Good Prospects Ahead for NORDMILCH in 2010

Last year, NORDMILCH once more benefited from its tailored product portfolio, geared specifically towards its target markets, and the company’s corresponding production structure.

23 Jun 2010 --- With a profit of 29 million euros, an increase in equity to 31 percent and a milk price above the average of its northern German peers, Germany’s largest dairy company has done well in the crisis year 2009. For the current year, NORDMILCH expects firmer markets and forecasts rising milk prices for its farmers.

An oversupply of milk combined with consumer uncertainty during the economic crisis resulted in a price collapse in 2009. This in turn had a negative impact on volume, revenues and income. Dr Josef Schwaiger’s comment on the 2009 financial year: “In this difficult environment, NORDMILCH met its objectives in full. It proved possible to keep volumes stable despite adversity in the markets not least through strong growth in the profitable cheese sector.” Although the Group’s revenues and gross profit went down due to the level of market prices, it succeeded once more in increasing its equity base, which is now around 31 percent.

With just under 2,500 employees, including 116 apprentices, NORDMILCH processed around 4 billion kilos of milk in the past financial year, the same level as in the previous period. NORDMILCH eG's members delivered approximately 2.8 billion kilos of milk with a fat content of 4.19 percent and a protein content of 3.42 percent. The rest came from associated companies and external purchases.

First ever milk payments above northern German average

In an environment where the absolute milk price level could never have been satisfactory for milk producers, NORDMILCH, with an average price of 22.88 cents (3.7% fat, 3.4% protein) paid more than its northern German peers for the first time ever. Moreover, for the second year in succession the cooperative is paying its members a dividend of four percent on the paid up and subscribed capital contributions. “The return is benefiting our 7,000 members directly and demonstrates that the restructuring years are bearing fruit,” according to CEO Dr. Josef Schwaiger. The positive trend is still ongoing: at 26.60 cents/kilo of milk, NORDMILCH’s basic payment (3.7% fat and 3.4% protein) is already 4.6 cents/kilo above the last year’s (Jan-May 2009: 22 cents/kilo). Overall, the company expects a much more stable trend in milk prices in 2010 than in the previous year.

Concentration on profitable product groups

Last year, NORDMILCH once more benefited from its tailored product portfolio, geared specifically towards its target markets, and the company’s corresponding production structure. In the branded goods business, the success story of the northern German territorial cheese assortment continued with the addition of MILRAM Sylter. An innovation was introduced in the form of the MILRAM Frühlingsmousse sandwich spread.

Cheese in particular contributed to an upturn in the group’s trade with the food processing industry, with sales up by six percent on the previous year. In addition, the Industry Fresh Products/Convenience areas and sales of milk powder for the confectionery and bakery industries proved to be positive drivers for the company. The Industry sector’s international business likewise developed well.

Other export business also stayed on the growth trajectory of the past years. Here, too, the cheese business proved particularly crisis-resistant, with a 21 percent increase in volume compared with the previous year. After a sharp price fall in the first half, NORDMILCH was able to achieve much higher prices from August onwards, and particularly in the months from
October to December.

Partnerships as a recipe for success

The Zentralkäserei Mecklenburg-Vorpommern cheese factory was fully integrated into the Group last year through the merger with Pommernmilch eG. First and foremost, this step served to expand the company’s cheese capacity; it also enabled NORDMILCH to strengthen the cooperative's long-term position in the Mecklenburg-Vorpommern region.

The company took a central and decisive strategic step last year by bundling NORDMILCH’s sales activities with those of Humana Milchindustrie GmbH to form Nord-Contor Milch GmbH. “A comparison of the development of the dairy industry in Germany with that in neighbouring European countries clearly reveals that Germany needs further consolidation to survive in international competition in the long term,” was Dr Schwaiger’s view of the collaboration.

Decision on Humana merger to come this year

Against this background, the Board of Management and Supervisory Board of NORDMILCH AG and Humana Milchindustrie GmbH have decided to propose a merger of the two dairy companies’ operating units to their decision making bodies. Their joint operation should be given the go-ahead in January 2011.

This is, of course, subject to the consent of the parent cooperatives’ representatives and the essential approval of the German Federal Cartel Office. The application is to be filed soon. The representatives of the cooperatives’ farmer members will be informed of the merger details at their annual assemblies. The decision will then be passed at extraordinary assemblies no later than the end of the year.