Valio posts record performance despite decrease in milk volume

Valio Group succeeded in increasing net sales for 2011 by 6 per cent in challenging competitive conditions. Valio net sales for 2011 rose to MEUR 1,929, although the volume of raw milk taken in fell by 1.5% to 1,870 million litres.

Once the company’s own costs are deducted from net sales, the resulting figure is the milk margin, on the basis of which the price paid for raw milk to Valio milk producers is formed. Valio’s milk margin grew by 7% to MEUR 963.

Valio generated a record high milk return* of 45 cents/litre (2010: 41.1 c/l) for the milk produced by its owners. Preliminary profit after taxes stood at MEUR 53 (2010: MEUR 39).

The money paid to the owners amounted to MEUR 836 (2010: MEUR 787). The price paid for raw milk to Valio Group co-operatives, including after payments, rose to 44.1 cents (2010: 40.9 cents).

Brand product demand from consumers generates the milk return

The greatest impact on the milk return stems from Valio’s own innovative brand products.

“In recent years, Valio has been developing a creation process for new products, taste research, and the communication of our products’ consumer benefits. Consumers need a good reason to buy a Valio product. In addition, the product should meet their expectations and taste so good that they want to make repeat purchases. Our new Valio OLO™ digestion yoghurt, soft quark, and Valio Plus™ milk and fermented milk products have proven to be true success stories,” says Pekka Laaksonen, Valio CEO.

Valio also succeeded in developing its export product range, and profitability improved especially in Russia. Exchange rates have proven favourable for Valio.

In Finland, Valio competes with multinational companies in all product groups. The share of imported cheese exceeded 40% and that of imported yoghurt was around 30% in 2011.

Profit for basic milks stood at MEUR 11

Extensive milk imports from Sweden have cut Valio’s basic milk volumes by almost 25% over the past two years. Due to the falling volumes and fierce competition, the operating profit of Valio’s Finnish basic milks unit decreased to MEUR 11. In the most competitive market, Southern Finland, Valio’s market share in basic milks is around just 35%.

Finnish basic milks account for only 8% of Valio’s net sales.

The figures are preliminary and unaudited.

* Milk return = (Milk margin less the requirement for depreciation of fixed assets i.e. financing requirement for investments) divided by milk volume supplied by the owners.