TINE Group sees expected decline in 2019

17-Feb-2020 - Last updated on 17-Feb-2020 at 10:51 GMT

The Norwegian company is still looking to cost savings in 2020. Pic: TINE

Norwegian dairy company TINE said it will be looking at the viability of some of its facilities as it announced expected losses in 2019 in spite of cost savings and growth in flavored milk and cheese.

CEO Gunnar Hovland said in 2019, sales revenues ended at NOK 23,381m ($2.53bn), an increase of 3.6% on 2018 (2.7% adjusted for changes in exchange rates). Operating profit for TINE was NOK 1,189m ($128m).

Hovland said, “When I started at TINE in early 2019, I was given a very clear assignment from the board that had hired me. It was to make the whole organization fold up its sleeves and turn every stone to look at how we could streamline operations and create growth.”

He said the company has managed to save more than NOK 300m ($32.4m) in cost savings and is investing heavily in the major core categories.

“Increased imports, tougher competition and changing dietary habits represent challenges, but the entire organization, together with the board and the owners, will enter 2020 with confidence that we are moving in the right direction,” Hovland said.

A new strategy was adopted in the summer of 2019, which involves cutting at least 400 man-years and a number of plans to streamline operations. Approximately 170 of these man-years have already been taken out and this process will continue in 2020.

At the most recent board meeting, it was agreed that the future of several TINE facilities will be assessed.

TINE will first assess the effects on the logistics costs of a possible relocation of its Central Warehouse in northern Norway, and investigate if smaller plants in the TINE system can be operated in a cost effective way.

“We need to rationalize where necessary and invest where appropriate to maintain competitiveness going forward,” Hovland said.

He said the company has invested more than NOK 12bn ($1.3bn) in dairies and other parts of the value chain throughout Norway over the last 10 years.

Total sales revenue in 2019 was NOK 3.558bn ($384m), an increase of 24.1% compared with 2018 (16.8% when adjusted for currency). The strong growth came from additional acquisitions of shares in Lotito Foods in the US, which is now a subsidiary of Norseland Inc. The acquisition gives TINE access to more than 95% of the food market in the US.

Operating profit in the third quarter of 2019 ended with a loss of NOK 1m, NOK 30m ($3.24m) less than the same period last year. Adjusted for currency and Lotito, operating profit was NOK 32m ($3.4m) lower. The decline was driven by costs related to establishment costs in Ireland and poor results in Wernersson in Sweden.

Production has been scheduled to start at TINE's new dairy in Ireland in the spring of 2020, but local authorities have not finalized permits, meaning production is unlikely to start until summer 2020.

TINE estimates the costs associated with a possible production deferral will be NOK 10m ($1.1m) a month from July 1, when export subsidies expire.