04 Compliance

Within our risk profile, we recognize four categories of risk: strategic, operational, reporting and compliance. These risks are assessed using a scale ranging from 1 to 5.

Within the strategic risk category, we distinguish between risks that we can influence through our own strategic activities (internal) and risks that originate outside the organization (external).

The most significant internal strategic risks relate to the current performance and future robustness of our variety portfolio, the availability of critical talent, intellectual property protection, and our ability to successfully execute strategic transformation initiatives.

We see the strength of our variety portfolio as the foundation of the group. Thus, the risk of not having the right varieties available, both now and in the future, is of the utmost importance. Therefore, we continue to invest in advanced breeding technologies, aimed at developing resilient, resistant and sustainable high-performing potato varieties, as our stakeholders expect from us. 

Attracting, developing and retaining the right employees remains critical for the future success of our organization. Competition for specialized talent continues to increase. We therefore focus on succession planning, leadership development, talent acquisition and employee engagement throughout the group. While some vacancies are open for a longer time, the mitigation measures taken are experienced to be effective. 

Aurora, our multi-year business transformation program, remains a key strategic priority. The phased rollout of our new ERP platform, with a major release on July 1^st 2026, ensures a stable foundation for the group to grow upon in the future. Successful implementation remains critical to reap the benefits and has had full attention. Lessons learned from previous implementation at STET have been used to improve this go-live, with dedicated attention to change management and full focus on critical work packages. This is considered to be the main mitigation for the business continuity risk. 

Protecting intellectual property rights is essential to safeguard the return on our investments in research and development. Through Breeders Trust and our own enforcement activities, we actively monitor and address infringements of plant breeders' rights and licensing agreements.

We manage our financial revenue risk by focus on our production-to-sales ratio and sales forecasting. Along with our sector peers, we have experienced a challenging year. Due to high volumes of produced seed potatoes and therefore availability, market prices have plummeted. We do not expect the specific market circumstances to repeat next year. 

Externally, climate change, increasing disease pressure, as well as evolving customer requirements, changing agricultural practices and regulations continue to shape our operating environment. Growers across several regions increasingly face weather volatility, water availability challenges and stricter regulatory requirements. As a group, Royal HZPC Group mitigates these risks through a diversified global footprint, strong local market presence and continued investment in resilient varieties. We consider our focus on resilient varieties key to mitigate this risk. 

Geopolitical developments remain a significant source of uncertainty. Trade restrictions, sanctions regimes, regional conflicts, supply chain disruptions and shifts in international trade relations may impact our operations, logistics, production planning and market access. The conflict in the Middle East is exemplary of this. Developments are closely monitored. This risk manifesting is always caused by external events. Therefore, mitigation is to be found in how timely and adequately we can adapt to developments. While individual circumstances of group entities can vary, on average we consider we are adequately equipped to adapt.

The operational risk category addresses risks that may disrupt or significantly impact Royal HZPC Group's day-to-day operations.

These risks include seed potato production and availability, product quality, cybersecurity and information security, business continuity, supply chain disruptions, treasury management, health and safety, and the organization’s ability to respond to rapidly changing circumstances.

Production risk continues to require significant attention. Availability of suitable acreage and planning, high-quality starting material, minituber capacity and expected crop yields are closely monitored. This risk is managed by the production and sales coordination department. 

Supply chain resilience has become increasingly important. Geopolitical developments, transportation challenges and local market disruptions may affect the timely movement of seed potatoes and other critical materials. Royal HZPC Group continuously evaluates these processes to be able to adapt timely to changes.

Our international scope, coupled with seasonal financing can potentially lead to cashflow issues. This risk is mitigated by dedicated attention to treasury. Implementation of LucaNet helps us monitor the group cashflow. In relation to treasury, another risk is variable interest rate. We use interest rate caps  to mitigate adverse effects of rate movements, while maintaining financial predictability. 

Cybersecurity and information security remain among our highest operational priorities. As digitalization progresses and our ERP implementation advances, maintaining a secure and reliable IT environment is essential. We continue to strengthen our security controls through vulnerability assessments, penetration testing, phishing simulations, employee awareness programs and investments in cybersecurity capabilities. With these efforts, we consider we do everything possible to protect the group. Residual risk remains present.

Employee health, safety and wellbeing remain fundamental priorities. A dedicated HSE-officer has been appointed, allowing us to continue to promote a safe working environment and invest in awareness and prevention initiatives throughout the organization.

Reporting risk includes events that may result in financial or non-financial reporting not being complete, accurate or delivered on time. Further implementation of Aurora, combined with ongoing improvements in data governance and internal controls, supports the reliability, consistency and efficiency of reporting processes across the group.

