Valio Group key figures

The profit from Valio’s business is paid to the owners, Valio Group milk producers. Valio does not strive to make a profit for the company per se. Our mission is to process the milk produced by our owners as profitably as possible, and the price paid for raw milk in 2013 was the highest in Valio’s history.

Valio’s entire profit goes to milk producers

Owned by Finnish milk producer co-operatives, Valio Ltd collects some 85% of Finland’s raw milk, of which it is obliged to sell around 10% to its competitors at cost price, if they want to buy.

Valio Group comprises 9 dairy co-operatives, and Valio Ltd focuses on processing and marketing the milk they produce. At the end of 2013, Valio Group encompassed some 7 500 milk producers (2012: 8 000).

Valio’s financial success is measured by the value added to the milk produced by the owners that have a business relationship with Valio, expressed as the milk return* which goes to Valio dairy farms in the form of the price paid for raw milk. Valio strives to pay its producers the highest price for raw milk in Europe.

The market success of Valio products benefits Finnish milk producers and the whole of Finland. Through the price paid for raw milk to producers, plus investment, purchasing, taxes and salaries, more than one billion euros is retained in Finland annually as a result of Valio’s operations.

Valio Group’s milk production and processing chain employs at least 30 000 people in Finland. Milk production is the most important provider of agricultural livelihood in Finland.

Records broken in 2013

Valio Group net sales for 2013 increased by 2.6% to 2 029 million euros.

Valio’s milk return* rose to 48.0 cents/litre (2012: 46.6 c/l), the highest ever recorded by the company. The Valio Group milk margin** exceeded the one billion euro mark for the first time ever to stand at 1 026 million euros (2012: MEUR 991).

The price paid for raw milk including after payment stood at 47.5 cents/litre (2012: 46.7 c/l), also a record high for the company. The share of after payment was 2.5 cents/litre.

In 2013, Valio paid 907 million euros (= 45% of net sales) to Finnish milk producers, up 24 million euros on the previous year.Valio took in 1 888 million litres of milk from its owners (2012: 1 865 million litres).

* Milk return = (Milk margin less the requirement for depreciation of fixed assets i.e. financing requirement for investments) / milk volume supplied by the owners. ** Milk margin = Net sales less other costs excluding depreciation and the price paid for raw milk and interest on shareholder loan paid to owners.

Milk is an important source of livelihood in Finland

Milk production is the only form of agriculture that can be practised everywhere in Finland. In large parts of the country it is the only profitable business in the agricultural production sector.

Milk is an ideal source of nutrition for Finns, as grass grows throughout the country to feed the cattle and there is a plentiful supply of clean drinking water.

Income from dairy farming accounts for over 41% of that from all agriculture in Finland. In Kainuu and Lapland, around 80% of agricultural income comes from dairy farms’ milk and beef production.

The share of income derived from milk is on average 65% in Central Finland, Northern Ostrobothnia, North Savo and North Karelia.

Silage and grain prices fell by some 10–20% in the latter half of 2013. Grain prices are nevertheless substantially higher compared with the period 2000–2010, when they were at their lowest.

Preliminary accounting data indicate that the milk production profitability factor* stood at 0.57 in 2013 (2012: 0.60, 2011: 0.58).

Measured by the production profitability factor, milk is the second most profitable form of agricultural production after greenhouse farming.

The average profitability factor for different types of agricultural production was 0.49 in 2012, and the forecast figure for 2013 is 0.44.

Summer 2013 yielded a good size and quality grass silage crop. That was the main reason why the calculated average yield of the cows increased as of the autumn to a considerably higher level than in previous years. The volume of milk delivered to dairies grew from May onwards compared with the same period in 2012.

* The profitability factor indicates the share of the required wage for farmers (EUR 14.5/hour) and return on equity (5.3%) realised (Taloustohtori 2012).

Annual report

Valio Group net sales for 2013 were up 2.6% at 2 029 million euros (2012: MEUR 2 000). Net sales from international operations increased by 3.9% and those from domestic operations by 0.1%.

The milk return* rose to 48.0 cents/litre (2012: 46.6 c/l), the highest ever recorded by the company. The Valio Group milk margin** exceeded the one billion euro mark for the first time ever to stand at 1 026 million euros (2012: MEUR 991).

The price paid for raw milk including after payment stood at 47.5 cents/litre (2012: 46.7 c/l), also a record high for the company. The share of after payment was 2.5 cents/litre.

In 2013, Valio paid 907 million euros (= 45% of net sales) to Finnish milk producers, up 24 million euros on the previous year.

Valio took in 1 888 million litres of milk from its owners (2012: 1 865 million litres).

Valio’s asset/equity ratio stood at 47% (2012: 47%). Investments totalled around 118 million euros (2012: MEUR 105), accounting for some 26% of all investments made by the Finnish food industry (source: EK).

Valio suffered a loss in sales volumes of basic milks in Finland

Valio raised the prices of basic milks as of the beginning of February 2013, as directed by the Finnish Competition and Consumer Authority (FCCA).

The FCCA has charged Valio with keeping the wholesale prices of basic milks too low. Valio contests the charges absolutely. Sales of basic milks have been profitable for Valio at all points, and that has also been the most profitable of the available options in the short term. The case continues.

During 2013, Valio suffered a loss of over 15% on its sales of basic milks compared with the previous year.

The share of imported cheeses remained at around 50% of consumption in Finland. The share of imported yoghurts was around 29%.

Russia and Sweden are the engines of international sales

Around 37% of Valio’s net sales were generated by exports and from the subsidiaries. Valio’s share of Finland’s food exports rose to around 40% and that of the country’s dairy product exports was close to 95%

Russia is Valio’s biggest export market. Despite the weak rouble, Valio Russia’s net sales increased by around 11% to stand at 378 million euros (2012: MEUR 341).

Russia accounted for 49% of Valio exports*** in 2013.

In Sweden, net sales increased by more than 10% to 94 million euros (2012: MEUR 85).

In Estonia, Valio is a major local player in fresh dairy products and the biggest cheese producer. The combined net sales of the Estonian subsidiaries increased to around 90 million euros (2012: MEUR 85).

Valio processes around 22% of Estonia’s total raw milk output, mainly for the Baltic and Russian markets.

In the market for demineralised whey powders (Valio DEMI™), Valio is one of the three major players in China. Valio DEMI™ powders are employed e.g. as ingredients in baby foods.

Valio net sales in China increased to 46 million euros (2012: MEUR 41).

Globally, Valio invests in the commercialisation and market specific conceptualisation of health and well-being products such as the functional lactic acid bacteria LGG®, and lactose free items, and invests in ingredients sales.

*** Valio exports = products manufactured in Finland and exported

Lapinlahti attracted the year’s biggest investments

Valio investments in 2013 totalled 118 million euros, accounting for around 26% of all those made by the Finnish food industry (source: Confederation of Finnish Industries) . 96.5% of Valio’s investments were allocated to Finland.

The most significant investments were the new state-of-the-art whey powder plant due for completion in summer 2014 and a new power plant running on Finnish fuel, both in Lapinlahti; increased production capacity at the Tampere dairy (special milks), Oulu dairy (cooking products), and Seinäjoki plant (quark and special butter); a new warehouse at the Suonenjoki jam plant and new packing lines at the Turenki plant.

Management of waste water loading enhanced

Valio invested 1.7 million euros into decreasing environmental impacts in Finland.

Water reuse was enhanced in Lapinlahti and Jyväskylä.

Production energy efficiency was improved by investing in a heat loss recovery system at the Seinäjoki and Lapinlahti plants.