Raw material prices hurt Evialis results

Turnover of Evialis amounted to €342.2 million, an
increase of 8.3% compared to the first six months of 2006.

This increase is largely the
effect of significant price rises of raw materials, especially cereals (over the
past year increases have been: corn + 43%, wheat + 46%, soy + 20%). Also the
good results from the “Nutrition International” division (+11%) attributed to
the good results.

Exchange losses, mainly relating to South Africa and
Vietnam negatively impacted on turnover by €3.5 million.

Reduction in
profit
Gross profit margin increased 1.8% to €100.2 million (on a
like-for-like basis). This small increase is explained by the difficulties
Evialis encountered to transfer higher raw material prices into retail prices,
for a greater extent in the “Nutrition France” division and in mature
markets.

On the cost side extraordinary expense are the result of the
reorganization of the French premix activities following the purchase of Nutreco’s premix business in
France.

The R&D budget has been extended from €1.5 million to €2.2
million in a difficult market. These developments mainly concern building
project of the largest privately owned aquaculture research centre in the
country.

Outlook
As far as raw materials are concerned there
seems to be no signs on the horizon that prices will be relaxed in the short or
medium term, confirming that this phenomenon is structural, lasting and
worldwide, Evialis said in a press release.

Moreover, the maturity of the
French market reinforces the necessity for the company to rebalance its
activities towards international markets as soon as possible.

Evialis
wants to meet these challenges with:

• Innovation, enabling the provision of
  optimal nutritional and economic solutions to the livestock farmers,

• Internationalization through organic or external growth, to locate the growth
  areas where markets are rapidly developing, and

• Optimization of the French operations to capitalize
  on a demanding and perfectionist markets.

Meeting the year’s forecasts is not out of reach, but remains a highly
ambitious challenge, the company concludes.