Dairy Ingredients division
Competition has intensified in the Swiss domestic market in particular due to the coronavirus pandemic. Higher domestic demand for milk products meant that milk receipts were lower than expected, resulting in bottle necks for cream. Demand from chocolate producers was also significantly lower.
On account of the integration of product categories from the former Cereals & Ingredients division and the sale of Uckermärker Milch GmbH, the 2020 results at division level are not comparable to the previous year. This division achieved net revenue of CHF 120.7 million. This includes CHF 25.4 million in sales from the operating business of Uckermärker Milch GmbH.
The fall in liquid quantity processed in Switzerland of –15.2% can be explained by the higher consumer demand for fresh milk products during the coronavirus lockdown, the fact that the cows were returned to Alpine pastures three weeks earlier than usual and the lower milk prices in competition with cheese making as a result of the follow-on solution to the “Schoggi Law”. We were able to improve the competitiveness of our milk prices thanks to our own price increases for certain products and lower Schoggi Law deductions towards the middle of the year. With the exception of cream, our delivery capacity was never at risk despite the smaller quantities of milk. Our plant utilisation was also good in the first half of the year.
We started several projects to optimise production processes involving close cooperation between development and production. This has already shown early signs of success, with raw material usage significantly reduced for a special milk powder, for instance. These improvements allow us to use the milk quantity we have saved for other purposes and help to increase added value.
In the context of the coronavirus pandemic there was reduced product demand from the chocolate industry from mid-April, mainly due to lower chocolate sales in the areas of Duty Free and tourism. The pandemic also impacted upon the export of milk proteins to the fitness industry. Due to the pandemic, Marbacher Ölmühle GmbH had to endure a significant downturn in sales in the second quarter. However, thanks to various optimisation measures, the company still achieved a higher gross margin compared to the previous year.
We will continue to work intensively on the optimisation projects in the second half of the year. The successful implementation of these projects is all the more important because the market environment remains very competitive and the challenging situation in milk procurement remains the same. We are also working on new product concepts to improve plant capacity and create more added value.
It is still too early to draw definitive conclusions about the impact of the coronavirus pandemic on milk powder sales. In particular, we expect lower demand from the chocolate industry due to ongoing travel restrictions, and its development will depend very much on the progress of the pandemic. Orders for milk proteins in the export business are currently showing signs of normalisation. We currently assume that we will achieve the net sales revenue projected in March of between CHF 190 and 210 million for the 2020 business year.
Information on HOCHDORF’s history and current activities can be found in the articles written for the 125th anniversary: anniversary.hochdorf.com