On track despite challenges
The Uelzena Group’s business development continued to be affected by the Covid-19 pandemic in the 2021 reporting year. Fortunately, raw ingredient processing and production has been maintained since the start of the pandemic, while the operational profit and milk payout significantly increased compared with the previous year. Despite difficult framework conditions, the company maintained its course and implemented the scheduled strategic measures.
Successfully negotiated challenges
The 2021 financial year was associated with major challenges for all business divisions. Nearly all divisions had to contend with, in some cases, extreme supply shortages as a result of the disrupted global supply chain. From the middle of the year, the effects of rising inflation were also felt along with sharply increased energy costs. Despite the tense market situation, the Uelzena Group increased its sales in 2021. The turnover increased markedly in virtually all product groups. Similarly to skimmed milk powder, prices for butter and cheese experienced positive growth during the course of the year. Only the delicatessen dairy products and health divisions saw a drop in turnover. As a result, a 13 percent increase in turnover was reported compared with the previous year. The Group was able to build on its successful year prior to the coronavirus pandemic with a turnover of €768 million in 2021.
Satisfactory milk payout
The overarching objective of Uelzena as a cooperative is to generate a sustainable and competitive milk payout price for its milk suppliers. In the reporting year the average payout was 35.44 euro cents, making the payout 3.87 euro cents higher per kilogram than the previous year. Despite the improved payout, the economic situation remains strained for the milk producers due to the sharply increased operating costs.
Expansion of capacities
About 18 months of construction from the initial groundwork to handover of the finished and tested plant to production – that's our schedule for building the new spray-drying plant in Uelzen, which started in 2020. This state-of-the-art plant is specialised in spray drying vitamins and minerals, as well as other specific ingredients, to the highest quality requirements. “High Care” is therefore the highest priority when designing and equipping the new spray-drying plant for the contract drying division. This includes, for example, a strict hygiene zones concept with hygiene airlocks to separate the different areas, and cleaning concepts with separate washing and drying rooms to clean plant components. In energy terms, the plant will meet the latest standards and enable production that is both sustainable and conserves resources. A bridge with an automated conveyor belt connects the plant to the fully automated high-bay warehouse, which was commissioned in 2019. To relieve pressure on the spray drying towers at the Uelzen site, which were running at full capacity, the capacities in the instant beverage field were expanded in Ratzeburg. Capacity potential has been significantly increased by the commissioning of an agglomeration plant to produce readily soluble and loose powdered products.
„Even in challenging periods, we have remained on our chosen path and invested in the future. In this way, we are pursuing the goal of building on the successful business development to date and generating a competitive milk payout for the milk producers."
Jörn Dwehus, Chairman of the Board, Uelzena eG
Whey processing secured
Biolac GmbH & Co. KG processes about a million tonnes of whey, its sole raw ingredient, into whey derivatives annually. In the course of restructuring, Milchtrocknung Südhannover eG was changed into a GmbH (limited liability company) with new shareholders Uelzena eG, Fude & Serrahn, and Breitenburger Milchzentrale, and is now the sole owner of Biolac. Uelzena is using this strategic opportunity to secure the long-term processing of its own whey volumes, which are used in innovative products for the national and international market.
Outlook for 2022
The Uelzena Group remains in an exceptional situation in 2022. Besides the ongoing Covid-19 situation and the associated supply shortages, the war that began in Ukraine at the end of February has had a pronounced impact on energy and feed prices, in addition to the resulting humanitarian crisis. Nevertheless, the strategic projects to safeguard the sustainability of the Group will continue to be promoted. The aim is to build on the successful business development to date and to generate a competitive milk payout for the milk producers. The completion of the spray drying plant in Uelzen as a central investment project continues to be a focus.
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 of milk powder, butter and cheese on national and international markets. The Group is responding to this challenge with 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.
A lot depends on the business success of the Uelzena Group; the milk payout for the members as well as the employee wages, capital expenditure and taxes. It is therefore the company’s responsibility to maintain and expand corporate performance in the long run and to continuously invest into its future viability.
The Uelzena Group is a medium-sized cooperative enterprise with around 790 employees and consolidated sales of 766 million euros, processing almost 788 million kilograms of liquid dairy raw materials, 699 million kilograms of which is raw milk, at four production sites in northern Germany. The business purpose of Uelzena Group is the support of its member cooperatives and their milk producers. See also: Company profile
Our management approach: Company
The main focus in the action field ‘company’ is economic performance. Systematic planning and hard work are the foundations 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.
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.
Our sustainable corporate strategy – overview on targets and measures
- The Uelzena Group aims at generating a competitive milk payout for its members and guaranteeing reliable purchases
- The goal is not short-term profits, 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 is committed to its members to reliably buy all of their milk. The company fulfils 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. 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 modernisation of the corporate sites and the individual lines of business.
Balanced use of financial resources
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 equity with the surplus. It is important to have a sufficient amount of our own capital, otherwise the Uelzena Group, with growing capital requirements would have to rely disproportionately on external financing, for example, for investments. Added to that, the equity also acts as a buffer in difficult market situations.
The Uelzena Group uses diversification to create several earning pillars that allow it to generate appropriate results. This enables the Group to better counterbalance unfavourable 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.
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
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