01 Message from Gerard Backx

We are still living in turbulent times. Just as the coronavirus crisis seems to be retreating, we are confronted with another crisis; the war between Russia and Ukraine. This has led to the European market, which was always stable and predictable, becoming less steady. There is uncertainty. But one thing is certain: the demand for sufficient and nutritious food remains.

HZPC has been able to weather the coronavirus pandemic reasonably well. Now that the worst is behind us, we are doing all we can to catch up. Corona meant that we had to take a substantial step back in terms of turnover and gross margin and, in turn, our operating result. Our long-term plan and the corresponding growth scenario was put on ice. Whereas we had estimated growth of a few percent per year, the rate of growth during coronavirus reduced to zero. We are now back to the old level, from before the coronavirus pandemic, and growth is continuing. We will not, however, recover those two years of missed growth.

The coronavirus pandemic was somewhat intangible and it was hard to consider the various scenarios. This is not the case, however, with the war between Russia and Ukraine. Again, we do not know the course, but we are much more able to think out possible scenarios and their consequences for HZPC. We may well have to deal with supplementary European or Russian sanctions and transport restrictions. If tensions increase, we might even have to cope with the nationalisation of our Russian branch. In this case, our biggest concern would be having to transfer our intellectual property.

The unrest which comes with a war is being translated into shifts in the market. Grain prices and fuel costs have increased to record levels, causing growers in some countries to swap potato acreage for grain crops. This is a logical choice as it requires less effort and input and can earn the farmer the same or sometimes even more. This means that the supply of potatoes is reduced. And whereas globalisation has been the order of the day for the past few decades, we are now seeing movement in the opposite direction. If food supplies are jeopardised, countries that have the capacity to do so will move to producing more of their own foods.

What the past few years have taught us is that HZPC is an exceptionally resilient business. We can weather the storms and keep pace with a market that is constantly changing in a world full of surprises. One of HZPC’s biggest strengths is that we are not based on one continent but are a potato breeder and trading house operating on a global scale. Where Europe and part of the Middle East are now experiencing instability, there are also numerous opportunities in growth markets such as India, China and Africa. In addition, we are growing in the Americas.

When it comes to Research & Development, we are also taking significant steps. With an eye on the future, we are developing varieties that can take on the challenges posed by resistance, climate change, soil quality and available resources. Thanks to marker-driven breeding, we have been able to accelerate the usual tetraploid breeding process; the initial products have been introduced and will continue to be introduced to the market in the coming years. Many promising new varieties will emerge in the short term.

We realised great results with diploid breeding at the end of 2021. We are thus on track to introduce the first hybrid potato varieties to the African and Indian markets in 2025. This is a revolutionary development and HZPC is leading the field by a considerable margin.

Thanks to this revolution, we can realise progress quicker in terms of the genetic development of potato varieties. This, in turn, benefits all potato growers across the world. It also enables HZPC to transport potato seed to locations that are inaccessible to seed potatoes for our current varieties.

It will still take a few years before the outside world notices any difference but, at HZPC, we are proud to see that our investments over the past few years have created a robust foundation and that we have managed to conquer all the technical challenges. We have something of exceptional value in our hands and this gives us an opportunity to explore new markets that are currently out of HZPC’s reach. We can improve genetics quickly and are currently preparing the introduction of varieties in Africa and India.

HZPC is sure that, in the long-term, this programme will provide a substantial contribution towards HZPC’s profits because it will allow the organisation to supply genetics to countries where it is not currently active.

The coming years will require development power and new strategic choices. Where necessary, we will work with partners and parties that can use their expertise to support HZPC’s pathway and future. Everything is focussed on translating developments in diploid breeding into growth and market opportunities for HZPC. There is plenty of uncharted territory yet to be conquered. To do so, we need a steady course and a sufficiently adaptable organisation. We will think about what this means for HZPC and what will be required in the coming decades. When we look towards the more distant future, HZPC is intending to carry on introducing top quality seed potatoes to the market while also supplying potato seed, directly or indirectly, to the market from which seed potato tubers can be grown locally.

HZPC remains 100% committed to what we believe in with heart and soul: making an impactful contribution to the worldwide food supply. This includes the choice to continue to supply seed potatoes - as long as we can - to Ukraine as well as Russia. We have always supplied to both parties in conflict zones and will continue to do so. It is my personal belief that conflicts cannot be resolved if populations are going hungry.

Underneath that resilience and mission lies great trust. From our customers, our growers, our employees and our partners. This confidence is vital if we are to regard the future with a sense of reassurance, despite the uncertainties that sometimes come our way. Of this I am sure.

This annual report covers the financial year 2021-2022. I hope that you enjoy reading it.

Gerard Backx