Dairy Ingredients business area
Dr Peter Pfeilschifter has been heading the Dairy Ingredients Division since the beginning of April. Together with his team, he continues to streamline the existing product portfolio and to develop new special milk powders at a high pace.
The Dairy Ingredients Division generated net revenue amounting to CHF 188.2 million (PY: CHF 216.6 million; −13.1%). The lower turnover was caused by the ongoing price distortions between the milk fat and milk protein valuation on the international milk market. The total amount of milk, cream, whey and permeate (liquid quantity) declined by a little more than −3% to 365.3 million kg.
In the Dairy Ingredients Division of HOCHDORF Swiss Nutrition Ltd, this year we introduced seasonal price reductions for the first time in the high milk season from March to May. A price surcharge in the same amount will be granted in the months from August to October, during which less milk is produced. Accordingly, the amount of milk processed in the Swiss plants dropped −4.8% to 166.3 million kg (PY: 174.7 million kg). However, the total amount of liquid processed increased slightly to 229.7 million kg (PY: 225.6 million kg; +1.8%). The project to improve profitability by means of streamlining the portfolio and developing new special milk powders was taken over and continued by Dr Peter Pfeilschifter.
At the agricultural policy level, industry, customer and supplier discussions were held concerning the successor solution to the «Schoggi Law». The implementation is associated with a number of pricing changes on the customer and supplier side.
In the first half of 2018, Uckermärker Milch GmbH processed a total of 117.8 million kg (liquid quantity) (PY: 125.3 million kg; −4.8%). The processed milk quantity remained more or less stable. In contrast, the amount of purchased cream dropped significantly, as the demand for fat could be largely covered from own milk acquired additionally. On the market side, we are still struggling with the low milk protein valuation. The good butter business was not able to fully compensate for the very weak milk powder prices. The curd business, which was resumed in mid-February, and the buttermilk business are at the expected level and are to be stepped up in the second half of the year, also through collaboration with a new partner on the marketing side.
In accordance with the strategy, our market development concentrated on higher-margin special milk powder. Initial production lots were marketed successfully, showing that we are on the right path. The successfully completed quality audits for the special milk powders provide additional confirmation.
The market environment has been and will remain challenging. In Switzerland, talks concerning the introduction of the new “Schoggi Law” solution continue with suppliers and customers. In the short run, we do not expect any major changes in the milk prices, either in Switzerland or in the EU. However, due to the extremely dry summer in many parts of Europe, we expect reduced quantities in the mid-term, which could lead to higher milk prices.
On the market side, we will continue to streamline the product portfolio and step up our marketing activities. We continue to anticipate net revenue of CHF 350 – 380 million for the business year 2018 as a whole.