Hochwald paying above-average milk price. Mechernich investment project in the pipeline. Investing in the future pays dividends.
Thalfang / Mechernich, 2 July 2021
Hochwald reported turnover of €1.65 billion in 2020. In a year of crisis dominated by the pandemic, the company benefited from higher sales of dairy products via the retail sector. A total of €204.9 million was invested in the year under review, mostly in the new production facility in Mechernich. Despite the largest investment in a single business year in the history of the company, the equity ratio stands at 31%. The strategic objective of paying an above-average milk price has been achieved, widening the gap from the German average. The export ratio is 46%, and continually growing.
Business year 2020
Initially, the rapid global spread of the coronavirus pandemic prompted a collapse in prices for dairy products. Although this was followed by a quick recovery, the previous year’s level could not be matched. The quantity of milk on the global market rose more strongly in 2020 than in the prior year, with the most significant rates of increase reported in North America and Oceania. In Germany, overall per capita consumption of dairy products rose during 2020, the year of coronavirus; on average, people consumed more butter, cheese and fresh milk products than they did in the previous year. Milk producer prices also fell in Germany for the third year in succession. In 2020, the cooperative paid its milk suppliers an above-average milk price of €0.341/kg. Major investments – amounting to the biggest investment project in the company’s history – were made in the construction of the dairy site at Mechernich in 2020. According to Detlef Latka, CEO of Hochwald Foods GmbH, “The Mechernich project is proceeding on time and within budget, despite the coronavirus situation. Between the start of planning five years ago and final commissioning, we have only lost three months so far. This is a superb achievement on the part of our employees”. In total, €204.9 million was invested. The Group’s equity increased from €218.9 million in the previous year to €236.7 million, while the equity ratio stands at 31%.
Developments in 2021
As we moved into the new year and the spring of 2021, the coronavirus pandemic continued to define the global picture as second and third waves of infection swept across practically every region of the world. Prices of baby/infant food and eating-out products, for example, came under significant pressure. With economies reviving in Asian countries especially, prices for basic commodities like skimmed milk powder, butter and whey rose sharply in the spring of 2021. In the course of 2021, higher prices will lead to rising milk prices. As Latka says, “For Hochwald, rising prices have a delayed effect given the varying contract terms 2/2 and the low proportion of powder and butter. We believe we will reach our target of paying above-average prices in 2021. In view of the significant increase in costs on dairy farms, higher milk prices are an urgently needed development”. Based on the sales trend for the opening months of the business year, the company expects annual turnover and consolidated profit to exceed the 2020 values in 2021.