As stakeholder expectations regarding transparency continue to increase, Royal HZPC Group is committed to strengthening reporting capabilities and data quality throughout the organization. For example, sourcing process for software to assist our document management, workflows and risk management has started. We expect this to lead to improvements, both in terms of effectiveness and efficiency, in the coming season.   

Compliance relates to adherence to applicable laws, regulations and internal policies. Operating globally exposes Royal HZPC Group to a broad range of legal and regulatory frameworks. Changes in sanctions legislation, export controls, anti-money laundering regulations, anti-corruption requirements, privacy laws and sustainability regulations continue to increase the complexity of compliance management. As Royal HZPC Group operates in several regions with elevated compliance risks, there is an ongoing risk that transactions, business relationships or payments may unintentionally conflict with applicable sanctions laws.

To mitigate this risk as well as the risks involved with third party payments (anti-money laundering), Royal HZPC Group maintains a risk-based compliance program that includes due diligence procedures, sanctions screening, third-party assessments, internal policies, monitoring and employee training. Compliance requirements are increasingly embedded within our governance, commercial and financial processes.

We maintain a strict approach towards integrity, transparency and ethical business conduct. Commissions and payments must be properly documented, commercially justified and compliant with applicable laws and internal standards. Royal HZPC Group rejects practices that could create corruption or bribery risks.

Any breach of applicable laws or regulations could negatively affect Royal HZPC Group's operational performance, financial results, cash flows and reputation. Therefore, Royal HZPC Group remains focused on timely incident identification, further improvement of internal controls and compliance awareness to support the business activities.

We invested in our business in 2025/2026, despite the economically uncertain environment, and will continue to do so. We have invested in the acquisition of IPM. We are making steady progress with the construction of our mini-tuber facility in France and hope to complete this in 2027. We have also invested in our mini-tuber production facility in the UK and in our distribution centers.

Our invested capital at the end of the 2025/2026 financial year is EUR 61.4 million, which is EUR 17 million higher than last year. The increase in total fixed assets mainly relates to the acquisition of IPM and the investment in Aurora. Through Aurora, we are adapting processes and replacing the old ERP system. These investments were in addition to regular replacement investments in operations and R&D.

The cash position, netted for the short term credit facility, ended at EUR 18.5 million. This is an increase compared to the previous year, which is a result of the decision to execute the last payout of the season in July instead of in June.

Net turnover of EUR 450 million was recorded in the past year. Sales were lower than previous season as Royal HZPC Group B.V. faced lower volumes sold as seed at lower average prices. License income amounted to EUR 27.1 million in 2025/2026, which is lower mainly as a result of lower licensed volumes. Sales and licensing volume amounted to 1.1 million tonnes during the year, which was in line with the 2025/26 level.

The gross margin, i.e. the sum of operating income minus the sum of costs of raw and auxiliary materials and third-party services, freight and loading charges and packaging, decreased from close to EUR 100 million to EUR 79 million. This is due to lower seed volumes and prices, and low revenues for top size and ware potatoes.

By paying close attention to costs, an operating result of EUR 6.1 million was achieved.

As yet, there are no expectations of the result for the coming season due to uncertainties. These are caused by uncertain yield expectations and the corresponding availability for different markets. In addition, uncertainty remains due to the geopolitical situation.

We do not expect any major changes for our workforce.

The company entered into a new financing agreement as per 3 December 2025. Participating banks and their proportionate participation are ING Bank N.V. (EUR 46.7 million), Commerzbank A.G. (EUR 36.6 million) and Credit Industriel et Commercial (EUR 26.7 million). ING Bank N.V. is acting as agent. The financing agreement consists of a long term loan of EUR 10 million, a revolving current account facility of EUR 30 million and a seasonal facility of EUR 70 million. The seasonal facility is available from 1 October to 31 July. The interest rate is 1-month Euribor plus 1.45%. The financing agreement was concluded for the duration of 3 years with an option to extend twice for 1 year. The EUR 100 million will help support existing operations and investments for the future, the other 10 million is used for acquisitions. 

The concluded financing agreement entails an increase in the seasonal credit facility for EUR 10 million and an additional term loan of EUR 10 million. The Term Loan has a term of five years. Funding is guaranteed for a minimum of 3 years after closing plus an option to extend until February 2029.

Solvency decreased from 41.6% in 2024/2025 to 33.9% in 2025/2026. The decline is mainly caused by the acquisition of IPM, which increased the total assets value.  

As for the debtor position, we have seen a slight increase compared to last year and this is reflected in the balance sheet. The provision for doubtful debtors decreased due to the write-off of the positions in Cuba.

