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Combined Annual Report and Sustainability Report 2018

Foreword by the cooperative's elected officers

Thomas StürtzThomas Stürtz has been a member of the Board of Deutsches Milchkontor eG since 2007 and was also appointed Chairman of the Board of Management in 2016. The 51-year-old graduate engineer and farmer took over his parents' dairy farm in the year 2000 and has managed it and a herd of around 350 dairy cows since then. His team consists of a farm manager, a herd manager, two employees and an apprentice. Thomas Stürtz is married and has three children.

Heinz KorteHeinz Korte has been Chairman of the Supervisory Board of Deutsches Milchkontor eG since 2015 and has also held the post of Chairman of the Supervisory Board of DMK GmbH since 2016. He was previously Vice-President of Landvolk Niedersachsen, the farmers' association of the Lower Saxony region. The 54-year-old master farmer took over his parents' dairy farm in in Bremervörde, with around 200 dairy cows, in the year 1990 and has managed it since then. His team consists of a farm manager, three employees and an apprentice. Heinz Korte is married and has three children

Ladies and Gentlemen,

In the past fiscal year, we continued to drive forward both our rigorous alignment with the market and the changes to internal processes and systems in the new corporate structure. We have worked on establishing a new corporate culture and implemented key stabilisers for the business. Our many activities demonstrate what we are capable of by our joint efforts, but also the extent to which change and further development were and will be necessary.

While this progress enabled us to pay a milk price of 33,57 cents per kilo including all average premiums and the dividend - a price that was always competitive within the north German business environment - compared to all German dairy companies in total, we were slightly below average in the year 2018. However, the company's performance and the first fruits of restructuring are an equally important perspective. With a stable turnover of 5.6 billion euros, profits at the previous year’s level of 30.6 euros and an equity ratio of 30.9 percent, we held the DMK Group economically in very stable waters despite the continued challenging market situation and the loss of milk volumes.

At this point we would like to express our gratitude to Volkmar Taucher, who has led our company as Chief Financial Officer for twelve years now. Mr Taucher made a crucially important contribution to the success of our realignment and has played a decisive role in the work to achieve sufficient financial scope for our new course and our company’s stability, not least by many capitalisation and financing measures. He retires in July on the grounds of age and will hand over his position as Chief Financial Officer of the DMK Group to Dr Frank Claassen, who comes to us from the position of Vice President Finance Europe with Beiersdorf AG We look forward to an equally good and successful working relationship with this acknowledged financial expert.

A working relationship of this nature is also essential outside the boundaries of our company and our cooperative when the interests of dairy farmers and our industry are concerned. The exceptional summer in the year under review once more gave a clear demonstration of this. Temperatures close to 40 degrees Celsius, arid fields, burning acres and dry grass had serious consequences for dairy farmers among others: the cows’ stress levels rose, as did their energy consumption, the milk yield fell, feed was in fairly short supply, which meant higher costs for the farmers.

Moreover, 2018 showed that our industry has to adopt a more autonomous structure and needs a dairy sector strategy to survive in both the domestic and global markets. DMK was one of the organisations behind the proposal of a strategy of this nature, which was positively received by politicians and professional associations. In concrete terms, this means that we have to develop a shared vision for the future and shared objectives. It is now important to motivate all dairy industry associations and organisations to contribute to this process and develop areas for action and concrete solutions together.

High milk price volatility will undoubtedly remain with us on our future path. In light of this fact, the executive bodies gave a great deal of thought in 2018 to a solution for partially hedging milk prices through the milk futures exchange. Our goal is to offer our members an exclusive hedging model that will improve their financial security and planning certainty.

We see ourselves as a modern cooperative, and accordingly took a first step last year towards contemporary payment for the milk ingredients, more focused on value added, and changed the ratio of fat and protein in the payment from 1: 2 to 1: 1.5. As of 1 January 2019, we introduced 1: 1 payments.

We also modernised a number of elements in the Milkmaster Programme, which defines our standards for responsible milk production, and simplified the system for the dairy farmers in 2018. We are now working on a market-oriented further development of the programme, with which we aim to drive forward the integration of the DOC Kaas system MELKkompas and to concentrate on future-related topics in the coming year.

Our future-proof realignment has found approval: more new dairy farmers are now becoming interested again in becoming members of DMK. In this context, the fact that the commitment to supply milk was reduced in the previous year from two years to one gives dairy farmers additional flexibility.

It was our key concern in the year under review to identify such needs among our members and develop workable solutions. We will go on doing so in the future, because at DMK, when we say “we”, we mean all employees and farmers – a total of around 14,000 people, and in many cases their immediate family members on the farms on top of that. We have undertaken and achieved an enormous amount for and with one another in the past two years. In doing so, we not only took the perspective of the day-to-day business, but also that of the future, to give targeted consideration today to the markets of tomorrow and prepare ourselves for these markets. Because the path we take now will determine our future success and competitiveness in the years to come. Let us continue to follow that path together this year, and enable the market to witness our performance capabilities as a future-proof company and modern cooperative. We as elected officers will continue to drive this approach forward in our cooperative’s various executive bodies.

More chapter topics

Business development