Dairy Ingredients business area
The market for milk mass products has been and will continue to be demanding. Thus, we continued to push ahead with the development of milk powder specialities and process optimisation measures. The reorganisation of Uckermärker Milch GmbH with a local managing director has proved successful.
As a result of higher prices, the Dairy Ingredients Division achieved gross sales revenue of CHF 216.1 million in the first half of 2017 (previous year: CHF 204.3 million; +5.8 %). In total, the processed quantities (liquid quantity) of milk, cream, whey and milk permeate declined about 9 % to 377.6 million kg (previous year: 415.9 million kg). While the liquid quantities were reduced in Prenzlau, Germany, and in Medeikiai, Lithuania, they remained at the level of the previous year in Switzerland.
The international milk prices developed in various ways. Milk fat prices surged, reaching record levels in the EU. By contrast, the prices of milk protein and skimmed milk powder only increased moderately. The high stock levels of skimmed milk powder around the globe and the rather low prices for protein powder represented a challenge for HOCHDORF.
At HOCHDORF Swiss Nutrition Ltd, the first half of the year was marked by a low milk inflow. However, thanks to the significantly increased processing of whey, the plant utilisation remained at a very high level. Reduced "Schoggi Law" funding, margin losses and too little B-milk for export products affected income. Therefore, a project was launched to improve profitability: Through a combination of price increases, portfolio adjustments and cost savings, we are seeking to achieve significantly better results as soon as possible. The integration of the condensed milk business, which we took over from Alicommerce SA as of 1 January 2017, is progressing well at the Hochdorf location.
The weak protein market and high milk prices, which could only be passed on to the market to a limited extent, greatly impacted the business of HOCHDORF Baltic Milk UAB. Under these conditions, we reduced the processed milk quantity as much as possible and optimised the production processes.
The record-high butter prices were beneficial for Uckermärker Milch GmbH to the extent that the butter could be produced from milk obtained from direct suppliers. It was difficult to purchase additional milk fat at competitive prices. The product and process development team worked intensively on specialty powders with higher added value. The reorganisation with Dr Peter Pfeilschifter as Managing Director on site quickly proved effective. In early July, we announced the closure of the curd production facility as of 31 October 2017. This decision was made due to the loss of commissioned orders of a large customer. The discontinuation of the curd business, which was no longer in line with Group strategy, had previously been discussed.
The market environment is still demanding. At all locations, we are focusing on the rapid rollout of the strategy and on the measures initiated to improve profit. Thanks to the improved milk prices in the EU, we expect the milk quantities to go up in the second half of the year. The bottom line is, however, that we expect the supply and demand to be more or less balanced, such that milk prices will only go up moderately.