The management team is constantly assessing the relevant information and risks in order to take the appropriate measures. The financing facility we now have is sufficient to continue paying out advances to growers, as HZPC is used to. The current facility is also sufficient to absorb future regular fluctuations and disruptions in customer receipts. The management team constantly monitors developments in turnover and costs in order to maintain an overview of liquidity developments. Analyses are also carried out on a regular basis so that additional measures can be taken in time. On the basis of the management analysis, the current results and the company’s financing position, the financial statement has been drafted on the basis of an assumption of continuity. Due to the difficult season in 25/26, HZPC is in default on one of the bank’s covenants. The EBITDA covenant for the season 25/26 is in default, where the solvency and leverage covenants are both compliant. Subsequent to year-end, the company received a waiver letter from its banks in respect of the covenant breach. As a result of this waiver, the bank has confirmed that it will not exercise its rights arising from the breach and the related borrowings remain classified in accordance with their contractual maturity profile in the financial statements. The waiver supports management’s conclusion that the company remains a going concern. With the outlook towards the next season and the latest estimates, we expect to be fully in compliance with the bank’s covenants for next season 26/27 and that the situation of default will be ended.

Potato breeder and seed potato trading company Royal HZPC Group announced on October 2, 2025, its proposed acquisition of IPM Potato Group, a leading seed potato breeder and exporter based in Ireland. Per the 1^st  of February 2026 the closing of the acquisition was realized. Despite the difficult year for IPM in season 25/26 due to the market circumstances, the acquisition is expected to make a positive contribution in the coming years.

Royal HZPC Group B.V. stands for Diversity, Equity and Inclusion (DEI).

We are committed to a diverse workforce and an inclusive environment where everyone feels valued and respected. In addition, we support a corporate culture where everyone feels encouraged to (continue to) develop and grow. Or, in other words: Guiding continuous growth.

We actively seek to attract, employ and retain people from diverse backgrounds. As a result, our workforce is increasingly reflecting the rich diversity of the societies in which we operate. Our commitment to diversity extends to all levels of the organisation, from entry-level positions to management positions. The diversity dimensions on which Royal HZPC Group B.V. intends to report are:

• Gender diversity (female/male representation)
• Age diversity (representation of different age groups) 
• International diversity (number of nationalities of our colleagues)
• Knowledge diversity (distribution of our workforce by clustered subject areas) 
• Equal pay for men/women

We are accountable to the principles of fairness, impartiality and justice. Our aim is to provide a working environment where everyone has equal access to professional and personal growth. To the extent that there are barriers to these principles, we want to remove them.

Our Code of Conduct describes how to deal with (perceived) unequal treatment. HZPC's Code of Conduct is publicly available on the company's website.

For us, inclusion means promoting a sense of ‘belonging’ and creating a culture where everyone feels properly rewarded, respected and valued. Our mission, vision, corporate values and goals should be unifying. Within this context, we encourage open dialogue, active listening and mutual respect for everyone's unique contribution to the whole. We recognise that inclusive teams are more innovative, productive and better able to achieve our shared goals.

Our commitment to Diversity, Equality and Inclusion (DEI) is in line with international (including European) laws and regulations promoting equality and non-discrimination in the workplace. We focus on adhering to the principles set out in the various international guidelines within the countries where we are based. We understand that building a diverse, equitable and inclusive organisation is a journey that requires continuous effort and improvement. We will discuss the objectives internally so that they are known to everyone. Based on insights gained, we will make arrangements with Staff Representatives to refine our practices and policies.

Twenty years ago, almost all certificates were in the hands of active growers. This has now fallen to around half. This is because many growers, who are no longer actively involved in growing, hold on to their certificates and in the past have rarely offered them for sale. At the same time, active growers purchased few certificates. Thanks to the Connecting Growers program, share certificates are increasingly coming into the hands of active growers. For the season 25/26 the share certificates for the Connecting Growers program have been purchased during the trading rounds in Nov 2025 and May 2026. Given HZPC’s results for the 2025/26 season, in which HZPC did not meet one of the bank covenants, the agreements with the banks stipulate that if not all bank covenants are met, HZPC is not permitted to make any financial distributions to its shareholders. This means that neither the Connecting Growers programme nor the dividend may be paid out.

Share certificates used to be traded on an internal market. Since the trading period in May 2022, Royal HZPC Group B.V. has operated a new trading system for trading in certificates. Twice a year, in May and November, certificate holders can trade HZPC certificates for 10 working days on the Captin trading platform; Captin is an AFM-regulated brokerage firm. Royal HZPC Group B.V. has thus become a semi-listed company that is obliged to abide by the Dutch Financial Market Authority (AFM) rules. The market has also become more transparent, and the rights of the certificate holders align with the regulations that govern the regular market. The range within which trading takes place is twenty percent. During these trading periods, Royal HZPC Group B.V. purchases certificates for the Connecting Growers program in addition to the certificate scheme for staff.

The certificate holders receive information about Royal HZPC Group B.V via press releases, the Annual Report and the HZPC website. In addition, Dutch certificate holders receive the company’s client magazine ‘Ruggespraak’.