Hochwald looks to Strategy 2020 after tough year

By Jim Cornall contact

- Last updated on GMT

Hochwald's sales declined by 5.5% in 2016.
Hochwald's sales declined by 5.5% in 2016.
German dairy cooperative Hochwald said it has laid the foundations for its "Hochwald 2020" strategy after a challenging 2016.

The company said it wants to grow into an international market-oriented milk specialist.

Its strategic aim is to pay a milk price above the national average.

Fiscal year 2016

Although milk production grew at a slower rate than in previous years in 2016, it significantly exceeded demand, which was influenced by the falling demand from China, Russia and oil exporting countries.

Hochwald sales revenues declined by 5.5% to €1.36bn ($1.54bn) in 2016 (compare to €1.44bn ($1.64bn) in 2015). Exports also fell from €655.9m ($745m) to €620m ($704m).

The price trend for dairy products came under pressure during the reporting year, which is the primary factor behind the decline in sales.

Equity capital increased to €171.7m ($195m) following a new issue of profit sharing certificates.

With €53.7m ($61m), EBITDA was slightly above the level of the previous year.

Investments

Investments in 2016 amounted to €47m ($53.4m), including investment in an RTD production facility in Bolsward. In addition, investments were made for further expansion of the cheese factory in Hünfeld and completion of the new plant for demineralized whey powder in Hünfeld and the associated sewage treatment plant.

Producer prices for milk have fallen significantly since 2016. Compared to last year, average milk prices fell in Germany.

The milk price at the parent cooperative association has also declined in the reporting year, in line with the previous year forecast.

At 4.0% fat and 3.4% protein content, the unit price amounted to €0.2892/kg ($0.3285), including S-class and quantity surcharges, as well as supplementary payments and VAT.

Future plans

Detlef Latka, chief executive officer, said Hochwald group sales will increase in 2017.

“We are doing our utmost to implement the "Hochwald 2020" strategy, which will sustainably improve the milk price for the members of our cooperative."

The implementation of the "Hochwald 2020" strategy is based on the company’s consolidation of its existing cooperative model. The goals "social responsibility, technology optimization, focussed internationalization, portfolio development, as well as organization and governance" are part of the reorientation of the Hochwald-group.

The required investments will be partly financed through a capital increase in the form of a contribution voted on by the cooperative’s representative assembly.

It will start with retaining some of the milk revenue supplementary payment for 2016.

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