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27.4.2023

Valio in 2022: Good performance in a challenging environment

20211124 Valio Ruoanvalmistus 0340 1

The operating environment was turbulent in 2022: after the most acute phase of the long Covid-19 pandemic had subsided, Russia invaded Ukraine in February. In autumn, there was uncertainty regarding energy prices and availability. The year was marked by an unprecedented rise in production costs at farms and in the food industry, as well as general inflation. Despite the challenging operating environment, Valio continued the resolute implementation of its strategy. Valio Group net sales in 2022 were EUR 2,236 million, up by 15.6% on the previous year (EUR 1,934 million). With the business success, during the year Valio was able to raise the milk price paid to cooperatives by 36 per cent. 

Domestic net sales increased by 17.6 % and international net sales by 12.4%. Some of the growth is attributed to the acquisition of Heinon Tukku in summer 2021. Heinon Tukku was included in the 2021 comparison figures starting from the second half of the year. 

Dairy farms faced an extremely tough year  

Valio is owned by some 3,700 Finnish dairy farms through cooperatives. Valio’s main purpose is to pay the best possible return to its owners, i.e. the dairy farms, through the cooperatives.  

Dairy farms faced an extremely tough year with, in some cases, manifold increases in fertiliser, energy and animal feed prices and significant increases in production costs at the farms. Problems also arose regarding the availability of some production inputs. At the same time, Valio’s industrial operations costs increased drastically as a result of, for instance, higher energy prices. 

Valio’s financial success is measured with a milk margin* and a milk return**. The milk margin amounted to EUR 1,008 million (EUR 862 million), and the milk return was 52.5 cents per litre (43.7 c/l). The average price paid to the cooperatives for raw milk was 52.1 cents per litre (42.3 c/l). The price includes the after payments made to the cooperatives for 2022.   

“Under these difficult circumstances, Valio was able to boost its operational efficiency, achieve cost savings and absorb the higher costs into its product pricing. The global market prices were also favourable. For these reasons, we generated a record milk return and were able to raise the milk price paid to cooperatives by a total of about 36 per cent. This is a major achievement in a very challenging market situation. All production plants operated normally throughout the year, and delivery reliability to customers remained at a good level,” Valio’s CEO Annikka Hurme reflects on the year.    

At the end of 2022, there were about 3,700 Valio farms, i.e. some 300 fewer than in 2021. The vitality of dairy farms and their ability to continue operating in different situations is important in securing domestic food production. 

“Our goal is to secure the future of Valio dairy farms, both in medium and long term, and to ensure that milk production, which is particularly well suited to Finnish nature, remains in Finland,” Hurme continues.  

Interesting, new and innovative products boosted Valio’s successes  

Valio’s vision is to be a trailblazer in innovative solutions and brands in the dairy and food industries. Our strongest strategic area is business operations focused on milk in the domestic market, and we will continue to further its development. Another important strategic focus is ingredients and solutions that generate value added for our industrial customers, through which we seek growth globally, for example in Asia. We are also targeting international markets with plant-based products. 

In Finland, we grew our market share in, e.g., snack products, cheeses and plant-based products, and we launched numerous new products. We extended product families, such as Valio Herkku yoghurts and Valio PROfeel® snacks, and introduced new sliced cheese products. 

We developed new, innovative baking and cooking products designed to make everyday life easier – using both milk and plant-based ingredients. New flavours were added to the Oddlygood® gurt and Oddlygood® Barista product ranges, and we launched vegan Oddlygood® Dreamy Desserts. 

Valio’s exports account for about 25 per cent of Finland’s food exports 

Net sales from Valio’s international operations totalled EUR 832 million (EUR 740 million). Product exports from Finland to some 50 countries totalled about EUR 553 million. Valio’s exports accounts for about 25 per cent of Finland’s total food exports.  

The global market prices of international industrial products, such as industrial butter and skim milk powder, continued to increase in early 2022 and reached an exceptionally high level. They peaked in the spring and then began to fall. Uncertainties in the global economy, and in China in particular, as well as inflation weakened the global demand for butter and milk powder. 

Investments in value added ingredients continued. The sales of both lactose free Valio Eila® and organic milk powders increased. 

In China, net sales denominated in euros increased by 28 per cent compared with 2021. The growth originated mainly from the higher market prices for basic products, such as skim milk powder and whey powder. In the USA, net sales denominated in euros increased by 19 per cent. Our core business, Finlandia cheeses and butter, developed favourably. In Sweden, net sales denominated in euros increased by 17 per cent. Growth was generated by lactose free milk drinks, cooking products, and yoghurts, as well as Valio PROfeel® and Oddlygood® products. Net sales in Estonia increased by 29 per cent, with growth in all categories. 

Openings in new business areas  

As part of our strategy, we continuously assess new business opportunities.  

Valio acquired Heinon Tukku in summer 2021, and in January 2022 the new wholesale business was renamed Valio Aimo®. The Covid-19 pandemic loosened its grip in the summer, and eating in restaurants increased. 

At the beginning of 2022, Mandatum Asset Management became a minority shareholder in Oddlygood Global Oy. Growth financing will accelerate internationalisation. Oddlygood® net sales increased by 21 per cent on the previous year. New records were set for market share in Sweden, Finland, and the Baltics States, and sales were launched in Poland. 

