches is extending to flavoured water as well Vague tax regulations create an unlevelled playing field Smallholders New products based on locally sourced agricultural outputs could mean an additional source of income for smallholders Environment Changing laws on oxo-biodegradable plastic Favourable tax climate for investments in renewable energy Investors Durabilis resources for investment are limited, as a result Barajii is largely relying on own funds for future growth 74 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

39 5 Barajii 5.3 STRATEGY In order to realise its vision to offer refreshing, affordable and high quality drinks for all, Barajii wants to build on its know-how as a (flavoured) water producer and distributor offer an adapted product range to different market segments privilege the use and transformation of locally sourced natural products Barajii aims to realise this vision based on 2 tactical pillars: continued investment in R&D producing closer to the market in small satellite production sites Outlook for 2014 Freeing up resources for consolidation and prepare-for-growth efforts: Installing a compact PET bottling line Investment in a 35 kwp solar panel system Preparing the management team for a new expansion phase Outlook beyond 2014 From 2015, Barajii is targeting major further growth: Stepwise geographical expansion, testing new markets with a compact, mobile container-sized factory and lower value products producing close to the market Extending the product portfolio with a strong emphasis on locally sourced healthy products and the use of stevia as natural sweetener 5.4 DEVELOPMENTS IN 2013 Increasing production capacity and adding new products to the portfolio In the beginning of 2013, an additional investment permitted a 20% increase in capacity, including a major investment in pasteurization capacity for juices and flavoured water. Additional flavours were added to the product range, such as the flavoured Citrus drink and the very popular natural tamarind juice. Regaining market share in pure water Professional marketing and distribution efforts have resulted in a resurgence of pure water market share in a market largely dominated by informal players. Consumers are coming back to the Barajii quality brand, despite its higher price. ContenO container-sized PET bottling line More value-added products of local origin require more advanced packaging and conservation technology. Additional investments in a PET bottling line and advanced pasteurisation equipment were prepared in collaboration with ContenO, a Belgian supplier of compact container bottling lines. (The line will be installed during the second half of 2014). The investment is financed by a local bank loan. Water taxation file Outdated legislation in the beverage sector obliged Barajii to start a long and intensive communication campaign with local authorities in order to reform the high taxation practices on water in Burkina Faso, despite the existence of UEMOA directives exonerating water in Sahel regions from revenue taxes. Health care at the factory A collaboration was started with a local NGO PaamLaafi ( headed by a Belgian doctor, in order to provide affordable health services to all SBFA employees. An infirmary was installed in the factory and a doctor is present on a daily basis. The NGO is using the resulting revenues for the construction and operation of a new hospital in Ouagadougou, offering affordable health services to the base of the pyramid. Oxo-biodegradable plastics With several years experience in oxo-biodegradable plastics, Barajii advised the Ministry of the Environment on the new law on oxo-biodegradable plastics and its application in Burkina Faso. 76 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

40 5 Barajii 5.5 CHALLENGES FOR 2014 AND BEYOND Roll-out of PET gamma While Barajii is still investing in production capacity, growing competition in the pure and flavoured water segment has triggered other diversification initiatives to be rolled-out gradually in the years to come. After installation of the new PET line, products that will add to the current portfolio are PET-bottled bissap, tamarind and mango juice, as well as 1l pure water bottles. Investment in solar energy system The new lines and pasteurizer are energy intensive. Since Ouagadougou suffers from electricity supply interruptions, and in order to bring carbon emissions down, a pilot 35 kwp solar panel system will be installed on the roof of SBFA with the possibility of gradually expanding to 200 kwp (a typical domestic system is between 1.5 and 3kWp). different locations, before investing in fixed assets or partnerships and establishing new production hubs. Defining the geographical expansion strategy Barajii sachets, mainly sold in Ouagadougou and Bobo-Dioulasso, are popping up in countries such as Mali, Niger, Ghana and Ivory Coast, indicating a strong international consumer interest to be exploited before competitors enter the arena. For lower value products a close-to-market production strategy will be used. 5.6 COMMITMENT TRACKER Higher value products will be produced in Ouagadougou where more stringent quality assurance and control standards apply. Geographical expansion will take place stepwise, testing new markets with a compact, mobile container-sized factory and further developing successful markets through local partners or own satellite factories. Communication to community With Barajii becoming a national icon, proactive interaction with community stakeholders becomes more important. The management team is relying on its extensive network within the country to increase efforts in that direction. Expanding the management team The planned extension of the product range and the increased complex- Stakeholder Commitment Former due date Status Comments New due date ity of the business call for a considerable expansion of the management Investor team. This will be realised by the recruitment of several new key management positions. Refinancing long term debt The imminent reimbursement of the long-term debt and the fact that short term debt arrangements are mismatched to the seasonal nature of the business could jeopardise operational efficiency and mid-term investments. Refinancing the current long term debt will make it possible to move ahead with mid-term investments, diversification projects and a more flexible working capital financing solution. Improve transparency on impact data regarding the commitments below Integrate sustainability KPIs in the management objectives Ensure 100% compliance with the worker aspects of Durabilis' Social Responsibility Charter 2013 WORK IN PROGRESS NEW NEW Data management has progressed a lot in collaboration with Durabilis Consulting in As from 2015 the management should be ready for sustainability reporting. In 2015 quantitative sustainability reporting will be possible at reasonable costs. Emphasis will be put on the reporting regarding the commitments below. A gap analysis has been performed. The recommendations regarding workers were integrated in the management objectives Designing a mobile pouches line for lower value products By analogy with the container-based PET bottling line which stays in Ouagadougou for higher value products, the design of a mobile compact packing line for lower value products will permit affordable market tests in 78 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

