Hochdorf Raises Profit Guidance as Cost-Cutting Helps Offset Falling Milk Prices

17 Aug 2016 --- Hochdorf has upgraded is profit expectations for the year, as it said that efficiency measures helped offset falling milk prices which dented overall sales by two percent to CHF278.4m ($289m).

The Swiss company said it will look to "further increase" efficiencies at its plants this year to combat the "continuing difficult situation on the milk market”.

Although sales fell, EBIT (earnings before interest and tax) was up 23 percent to CHF13.1m ($13.6m), as Hochdorf implemented cost-saving measures in the first six months to 30 June.

The Swiss company said it processed 415.9m kg of milk, whey, permeate and cream in the first half of the year, down 1.3 percent on the year.

Across Dairy Ingredients, the quantity of liquids purchased and processed was up by 6.8 percent to 226.7m kg compared with the year previous year.

At its Swiss plants, 189.6m kg of raw milk was taken up, up 3.5 percent. At its Sulgen plant, Hochdorf processed 33.7 million kg of whey, nearly 30 percent more than in the previous year. 

Overall, the Dairy Ingredients Swiss business generated gross sales revenue of CHF110.4 million ($115m), down 6.8 percent on the year.

The lower turnover was due to lower commodity prices, which were passed on to customers, and a large increase in inventory. 

At its Lithuanian plant, the purchased quantity of liquids fell significantly, due to the difficult situation on the milk market and political 
Interventions on the market. The plant processed 29.5 million kg of milk and permeate, which was 27.8 percent less than the previous year.

Across Baby Care, Hochdorf reported sales revenues were up by 20.3 percent to CHF 60.2 million ($63m).

Across Cereals & Ingredients, sales came in at CHF10 million ($10.4m), up 13.9 percent on the year and Hochdorf said its facilities were running at high capacity as a result of several large orders. 

Looking forward, Hochdorf said it would look to further "increase efficiency" at its plants to handle the difficult situation of the milk market.

It said that its EBIT percentage is expected to be higher than previously indicated, based on its first half year results.

“We are optimistic as to the second half of the year. Because of the persistently low price of milk with influence on the Dairy Ingredients products, we slightly lowered the forecasted annual turnover to CHF540 ($562m) to CHF580 million ($603m),” said Thomas Eisenring, CEO of Hochdorf said.

However, it said that EBIT is now expected to be in the range of between 3.5 to 4 percent, higher than previously indicated.