2020 was a year that was remarkable for everyone around the globe. For DeLaval, it was a year of new ways of working and new challenges from the COVID-19 pandemic, but also a year of exceptional growth and extraordinary commitment from our employees under difficult circumstances.
We were impacted very early by the pandemic at DeLaval as our factory in Tianjin, China, was forced to close early in 2020. By the time we re-opened, we had found ways of providing safe working conditions for everyone during the pandemic. The Chinese authorities even used us as a role-model for others in China. The lessons learned from this experience were then used in our factories, distribution centres and offices as the virus spread around the world.
We were able to adapt quickly to the changing situation due to those early lessons but also due to the extraordinary efforts made by our staff. They were able to ensure a swift and safe transition to new ways of working while avoiding disruption to our operations. This smooth transition is one of the reasons we believe 2020 was our most successful financial year yet.
The underlying demand for our products increased during the pandemic. Automatic milking has become even more relevant today given the difficulties of having personnel on farms. At the same time, farmers continue to produce milk as always and our aftermarket products experienced double digit growth in 2020. Net sales were 1.6 per cent higher than in 2019, making 2020 an unprecedented record year.
The effects of the 2019 transformation programme also benefitted us in 2020. The cost reductions from the programme were fully in effect in 2020 with for example a much leaner supply chain.
We experienced strong growth in every region of the world in both capital goods and aftermarket products. In China and South East Asia in particular, a record number of large farm contracts were signed. At the same time, our overall market presence helped us to continue to sell to all kinds of farms.
We also saw particularly strong sales among our range of rotaries for large farms. This was driven by self-sufficiency policies introduced in Asia, and in China in particular. The need for increased domestic food production was already an issue due to trade disputes but has become even more apparent due to the pandemic.
The success of the DeLaval VMS™ V310 continues with the addition of new innovations such as DeLaval RePro™ now integrated into a third of all our VMS™ V300s. Another innovation in recent years that was particularly well received during 2020 is the DeLaval Evanza™ milking cluster.“Farmers continue to produce milk as always and our aftermarket products experienced double digit growth in 2020. Net sales were 1.6 per cent higher than in 2019, making 2020 an unprecedented record year.”
Our engineers also adapted quickly to their ‘new normal’ of working from home. They have managed to continue at the same pace when it comes to research and development. Our focus on innovation remains and the examples above illustrate this.
The major trends that we saw in 2019 remain despite the changes in place due to COVID-19. We have previously identified food safety, animal welfare, farm profitability and work efficiency as the four major challenges for our customers. The need for work efficiency and food safety were particularly evident in 2020 due to the pandemic. Even internally, we have had to adapt to maintain work efficiency under new conditions.
The pandemic has also highlighted another critical aspect of our business: food security. Both food safety and food availability are crucial for any functioning society and this became particularly clear in 2020. While the political focus was preventing the spread of COVID-19, we know things would have been very different without the safe and secure supply of food.
Since everyone working in the food chain is essential for a functioning society, we needed to ensure that our factories remained open while protecting our staff and their well-being.
Food safety is another important aspect of food security that has always been a priority area for us and our customers. We are happy to have several solutions in place that improve food safety on farms, such as our teat-spray solutions and digital sensor solutions that ensure clean milking lines.
Our customers today have a very positive perception of the DeLaval brand in terms of the quality of the products and services we offer. Internally, we want to work more on ensuring high quality. This will not only help maintain our reputation but will also help us save time and improve productivity internally with less time spent on fixing issues that may arise.
Almost a decade has passed since we set our vision ‘make sustainable food production possible’. We were one of a small number of companies that put sustainability into the heart of our vision at that point. Today, we see that it has given us a head-start over many competitors and helped us to provide solutions that can ensure the long-term sustainability of dairy farms. We will continue to invest in new technologies that lead to better animal welfare and higher productivity on farms. Dairy products are a food stuff with very high nutritional value, and are a great source of high-quality protein that is needed to feed the growing global population.
Internally, we are now stepping up our efforts on environmental sustainability. In 2020, we measured the entire carbon footprint of our supply chain operations. This has given us much needed data that will help us reduce our own emissions in line with the UN Paris Agreement on Climate Change.
We expected a certain degree of uncertainty in the market in 2020 mainly due to changing subsidy programmes such as Europe’s Common Agricultural Policy and the effects of Brexit as well as similar subsidy programmes in the US and Asia. What we have seen is that these programmes have largely remained the same, which is good news for farmers as it creates greater certainty in the market.
We believe that this will create a more stable market in 2021 for DeLaval even if there is still uncertainty due to the pandemic. We go into 2021 with cautious optimism and will be satisfied if we maintain our level of success in 2020.
After 18 years as CEO of DeLaval and 35 years within the Tetra Laval Group, I will leave my position on April 1, 2021. This is a timely moment for me to thank you, our customers, employees, dealers and partners, for our fantastic relationships over the past decades. I depart our company secure in the knowledge that our future is in safe hands. I am very pleased that the Tetra Laval Group Board has appointed Paul Löfgren as my successor. Paul is well respected by his colleagues, and well placed to support them and our customers in the years ahead. I am looking at my time in DeLaval with gratitude and pride. I will continue to look out for news about DeLaval’s innovations and customer successes (old habits are hard to lose). With that, I thank the Board for their continued commitment, engagement and support and I thank my colleagues and wish DeLaval a very successful future.Joakim Rosengren