41 5 Barajii Stakeholder Commitment Former due date Status Comments New due date Stakeholder Commitment Former due date Status Comments New due date Workers Customers Reduce the proportion of temporary workers by 5% each year NEW A reduction had been achieved during several years, however in 2013 and 2014 efforts were put on hold. Improved reporting on employment status and inclusion of daily workers is again on the agenda for Gaining more insight in customer profiles by introducing a customer follow-up system NEW Today small distributors are not followed individually. However in order to improve understanding of their needs, a closer follow-up will be introduced Enforce control and training on health and safety measures. Establish a health and safety committee. Control overtime hours and limit them to the legal maximum. Introduce a worker grievance system ACHIEVED WORK IN PROGRESS NEW NEW The quality manager now oversees Health, Safety and Environment and safeguards health and safety procedures and training. In 2013, an internal pharmacy and free doctor consultation were introduced as a service to employees. The establishment of a health and safety committee has been integrated in the management objectives for It will contribute more to the improvement of the HSE system. Performed overtime hours are generally limited thanks to a shift system, but will be quantified as from 2015 in order to determine next steps. Installing grievance procedures will allow workers to express their concerns and the company to address them Suppliers Consumers Find local suppliers of oxo-biodegradable plastic Introduce more nutritious products on the market. Find healthier alternative for sugar. Introduce a consumer hot line ACHIEVED ACHIEVED ACHIEVED NEW Although a lot of effort has been put in finding local suppliers, no providers of good quality plastics have been found yet. A local supplier is however supplying oxo-biodegradable masterbags since 2013, completely eliminating the use of non-oxobiodegradable plastic since A new line of juices has been introduced in More will follow in the coming years. Stevia now replaces 30% of sugar in juices and 20% in flavoured water The hot line will allow formally addressing customer complaints Gradually bring the lowest salary from legal minimum (around FCFA) to basic needs wage (around FCFA) NEW The HR manager will present an analysis and action plan by the end of Environment Find a solution for effluents and solid waste in the Ouagadougou factory WORK IN PROGRESS A specialist study was ordered in 2013, and delivered beginning of An in house water treatment facility will be installed during Roll-out the 35kWp solar project in order to increase the proportion of renewable energy. NEW The plans for the solar project are ready for implementation in Find a solution for large fossil fuel consumption for product transport WORK IN PROGRESS In the light of expansion to new markets, the BaratenO concept was developed in It will be applied for the first time in A new truck fleet will decrease fossil fuel consumption. A GPS tracking system will increase efficiency by means of wellplanned routes Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

42 6 TERRAL 82 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

43 Senegal 6 TERRAL Terral brings fresh rice, locally produced by smallholder farmers, to the urban West African market which is traditionally supplied from the global market Supplying urban markets in a professional way Year-round market presence Worker salary SOURCING MARKETING - DISTRIBUTION) LOCAL RICE Workers (FTE) Lowest salary ( /month) Farmer revenue LE BON RIZ, AU MEILLEUR PRIX! Smallholders Average revenue ( ) Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

44 6 Terral Senegal 6.1 TERRAL IN A NUTSHELL Product range Fresh rice from Senegalese smallholders for Dakar s urban base of the pyramid market Main markets Senegal, Dakar Long grain rice is perceived as better quality and sold at higher prices Broken rice is traditionally used for most dishes in Senegal Main challenges Managing considerable volume expansion throughout the entire value chain: diversifying and reinforcing paddy rice sourcing fine-tuning transformation processes and boosting sales diversifying and reinforcing paddy rice sourcing, fine-tuning transformation processes and boosting sales 2013 key figures Volumes 850 M tonnes Sales EBITDA 0,3-0,1 M M Workers 5 Smallholders 23 / (headcount) FTE 86 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

