Challenges accepted as we keep on track
The extreme drought in the long summer of 2018 had a negative impact on the basic forage crop and so was a major challenge for milk producers. Nevertheless, our longtime milk producers were able to keep milk volumes of deliveries at a stable level. Due to the acquisition of new milk suppliers, the total milk volume received increased by 12% and reached a new record level.
The weakened market situation for dairy products had some impact on the economic result. There were also some construction projects going on in the milk drying area so that we were not able to use our full capacity for the entire year. This resulted in the price paid per kg raw milk to our agricultural milk producers being lower than in the previous year.
While 2017 had been economically very successful for Uelzena and included an above-average milk payout, in 2018 the market prices for our main product groups of skimmed milk powder, butter and cheese dropped significantly. Despite stable development in sales, we had to accept a loss in revenue of more than 50m Euros resulting in a reduced milk payout.
The Management Board, Supervisory Board and Management agree that the top priority is to ensure an economical milk payout for Uelzena's milk producers in the long term. This is the only way to guarantee sustainable milk production. All employees of the Uelzena Group are fully committed to achieving the best possible success for the company and its members.
In order to achieve this goal, the Uelzena Group continues on its path while focusing on growing market segments, expansion of diversification and controlled growth. Our focus on our customers is the factor to our success. The most important challenge here is to find the balance between the payout price, the required investments and the salaries and wages for the employees. Milk volume growth, processing, quality assurance and marketing must all go hand in hand. We had a successful start in 2018. The growth in milk volume of more than 10 percent, which was planned together with our member cooperatives, was achieved and more than 30m Euros were invested in very necessary future-oriented projects at the production sites.
2018 also persistently demonstrated that weather and political risks are constant companions in the milk value chain. Issues such as the economic stability of producing companies, regulations on fertilizers and animal welfare are increasingly moving into focus within society. Uelzena addresses these issues with the support of its farmers, including amongst other things its involvement in the project, "Sustainability Module QM Milk".
In a structured process, relevant data is collected on how sustainably milk is produced. In the next step, strengths and weaknesses are identified, which leads to a continuous improvement process on relevant topics such as animal welfare and climate protection.
We will continue to implement our strategy during 2019 for the benefit of our milk producers and employees in close dialogue with our stakeholders. In 2019, the entire Uelzena Group will again successfully master the challenges and continue to keep on track.
Chairman of Uelzena eG