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Difficult Year For Valio Group

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Difficult Year For Valio Group

Difficult Year For Valio Group
March 09
09:48 2015

The ban on exports to Russia and a tough trading climate domestically have adversely impacted on the 2014 financial performance of Valio Group, the Finnish dairy company, which has reported a 3.9% drop in net sales to €1.95 billion. Net sales decreased by 9.0% in international markets and by 0.8% in Finland.

The Valio Group milk margin was Eur974 million, down from Eur1.026 billion in 2013. The Valio Group milk return was 43.7 cents/litre against 48.0 centre/litre in 2013, while the price paid for raw milk dropped from 47.5 cents/litre to at 45.4 cents/litre.

The period from August 2014 to the year-end was extremely challenging for Valio Group due to a number of unfavourable factors. The decrease in net sales and product profitability resulted in Valio lowering the price paid for raw milk to dairy co-operatives and a reduction in the Valio workforce.

Exports to Russia collapsed in early August due to the import embargo, and hundreds of millions of litres of milk had to be processed into industrial butter and milk powder for world markets, the prices of which were at a record low. Valio was hit by far the hardest of all companies in Finland by Russia’s import restrictions.

ValioLogoCompetition was also tight in Finland – Valio’s market share in basic milks fell below 30% because the company is not permitted to engage in price competition on market terms. Some 47% of the cheese consumed in Finland was imported, and Valio is now the only major domestic player making cheese from Finnish milk in Finland.

The economic situation in Finland made consumers focus even further on inexpensive products.

Due to the changes in the operating environment, Valio’s capacity to pay its owner co-operatives for raw milk weakened, and consequently the price paid by the co-operatives to the milk producers also fell. Valio pays the profit accrued from its operations to the milk producers through the dairy co-operatives.

Valio’s strengths last year were again value added and new products, which generated increased sales in Finland and Sweden.

Around 35% of Valio net sales were generated from exports and its subsidiaries. The value of Valio’s exports stood at Eur450 million. Valio is the biggest food exporter in Finland, and Russia was the company’s biggest export market. Valio Russia’s net sales for 2014 stood at around Eur258 million, but would have exceeded Eur400 million under normal conditions. Russia accounted for 37% of Valio exports in 2014.

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