45 6 Terral Impact Employment generation Terral is a small employer, but striving to comply with all national and international legislation Income/productivity growth Terral is one of the few formal rice buyers in Senegal building long term relationships with its growers Buying immediately after harvest provides farmers with cash for immediate financing reimbursement and relieves them from storage problem 6.2 CHALLENGES AND OPPORTUNITIES Consumers Smallholders Growing quality awareness amongst Senegalese Farmers produce mainly for own consumption, consumers. They appreciate fresh and long but seek a market for part of their production grain rice and are increasingly prepared to pay so as to reimburse the pre-financing of inputs a premium price Customers Customers value the professional approach and year-round availability of Terral rice Environment The traditionally high-input rice production in the Senegal Valley has a significant impact on the local ecosystem Agricultural productivity Competitors Community In-the-field demonstrations of improved production Largest part of available paddy is processed Large infrastructural investments in rice sector practices artisanally. Rice production is largely overshooting resulting from the state government s objective Close production follow-up and advice processing capacity of being self-sufficient in rice by 2018 Access to information Workers Investors Supplier inclusion through transparent contracts, With employment in Senegal scarce, the Company in start-up phase quality reports and payments to farmers Food Security The local rice supply covers only 25% of the needs, while tons are imported every year Rice is a strategic sector for the Senegalese government as part of its food security ambitions THE LOCAL RICE SUPPLY COVERS ONLY 25% OF THE NEEDS, WHILE TONS ARE IMPORTED EVERY YEAR establishment of formal employment means a lot to the community The country s employment conditions are not entirely in line with national or international legislation Considerable working capital needed for paddy sourcing CONSUMERS APPRECIATE FRESH AND LONG GRAIN RICE AND ARE INCREASINGLY PREPARED TO PAY A PREMIUM PRICE 88 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

46 6 Terral 6.3 STRATEGY Building on lessons learned since 2011, Terral will expand its volumes considerably during the coming years: Investing in own rice mill Expanding sourced volumes by diversifying producer base Exploring expansion to Mali and Burkina Faso Outlook for 2014 In August 2014 the own rice mill becomes operational. The improvement in equipment will mean a quantum leap for the processing KPIs and profitability Outlook beyond 2014 Gradually, current investments will be taken to their limit. An investment in additional drying capacity is planned in Limited rebranding efforts will boost Terral s already tangible popularity in order to keep sales up with growing rice volumes. IN 2013, WITH SUPPORT OF THE GRAMEEN CRÉDIT AGRICOLE, THE DECISION WAS TAKEN TO INVEST IN A NEW RICE FACTORY WITH A CAPACITY OF 8000 TONS OF PADDY 6.5 CHALLENGES FOR 2014 AND BEYOND 6.4 DEVELOPMENTS IN 2013 Diversifying producer base In the past Terral has been providing micro-credits to Improving paddy quality Senegal historically being a rice importer, rice produc- Formalization of SFA rice factory with a capacity of 8000 tons of paddy a its farmers in collaboration with the Pamecas Bank, created between the Senegalese and Canadian gov- tion practices are far from optimal today. Since good paddy quality is the basis for cost-efficient processing, In 2011, Durabilis started a rice project in Senegal year. Negotiations for a land concession were started ernments in order to promote economic and social technical support to the farmers is essential. With the aimed at boosting the supply of local rice for the urban in October 2013 and successfully completed in Feb- well-being. Since growth through Pamecas is limit- current small agricultural team, technical assistance bottom of the pyramid. After in depth stakeholder and ruary In the meantime, project planning and ed but Terral s producer base needs to follow its in- has been limited to enforcing a nationally promoted supply chain analysis and agronomic research, Dura- negotiations with shed and machinery suppliers were creased processing capacity, alternatives need to be rice growing calendar. Terral is looking into different bilis got involved in managing the entire supply chain, started. developed. Financing through CNCAS, the Senegalese options for subsidies or donations that could allow for assisting the farmers cooperatives, managing a rented rice factory, marketing and selling in Dakar. In March 2013 SFA (Sénégalaise des Filières Agricoles) was created as a 100% subsidiary of Durabilis, covering all Grameen Crédit Agricole entering the capital of SFA Grameen Crédit Agricole accepted to enter SFA s cap- state bank with a large stake in the rice sector, will be the first complementary source. Building the rice mill better research and support in the form of a farmer field school. Becoming the price maker Senegalese rice activities. ital for 20% of the shares, and provided a long term Moving from a rented, underperforming rice mill to a In order to impact the rice price and be able to in- Preparations for building own rice mill credit line for an amount of This will allow the construction of a new rice factory with a capacity company-owned one was essential for the future of Terral s activies. The building was ordered from Bel- crease the return to its producers, Terral s ambition is to double sales every year and become the number Because the rented rice factory and old Chinese of 8000 tons of paddy a year. Additionally, Alterfin, a gian supplier Frisomat, while a low-budget but ade- one brand in Senegal. The sales team and marketing equipped factory did not offer the drying, storage Belgian Social Investment Company provides working quate Chinese machine was bought for Terral s initial efforts will be gradually reinforced in order to achieve and cleaning possibilities needed for high-quality long capital funds. years. In August 2014, the first lots were processed these objectives. grain rice, the decision was taken to invest in a new with satisfying results. 90 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

