Finnish dairy company Valio has reported a sales increase of 4.3% to €1.708 billion in 2017, despite a challenging domestic milk market.
Domestic net sales remained unchanged for the period, while international sales increased by 12.4%, according to the company.
Last year, Valio continued its growth, particularly in Sweden, the Baltics, Russia and China.
Milk margins and returns increased by 3.2% and 5.0%, respectively, while milk volume decreased by 1.3%. The company also saw a drop in investments, down 22.8% to €98 million, compared to €127 million in 2016.
“The biggest challenges come from the dairy industry’s operating environment,” said Valio’s CEO Annikka Hurme. “The imbalance of the global markets continues, and the growth in milk production is expected to outpace the demand for dairy products.”
Price Drops
The very low price of milk powder and the drop in the price of industrial butter from the peak prices at the beginning of the year chipped away at the milk return, and thereby Valio’s profitability.
The challenging situation is expected to continue due to the high volume of EU milk powder intervention stocks, the cause of which is the overproduction of milk both in the EU and on a global level, according to Valio.
Some 35-40% of the company's raw milk is processed into powder and butter, meaning that changes to productivity there have direct impact on the its profitability.
The decline of dairy product consumption in Finland is rerouting the use of raw milk for these industrial products and shifting the company’s focus beyond the border to grow exports from Finland.
Export Growth
“Accessing new export markets and achieving profitable growth requires us to invest in personnel and in marketing in the upcoming years,” Hurme said. “Consequently, we are constantly looking for new ways to do things more agilely and efficiently.”
“There are no shortcuts to accessing new export markets; it’s a matter of going through the regulatory permit processes as well as long-term building of recognition,” she said.
The company is aiming to pay the EU’s highest and most stable milk price to its 5,500 dairy farmers through its 16 cooperatives.
Valio’s milk price has remained above the EU average since the beginning of the new millennium. The average price paid for raw milk last year was 39.0 cents per litre (38.1). The company decided to pay 0.5 cents more per litre after payments for 2017.
The total raw milk price paid to owners was €9 million more than in the previous year.
“All business earnings, less expenses and funds allocated for business development, are paid to the owner entrepreneurs,” Hurme said. “Additionally, keep in mind that the investments of our owners help us to create premium products and future favourites.”
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Karen Henderson. Click subscribe to sign up to ESM: European Supermarket Magazine.
