07 Report of the Supervisory Board

In the past year, there were no personnel changes within the Supervisory Board (SB). Irina Frolova was nominated for reappointment to the HZPC Association board. She was appointed on 16 May 2023 for her second four-year term. Chair Michael Kester looks back on the financial year 2022-2023 in this annual report and takes a look into the future.

In a dynamic global market, Royal HZPC Group B.V. grew in volume by more than 6% to almost 1 million tonnes and in turnover by 20% to more than EUR 400 million. The combination of higher sales and cost control resulted in a solid result that everyone at Royal HZPC Group B.V. can be proud of. On average, it has also been a good year for seed potato growers in the Netherlands: a higher yield and a 10% higher payout price.

The supervisory role we have as SB is becoming increasingly weighty. The world around us is becoming more complex; sustainability is important, but so is Royal HZPC Group B.V.'s place in the world. More and more risks are emerging too, relating to local politics, compliance issues, cyber security and dynamics in existing and new markets. The board makes considered judgements in this regard. As the SB, we have become more critical and sometimes ask more of the management. Fortunately, there is a great deal of mutual respect and understanding. We never trespass on one another’s territory and the division of roles is clear. That makes it a very pleasant collaboration.

As financial legislation and requirements around compliance become stricter, the SB chooses to have tighter oversight of international payments. Royal HZPC Group B.V. has already tightened its own policy on this considerably. The SB supports Royal HZPC Group B.V. in its vision to continue supplying sanctioned countries and conflict areas where the banking system does not always function well. The corresponding risk is a regular item on the agenda. The financial risks are then discussed, as are the  legislative frameworks around the payment system to which Royal HZPC Group B.V. must adhere. The management and the SB continue to monitor the situation closely and adjust policy if necessary.

For several years, Cor Biemond and Irina Frolova (Vice-chair) of the SB have formed the audit committee. They are tasked with working with Finance to dive much deeper into the figures than is possible in regular SB meetings. They speak to relevant internal and external parties, such as the auditor Ernst & Young, to form an effective view on the quality of financial records, the robustness of processes and access to credit. Also, due to increasing complexity, the SB decided to seek external advice on compliance issues. The experience so far has been very positive.

We are closely monitoring Aurora's implementation, with the support of an external agency that is advising us on progress. Many uniform processes have already been set up to ensure that everyone within Royal HZPC Group B.V. works in the same way. In mid-2023, Royal HZPC Group B.V. launched the planning module in its ERP system. This allows Royal HZPC Group B.V. to manage and control stocks much better and was an important step in the implementation process. Many challenges remain, but Aurora is now well on course.

Royal HZPC Group B.V. has invested heavily in research. This is incredibly important, especially for the longer term. It ensures that Royal HZPC Group B.V. can continue to grow. The journey across the agricultural sector is naturally towards sustainability and this means varieties need to be more resilient. Royal HZPC Group B.V. is, of course, explicitly engaged in this quest, including by investing in marker technology. Knowledge of DNA and how it is transferable to subsequent generations has increased enormously in the last few years. The hybrid programme is indispensable in this regard. In tetraploid breeding, you can also see that the commitment to resistances is now starting to pay off. In recent years, Royal HZPC Group B.V. has not introduced many new varieties but various great developments are now on the way. That is both amazing and unique.

The Executive Board of Royal HZPC Group B.V. is developing a business strategy for the next 5 years. They share their progress with us and, when the Executive Board wants to implement the strategy, it is up to us to give them the green light. A key component in this is how Royal HZPC Group B.V. will manage global market access. This encompasses licensed cultivation in India, where Royal HZPC Group B.V. is also reaping the benefits in 2022-2023, in China, where protection of varieties is an important point of attention, and the market approach in Africa and America, where new opportunities also lie.

Besides market access, sustainability objectives are an essential part of the strategy. Royal HZPC Group B.V. takes this very seriously; just look at the new robust varieties. From 1 January 2026, large companies will be required to report on sustainability. Royal HZPC Group B.V. must start preparing for this Corporate Sustainable Reporting Directive (CSRD) from 2024 and this will require the necessary manpower and expertise.

The Supervisory Board of Royal HZPC Group B.V. supervises the policy of the Executive Board and the company strategy and operates completely independently of this board. The Executive Board submits plans to the SB in terms of strategy, budgets, investments and commercial policy. The SB serves to provide approval of the plans after review. The survival of the company and the interests of all stakeholders are paramount. As an employer, the SB also sets the remuneration for the Executive Board. As a shareholder, the HZPC Association (re)appoints the members of the SB.

In 2022-2023, spread across the year, six meetings took place between the SB and the Executive Board of Royal HZPC Group B.V. The Chair of the SB works with CEO Gerard Backx to prepare for the meetings. The audit committee met five times, always prior to meetings between the SB and the Executive Board. This financial year, the SB has also held two meetings of shareholders with the Board of HZPC Association.