47 6 Terral 6.6 COMMITMENT TRACKER Stakeholder Commitment Former due date Status Comments New due date Stakeholder Commitment Former due date Status Comments New due date Investors Environment Improving transparency on impact data regarding the commitments below NEW Terral being a start-up, has been able to guarantee strict data management from the beginning. The challenge is now to translate this information to clear-cut KPIs Developing a sustainable production plan for smallholders 2015 WORK IN PROGRESS Exploring environmentally friendly practices on the nucleus plantation, in order to implement them in smallholder production through technical assistance programs & farmer field schools. Planning construction of own mill 2013 ACHIEVED Although not built in 2013, the own mill was deployed in the second half of Finding ways to valorize waste from milling 2013 RECONSIDERED Energy from husk forms part of the terms of reference of an own mill. However the plans have not been executed yet. Feasibility study is pending Workers Ensure 100% compliance with the worker aspects of Durabilis' Social Responsibility Charter 2013 WORK IN PROGRESS With limited resources available, all efforts have gone to securing the harvest and building the new mill. Now that it is up and running, a gap analysis will be performed and the recommendations regarding workers integrated in the management objectives Customers Consumers Including small entrepreneurs 2011 RECONSIDERED Since Terral's impact is mainly linked to its suppliers and national food security, this ambition has been postponed for future revision. Suppliers Gaining production experience on an experimental plot Establishing a social profile of the supplying farmers 2013 ACHIEVED NEW A small scale experimental field was started in collaboration with a local farmer. Results are expected end A socio-economic study of the rice producers and their communities will provide better insight in their needs and concerns Further examining possibilities for introducing new innovative products such as baby-food, whole-grain rice or fortified rice 2012 RECONSIDERED Remains an important objective, however focus is first on the development of white rice Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

48 7 DURABILIS CONSULTING 94 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

49 7 DURABILIS CONSULTING Durabilis Consulting is our expertise center that concentrates 10 years of experience in setting up and managing value chains in developing countries and building relationships with supply chain partners. Having learned from our own successes and failures, Durabilis Consulting is an instrument for the transparent allocation of management support to Durabilis subsidiaries in all aspects. Our know-how is especially focused on the agribusiness sector, from harvest through to production, processing, selling and exporting fresh and processed products, always promoting a fair distribution of profit and risks and sustainable resource use. Social Responsibility assessments, implementations, monitoring and evaluation processes Social Responsibility strategy and implementation Social Responsibility management dashboard Certificate implementation Health and Safety guidance Analysing business opportunities from business plan to launch Business Model Development Financial, operational and sustainability due diligence Feasibility tests Business Plan or Impact Invest Plan Fundraising Assistance in the complete value chain from technical assistance to processing and export mallholder management, training and certification Sustainable growing and farm management Plant engineering and design Food processing technologies Renewable energy solutions Improving and managing core, support and reporting processes in new and existing businesses Finance and accounting Performance measurement and reporting Research and Development Trade, sales and marketing assistance Production and operations management Purchasing, supply chain management and distribution 96 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report

50 8 CONTACT US DURABILIS NV +32(0) (0) Bollebergen 2b, bus 21, 9052 Zwijnaarde ANTWERP MEETING ROOM CMB De Gerlachekaai 20, 2000 Antwerp BRUSSELS MEETING ROOM VOCATIO Albertinaplein 2, 1000 Brussels General Management Sebastiaan Saverys Chief Executive Officer Peru Dutch, English, French, Spanish, Italian Finance and administration General operations Evert Wulfrank Chief Operations Officer Belgium Dutch, English, French, Spanish Sustainability and Impact Stefan Jamar Chief Finance Officer Belgium Dutch, English, French Bert Sercu Chief Sustainability Officer Belgium Dutch, English, French, Spanish, Portuguese Investor relationships Paul Jacquet de Haveskercke Chief Strategic Officer Belgium Dutch, English, French, German FairFruit International Carl Wulfrank Chief Executive Officer Belgium Dutch, English, French, Spanish 98 Global Activity Report 2013 DURABILIS DURABILIS Global Activity Report