In February, we established a joint venture with St1 Oy, Suomen Lantakaasu Ltd. The joint venture is part of the practical implementation of our climate programme. In December, the Ministry of Economic Affairs and Employment granted EUR 19.2 million in funding for the construction of Finland’s largest biogas plant complex in Kiuruvesi. The subsidy is conditional on approval from the European Commission.  

In March, we announced that Valio is buying the Gold&Green brand, as well as the intellectual property and R&D operations of Gold&Green Foods from the food company Paulig. We aim to hold an even stronger position in the growing plant protein markets. In the autumn, we launched new Gold&Green products and relaunched Nyhtökaura (Pulled Oats). 

In 2022, we started a new performance improvement programme set to run to 2025; through the programme, we will look for new cost-conscious ways of working and we’ll focus on aspects such as reducing time wastage. 

Valio’s operations in Russia ended in April  

Russia’s invasion of Ukraine in February made it both ethically and operationally impossible to continue Valio’s business in Russia. At the end of April, Valio completed negotiations on selling its Russian operations to Velkom Group. The sale was implemented immediately and Valio’s operations in Russia ended. The sale included Valio’s Russian business operations and the processed cheese plant in Ershovo. The Viola® processed cheese brand, produced and sold in Russia, was also included in the sale. 

Russian net sales accounted for around five per cent of Valio’s total net sales. Valio exports products to some 50 countries around the world, so we have spread the risk across different markets. Russia’s significance to Valio’s business operations was therefore not as great as in 2014, when exports to Russia were halted due to the invasion of Crimea and the ensuing sanctions imposed by the EU and Russia’s countersanctions. 

Climate programme advances  

Valio aims to cut the carbon footprint of milk to zero by 2035. Valio’s total emissions from operations in Finland (excl. wholesale functions) have decreased by 10 per cent from the 2019 base line to 2022. Valio complies with the international GHG Protocol and the emissions report is assured by a third party. The reporting covers scope 1–3 (emissions from Valio’s own operations, emissions from Valio’s purchased electricity and heat, and all other indirect emissions from Valio’s value chain).  

During 2019-2022, emissions reductions of -42% were achieved in Valio's own operations (scope 1) and -34% in emissions from electricity and heat purchased by Valio (scope 2). All other indirect emissions in Valio’s value chain (scope 3) decreased by a total of 8%. Of these, the emission reductions during 2019-2022 were -9% for raw milk received and -20% for logistics. 

We track the reduction in dairy farm greenhouse gas emissions with the CARBO® Farm calculator. More than 1,900 dairy farms have reported their raw milk carbon footprint to Valio. This accounts for about 60 per cent of our milk intake. We train dairy farmers in carbon farming methods to reduce climate emissions. By the end of 2022, we had trained about 1,000 farms, i.e. over 25% of all Valio’s farms.   

In 2022, the largest energy efficiency investment in Valio’s history was completed at the Lapinlahti plant: the new flue-gas condenser recovers heat from the plant’s chimney and reduces energy consumption by more than 10 per cent. 

Year 2023  

The operating environment remains volatile, and there is an exceptionally high degree of uncertainty in forecasting, e.g., global market prices for industrial products, consumer demand, and dairy farm and industry’s cost level. It continues to be a tough situation for dairy farms.  

Year 2023 is continuing to progress along the guidelines of Valio’s strategy. Our goal is that strategic projects will generate new growth, improve operational efficiency and enhance profitability in the coming years. Valio’s main purpose is to pay the best possible return to the owners, i.e. dairy farms, through the cooperatives. 

In the Suomen Lantakaasu Oy biogas plant project, a call for tenders for the construction and detailed planning of the plant will be launched. The goal is for the plant complex to start operations in 2026.  

Valio is updating the sustainability programme for dairy farms in May. In the future, farms can receive an additional price for their milk by giving cows grazing and outdoor opportunities, for farming that supports biodiversity and for efforts to reduce the farm’s carbon footprint. The reform is significant for agriculture overall in Finland, as around 80 per cent of the milk produced in the country is covered by Valio’s sustainability programme. 

Read Valio’s Sustainability Report and Board of Directors’ Report and Financial Statements 2022: Reports and Financial Statements | Valio

Valio Group’s key figures in 2022 

2022  2021  Change 
Net sales, MEUR   2,236   1,934   16% 
Milk margin, MEUR  1,008   862    17% 
Milk return, c/l   52.5   43.7   20% 
Milk volume, ML  1,682  1,723   -2% 
Equity assets ratio   49%   48%    3% 
Investments, MEUR   55   56   -3% 

 
*Milk margin, MEUR:  

Net sales less all other costs excluding the price paid to the co-operatives for raw milk, interest on shareholder loans, depreciation according to plan, supplementary payments to the pension fund, pension contribution refunds, and items not included in actual business operations, such as sales gains from sales of business operations, provisions, sales gains and losses from real estate sales, write-offs of non-current assets, costs arising from acquisitions of companies and business operations, and subsidiaries' minority interest of the profit. The milk margin includes Valio Ltd's taxes, with the tax share of the net profit 

corresponding to the amount of the average dividend percentage from the share capital, and taxes of subsidiaries. Taxes also include the cost effect of direct taxes resulting from depreciation deficit. 

**Milk return, c/l:  
Milk margin less estimated required financing for investments, and the figure is divided by the milk volume taken in from the owners of Valio Ltd. 

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