Company

Strategies, investments - dynamics

Milk payout, market prices and sales: all in all, the Uelzena Group experienced very positive development during 2017. The good results will strengthen the position of the company in setting the course for future success.

The development of the milk market in 2017 was not typical: the prices for fat reached an historical high while the prices for proteins took a continual downturn. However, the Uelzena Group was able to achieve its goal, namely to keep the milk price paid above the federal level. In 2017, the Group paid 36.54 cents per kilogram (ct/kg) raw milk, which is more than the federal average of 36.19 ct/kg.

Statistics for the Uelzena Group: The price of butter rose from 4.40 euros per kilogram (euros/kg) to 7.00 euros per kg in October and then fell to 5.40 euros/kg at the end of the year. Skimmed milk powder fell from 2.10 euros/kg to 1.44 euros/kg. The prices for cheese predominantly developed well in 2017. They were almost always higher than 3.00 euros/kg and just dropped to 2.88 euros/kg at the end of the year. The market prices in combination with the development of sales volume had a positive effect on the business success of the Uelzena Group within the reporting period.

Overall, the earnings situation in the financial year 2017 can be described as very good. In addition to the good milk payout, the equity capital base was further strengthened and a clear annual surplus was shown. See also: results 2017.

Investments and ideas for the future

This positive balance demonstrates the performance of the Uelzena Group; it ensures an excellent position with the banks and thus the highest credit rating. This is a good starting position for the ambitious investment plans for the next few years.

Starting in the second half of 2017, a medium-term strategy and investment plan (multi-year investment plan) was developed for the entire Uelzena Group that involved all business divisions, sites and executives. The plan includes the further development and modernization of the corporate sites and the individual lines of business. Working groups are developing concepts for the future and are reviewing the current structures. A financing concept based on strategy and investment planning should secure the company's growth over the next few years.

In 2017, several Uelzena Group sites saw substantial investments. For example, Uelzena eG invested heavily in the modernization and improvement of quality standards for skimmed milk drying processes. Moreover, following several months of planning, the construction of a new high bay storage unit has begun in Uelzen and storage space for about 13,000 pallets will be created close to the main Uelzen site. The growing Uelzena business requires more storage space. Investment volume: 17m euros.

More productive and safer

At the other production sites investments were made in new and improved equipment and technology in order to boost production performance and safety in 2017. A new pouch filling and sealing line was installed at the subsidiary Schoppe & Schultz in Ratzeburg, which will improve the quality of the pouches and increase productivity. Added to that, a new x-ray system is checking all pouches for foreign matter.

At the Altmark-Käserei in Bismark (AMK) a new filling line for portion butter was built which also included a wrapper and an automatic case packer. With this investment the production of portion butter can be increased; existing equipment need not be retrofitted. This allows the production of portion butter on two lines at the same time.

“2017 was an extremely successful year. In the end, a consolidated net profit of 9 million euros further improved the equity ratio.”

Christoph Bonmann, Managing Director Finances and Human Resources, Uelzena

 

Context: why the Uelzena Group needs a sustainable corporate strategy

The Uelzena Group is a dairy that faces one key challenge, namely the heavily fluctuating prices for its main products milk powder, butter and cheese on national and international markets. The Group’s answer to this challenge is a strategy of diversification and differentiation. The primary objective is to compensate for fluctuations in milk prices and to provide farmers with a competitive milk payout. Both were achieved in 2017.

The Uelzena Group is a medium-sized dairy cooperative in Northern Germany that employs a staff of more than 700. Its turnover is greater than 700m euros. At four production sites, more than 590m kilograms of liquid milk raw materials are processed every year and the sales volumes has also grown constantly from one year to the next. The business purpose of the Uelzena eG is the support of its member cooperatives and their milk producers.

See also: company profile

A lot depends on the business success of the Uelzena Group: milk payout for the members, wages for the staff, procurement costs, investments and taxes. It is therefore the company’s responsibility to maintain and expand the corporate performance in the long run and to continuously invest into its future viability.

Our management approach: company

The main focus in the action field company is economic performance. Systematic planning and work is the foundation for the business success of the Uelzena Group. In its efforts, the Group is supported by various management systems and processes such as strategic multi-year planning, risk management, compliance and management by targets.

The corporate management defines long-term goals, plans implementation measures and monitors their effectiveness. Norms and standards are constantly further developed and require adaptation in corporate management, for example the change from ISO 9001:2008 to ISO 9001:2015 that will take effect in 2018.

 

Our sustainable corporate strategy – overview on targets and measures

Corporate objectives

  • Uelzena eG aims at generating a competitive milk payout for its members and guaranteeing reliable purchases
  • The goal is not short-term profit but rather continual good corporate results
  • The independence of the Group must be maintained in the long term

Reliable and guaranteed sales

The Uelzena Group has made a commitment to its members to reliably buy all of their milk. The company fulfills this obligation every year, again and again to 100 percent. This is achieved by ensuring that processing capacities and sales opportunities - i.e. access to customers - are always in line with the amount of raw milk delivered by the members.

Balanced use of financial resources

The economic performance is expressed as the ability to generate appropriate revenues on the markets and to act cost-consciously. The generated revenues make it possible to pay the member companies and their milk producers a competitive milk price (operational costs) while at the same time strengthening the equity with the surplus. It is important to have a sufficient amount of our own capital, otherwise the Uelzena Group would have to rely disproportionately on external financing as its capital requirements grow, for example for production equipment. Added to that, the equity also acts as a buffer in difficult market situations.

Diversification

The Uelzena Group uses diversification to create several earning pillars that allow it to generate appropriate revenues. This enables the Group to better counterbalance unfavorable developments in market prices or sales in individual business or product fields. In total, it decreases the economic risk for the company and its member enterprises.

Differentiation

When it comes to products and services, the Uelzena Group is a strong partner to its customers. The Group reliably takes care of the requirements from demanding customers and market segments. This creates added value for the customers and a basis for very often many years of partnership – this makes a significant difference in a competitive environment.

Strategy and management systems

The Uelzena Group has implemented various management systems in order to ensure proper management and control of the company. There are clearly defined work instructions, procedures, responsibilities and process descriptions in place:

  • Strategy and sustainability process
  • Systematic risk and crisis management
  • Quality management based on ISO9001 and a continuous improvement process
  • Energy management based on ISO 50001
  • A team responsible for occupational safety that reviews accidents and implements improvement measures
  • Reviews of IT systems in terms of data protection and privacy issues
  • Compliance officer who receives and checks information on violations of the Code of Conduct and, if necessary, initiates measures