The Dairy Ingredients Division generated net sales revenue of CHF 405.1 million in 2017. The gross sales revenue of the individual companies predicted in the 2016 business year could not be reached, as already indicated in the interim report. The differing price trends were challenging in 2017 with record-high prices for milk fat and a price slump for milk proteins and skimmed milk powder. This led to slight advantages for our factory in Uckermark and big disadvantages for our factory in Lithuania. In Switzerland, milk fat prices fluctuated only minimally, whereas milk protein prices were significantly lower than in the previous year.
In Switzerland, we processed virtually the same volume of liquid (especially milk and whey) as in the year before (409,009 tonnes in 2017 compared with 409,119 tonnes in 2016). Accordingly, plant utilisation was at a very high level throughout the year. The reduced «Schoggi Law» contributions and too little B milk for the contractually agreed export products had a considerable impact on our margin.
At an association level, we pushed hard for a sensible «Schoggi Law» follow-on solution. The solution worked out in the industry was approved in the second half of the year by both parliamentary chambers by a clear majority. The new solution is to be introduced from 1 January 2019.
As a result of the high Lithuanian milk prices and the low protein prices on the international market, we further reduced the processed milk volume. In 2017, we processed 45.6 million kg of milk in Medeikiai (previous year: 56.8 million kg; -19.7%). The factory is currently under review. The strategic benefit of the factory is now much less as a result of the development of the HOCHDORF Group. In addition, the high milk price in our sales markets, which is influenced by agricultural policy, is not viable at present, or only to a limited extent.
We found the record-high prices for milk fat and the price slump for milk proteins and skimmed milk powder challenging. This was especially the case when it came to contracting and setting buying and selling prices. All in all, we have been able to cope well with these tasks. The processed volume of liquid (especially milk, cream, buttermilk), however, fell to 193.8 million kg (previous year: 271.7 million kg; -28.7%). The main reason for this was the significantly lower curd production year on year. Butter and powder production was also down. On the other hand, we produced more buttermilk, as planned.
At the beginning of the year, we defined our future strategy. In the area of powder production, we want to develop and market specialist powder with a higher added value. We successfully conducted our first test production of specialist powders in the second half of the year. The partial discontinuation of curd production from the end of October 2017 was crucial for us. In the meantime, new opportunities have opened up for this production area.
In the first half-year, we are expecting a larger volume of milk in comparison with the previous year as a result of the still relatively high milk prices. Therefore, pressure on milk prices is likely to increase again in the second half of the year. We expect net sales revenue in the range of CHF 350 to 380 million over the whole business division.
In Switzerland, we shall gear the milk volumes of the individual milk segments (A, B or C milk) even more rigidly to our actual needs. Moreover, the project for improving the margin will be continued. We are expecting an improvement in earnings figures in 2018 with cost-cutting measures and efforts to streamline our product range and develop products.
The butter business and the buttermilk business will continue at the normal level in 2018 at our factory in Prenzlau. Contrary to our communication in mid-2017, we can continue curd production at a lower volume level, thanks to our cooperation with a new partner. The volumes are, however, sufficient to make it worthwhile for the factory as a whole to continue curd production. In addition, we received and produced the first orders of specialist powders and delivered them to customers at the beginning of the year. We expect to start initial commercial production of other specialist milk powders over the course of the year.
The aim is for the Dairy Ingredients business to develop at a sustainable global level from a strong Swiss base. Cooperation between the milk plants will be optimised and the product portfolio amalgamated. In Switzerland, we want to defend our market position and reap the global rewards of our knowledge in the area of roller-dried whole milk powder. We want to develop, produce and market new products with higher added value across all plants. We will position new products in the markets as premium alternatives with the corresponding service. Across all our activities, it is important to consider the various underlying conditions and build them into our operational implementation.
Enriched milk powder, label milk powder (kosher, halal), cream, milk concentrate, skimmed milk powder, whole milk powder, cream powder, fat powder, milk protein powder, whey powder, whey protein powder, permeate powder, butter, buttermilk, curd.
|Net sales revenue (in TCHF)||405,131||393,099||415,379*||298,563*|
|Share of revenue abroad (in %)||55.4||55.1||55.2||26.1|
|Volumes sold (in tonnes)||165,846||212,421||216,511||80,737|