Domestic net sales increased by 10.9%, and international net sales fell by 0.7%. The coronavirus pandemic affected domestic consumption and was visible in the growth in retail sales. HoReCa sales increased considerably with the acquisition of Heinon Tukku. In the challenging situation, the business operations enabled Valio to keep the raw milk price paid to the cooperatives higher than the average European price. The milk return increased, as in previous years. In April 2022, the basic raw milk price paid to the cooperatives was 8.5 cents higher than in the previous year.
Valio improved its profitability and said it recorded a good financial performance in 2021, despite a second consecutive year of coronavirus impacted Valio’s operations in all markets. In the domestic dairy market Valio focused on its consumer brands, and in international markets on value-added ingredients for industrial customers.
Valio’s domestic net sales were €1.178bn ($1.239bn). The coronavirus pandemic increased retail sales and hotel, restaurant and catering (HoReCa) business. HoReCa sales increased considerably compared to 2020.
Valio also carried out many strategic undertakings: The Heinon Tukku acquisition, the letter of intent on the production of manure-based biogas with St1 Oy, and the spin-off of the business operations of Valio Oddlygood plant-based products.
“I am especially proud of the fact that we were able for the second consecutive coronavirus year to grow our net sales, strengthen our result, and advance our strategy with determination. We succeeded in securing our employees’ health and, despite the challenging conditions, our personnel managed to keep all Valio’s factories operating normally throughout the year; delivery reliability to customers continuously exceeded 99%,” said Valio’s CEO Annikka Hurme.
The new Valio PROfeel puddings set new sales records and sliced cheeses continued to gain market share. Valio Oltermanni and Monterey Jack cheeses and the Valio Oddlygood Barista oat drink cinnamon roll flavor did well, the company said.
Net sales from international operations totalled €740m. Growth was particularly strong in Sweden, where net sales grew by around 10%. Growth stemmed especially from cooking products, Valio Oddlygood products, snacks and Valio PROfeel products.
Demand for international industrial products, i.e. butter and milk powder, also was strong. By using value-added powders, a chocolate manufacturer, for instance, can reduce the sugar content of its products without changing the taste, or the powder has some other benefit for the customer. The most significant new products launched were Valio Eila NUTRI F+ powder for the Korean company Maeil Dairies, and Valio Eila Pro lactose-free skim milk powder as an ingredient for Nestlé’s baby food powder.
In China, sales continued to grow by about 16%, as in the previous year. In the US, sales returned closer to the pre-pandemic level.
After the close of the financial period, Valio announced on March 7, 2022 that it will discontinue its business operations in Russia.
Valio is owned by 4,000 dairy farms, and Valio pays its operating profit to the dairy farms through four cooperatives. Valio’s financial success is measured with a milk margin and a milk return. The milk margin amounted to €862m ($906.6m), and the milk return stood at 43.7 cents per liter.
Valio switched to a contract production model at the beginning of 2021. It said better predictability of the milk volume is necessary so Valio can adjust its production capacity to market demand. In accordance with contract production, Valio’s milk procurement cooperatives supply a pre-agreed volume of raw milk to Valio. The average price paid for raw milk was 42.3 cents per liter. The price included after payments to dairy cooperatives for 2021. The sustainability bonus remained at two cents per liter.
In 2021, Valio said agriculture faced a drastic cost crisis that is still ongoing, and said costs rose substantially in the latter half of the year in particular. The price of fertilizers more than doubled, and major increases were seen in energy and animal feed prices, for example. The higher costs put heavy pressure on dairy farms’ finances. The index of purchase prices for the means of agricultural production (Statistics Finland) hit its highest level in the 2000s.
At the same time, the war in Ukraine is further increasing the already record-high prices of fertilizers, energy and feed. The prices for packaging materials and other raw materials increased globally. With the three-year cost savings program that ended in 2021, Valio was able to increase the price paid for raw milk to the cooperatives by 2 cents per liter from November onwards. It also paid an extra 1.5 cents per liter for ordinary raw milk received in the first half of the year, plus an after payment of 1.2 cents per liter from January to December 2021.
Valio said it was abke to keep the raw milk price paid to the cooperatives higher than the average European price in 2021. In April 2022, the basic raw milk price paid to the cooperatives was 8.5 cents higher than in the previous year (source: EU commission).
The three-year program introduced in 2018 to improve cost efficiency came to the end and exceeded the goals set for it. Improving profitability, competitiveness and cost efficiency will continue with a new four-year project.
Valio said year 2022 is continuing to progress along the guidelines of its strategy. Valio said the goal is for strategic projects to generate new growth, improve operational efficiency and enhance profitability in the coming years.
The operating environment is still extremely challenging, the company said. The global increase in costs is directly reflected in Valio’s production costs. The prices of, for example, the energy, packaging materials and other raw materials used by the plants have risen significantly, and a container shortage is increasing export freight costs. Fertilizer and energy prices are expected to remain at record-high levels for at least the first half of the year. Feed prices will likely drop in the summer, when the new feed crop increases the supply of animal feed.
“The coronavirus pandemic is now in its third year. It is important for us to look after the health of our personnel and to maintain production. Valio’s strength is that milk, the most important ingredient of our products manufactured in Finland, is produced locally, at Valio’s owners’ dairy farms. Products are manufactured in 12 plants, which helps to ensure the security of supply. We continue to prioritize people’s wellbeing, serving our customers in all our operations, and working together with cooperatives to support the dairy farms. Our task is to secure the future of Finnish agriculture and to take care of the domestic security of supply,” Hurme said.