A CHALLENGING YEAR WITH GOOD PROSPECTS FOR THE FUTURE

​​​Tetra Laval Group’s net sales amounted to €13.6 billion, a nominal decrease of 2 per cent compared with 2017. At comparable exchange rates, sales increased by 2.4 per cent. All industry groups successfully grew service sales while Tetra Pak and DeLaval also grew equipment sales. The Group reported a decrease in operating profit, mainly attributable to the adverse currency effects, competitive pressure, escalating raw material costs and tough economic conditions in some markets. I want to express my gratitude to our dedicated personnel for their commitment during a challenging year. 

Digitalisation presents significant opportunities​

All three industry groups are investing significant resources to secure they remain in their leading positions and develop new ways to improve their customers business. Digital printing is highly interesting to Tetra Pak and we are now making our first full-scale installations of digital printers in the clusters. 

Tetra Pak wants to connect the food industry in areas that we know drive value creation for both our customers and for Tetra Pak. These areas will address smart factories, integrated supply chains and smart consumer engagement through connected packages.

DeLaval’s opportunity is to offer global data management services combining data and sensors for different customer segments within the dairy industry and provide access for the farmers to high quality data, information services and data analytics.

The latest product development efforts in Sidel have a strong focus on performance, reliability and ease of use supported by machine connectivity tools. Delivering per­formance of the installed base is a key differentiator and a driver for customer loyalty, supported by continuous data-driven line monitoring. 

Improved growth in our largest markets​

In our two largest markets, China and Brazil, we have returned to growth. Economic volatility and sanctions continued to subdue sales in the Middle East and Russia. We also saw declining sales in Europe due to tougher market conditions and customer dual sourcing strategies, while sales in the Americas remained basically the same as in 2017.

We experienced the strongest growth in South and East Asia & Oceania. The construction of a packaging material plant in Vietnam to support growth proceeded according to plan and will be operational in mid-2019. 

Tetra Pak continued to grow in a challenging market

Total sales of Tetra Pak grew 2.5 per cent, excluding currency effects, in a challenging market. Growth of capital equipment sales in both Packaging and Processing contributed with 2.5 per cent and 13 per cent respectively. Sales of packaging material declined slightly, even though the unit number of packages grew by 1.5 billion to 190 billion. Sales of additional material, like caps and closures, grew 6 per cent thanks to the successful deployment of new packaging formats. The positive trend in service sales of recent years continued with a growth rate of 8.7 per cent. Service sales now account for more than 13 per cent of total sales.

Profitability declined due to adverse currency effects, competitive pressure, escalating raw material costs and tough economic conditions in some markets.

We launched a game-changing plant management service, Tetra Pak® Plant Secure, that covers all the equipment and systems supplied by us and others, for example in a dairy, delivering tangible profitability results for our customers.

Sustainability is at the forefront on Tetra Pak’s agenda. We are committed to working with industry partners to develop improved recycling solutions and substantially increase the use of bio-plastics and recycled plastics once they are validated as safe and legally acceptable as a food material.

In 2018 Tetra Pak developed a paper straw for its portion-sized packages. The goal is to launch paper straws during 2019 that are fully functional, meet global food standards and satisfy volume demands.

​​​​We expect continued growth for Tetra Pak in 2019. 

DeLaval – innovation at the forefront

Sales excluding currency effects grew 7.5 per cent and order intake had double-digit growth. We have grown faster than the market in favorable market conditions. The growth is mainly due to the launch of a full range of capital goods and after-market products. The innovations are the outcome of several years of intensive R&D activities. We launched the new DeLaval VMS™ V300, an automatic voluntary milking system to which farmers reacted very positively. At a time when farmers in many countries are finding it increasingly difficult to recruit the right staff, the work efficiency benefits of automatic milking are highly relevant. On the non-robotic milking side, we have revitalised our solutions to parlours and rotaries mainly used on large farms. These are among the innovations that build a base for profitable growth in the coming years.

Our activities in data management continued to develop positively and we are allocating significant resources in this area. With our ability to collect data on the farm, we can gather and analyse information – with the farmers’ permission – to give more accurate recommendations that help them improve both food safety and farm profitability. ​

We are entering 2019 with a very solid order book and expect to see continued growth for DeLaval during the year. 

​​Sidel – increased aseptic demand

Sidel’s sales grew by about 1 per cent, excluding currency effects and despite challenging market conditions. The continued growth of services managed to compensate for the decline in capital sales. By keeping costs under control and progressing on strategic initiatives, we maintained the profitability level.

Sidel’s sales of PET declined somewhat. Sales in Europe were, however, positive and continued to be strong for PET in all the categories we serve. There is a clear conversion trend to PET. China offered interesting opportunities for our ultra-clean and aseptic technologies for sensitive products in PET.

We have successfully launched new products for fillers, offering beverage producers active in the can and glass segments high-­quality products at an advanced performance level. We also introduced a new generation of labelling solutions for our Super Combi launched in 2017.

Packaging design with an attractive look and format is a key differentiator for our customers. Sidel has deep expertise in package design and to strengthen that offering further, PET Engineering in Italy was acquired.

We expect 2019 to be a year of further improvements for Sidel. 

Growth, sustainability and innovation – our focus for 2019

Several of our customers struggle with subdued growth and profitability due to changing consumer behaviour. Our commitment is to support our customers to introduce more attractive products at competitive prices, thus generating growth for them. Through our expertise, we also contribute to improving our customers’ operational efficiency.

For Tetra Pak, we are developing various solutions to optimise plastic closures, as well as potentially replace straws in some applications. Through packaging material development, we are determined to increase the renewable content and establish materials that are even simpler to recycle. For DeLaval, a prime target is to reduce methane (CH4) emissions at the dairy farm. In Sidel’s case, light-weighting of bottles and design of bottles for easier recycling further support our customers’ environmental ambitions.

Internally, continued efficiency improvement in all parts of the Group is necessary. Finally, innovation is in our genes and recent product launches create significant opportunities.

We are addressing these focus areas with speed and determination and I am confident that the Group will deliver satisfactory results despite challenging market conditions in 2019.

Finally, looking into 2019, I have the pleasure to welcome Adolfo Orive and Monica Gimre as new CEOs of Tetra Pak and Sidel respectively. I also want to convey our gratitude to Dennis Jönsson and Sam Strömerstén for outstanding achievements for more than 30 years within the Tetra Laval Group. 

Lars Renström