German dairy DMK to pursue cost-cutting amid tough trading - Just Food
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German dairy DMK to pursue cost-cutting amid tough trading

21 Jun 2016

German dairy cooperative DMK said today (21 June) it is pushing ahead with a major cost-cutting programme to free up EUR60m (US$67.8m) by the end of the year in response "severe challenges" faced by the dairy industry.

German dairy DMK to pursue cost-cutting amid tough trading

German dairy cooperative DMK said today (21 June) it is pushing ahead with a major cost-cutting programme to free up EUR60m (US$67.8m) by the end of the year in response “severe challenges” faced by the dairy industry.

CEO Josef Schwaiger said DMK had completed a “factory structure concept” for its 26 sites. He added “the corporate organisation will be adapted to future market requirements in the second half of 2016 following a good year of preparation”.

Ingo Mueller, DMK’s managing director for ingredients and agricultural affairs/raw materials, who is also the board member in charge of the future corporate organisation, said: “In addition to the ongoing cost reduction programme, with which DMK is helping to bridge the liquidity problem for the farmers in the current crisis, a secure future for the cooperative shareholders and employees can only be achieved by successful structural changes.”

The company made the announcement alongside the publication of its annual results for 2015.

DMK said low market prices for milk and dairy products saw revenues fall to EUR4.6bn in 2015 (US$5.19bn) compared to EUR5.3bn in 2014. 

However, DMK said it paid out EUR30m of profit to farmers through the milk price in the course of 2015 “to ensure that every possible eurocent went to the dairy farms”.

Reflecting on 2015, Schwaiger said: “The crisis-torn year in 2015 has shown that the DMK group’s long-term strategy is the right one, even if every possible cent needs to go, and is going, to the farms at the moment,” Schwaiger said.

DMK’s merger with DOC Kaas, the Netherlands’ second-largest cheese manufacturer, came into force on 1 April. DOC Kaas, also a cooperative, produced 1bn kilos of raw milk in 2015 supplied by around 1,050 dairy farmers into cheese, DMK said. “The German and Dutch dairy farmers alike will reap benefits from the merger because of synergy effects in the production and sale of cheese and fresh dairy products,” Schwaiger insisted.

DMK said income “will be under less of a strain” this year than in 2015 because major capital investments have now been completed, including new production facilities in Zeven, Georgsmarienhütte and Erfurt, which have already gone into operation “and helped to improve competitiveness in 2015”.