COMMENTS BY THE CEO

“The year saw the successful launch of several new products, particularly in the portion pack segment, plus a number of formats specifically designed to serve new categories where we see strong growth potential.”

​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Strong results despite exceptional market conditions

Tetra Pak’s revenues reached €11.9 billion in 2015, 7.5 per cent higher than in 2014. Although positive currency impacts accounted for 6.4 per cent of the gain, we saw underlying growth across all parts of our business, with particular strength in Services and Processing Solutions. Within the context of the political, economic and competitive hurdles faced during the year, this was an outstanding achievement, once again reflecting the robustness of our strategy, the loyalty of our customers and the extraordinary commitment of our employees.

TOUGH TIMES IN KEY MARKETS

The year saw slowdowns in three of our four most important markets. In China, the fall in annual GDP growth to less than 7 per cent was well-reported. More significant from Tetra Pak’s perspective, however, was the continued slowdown in growth of China’s fast moving consumer goods, which rose by only around 2 per cent in 2015, with the food sector increasing just 1 per cent. In Brazil, GDP shrank by 3.8 per cent in 2015 compared with 2014, with consumer confidence touching an all-time low; while Russia also reported that GDP fell by 3.8 per cent, with domestic consumption dropping even more sharply.

TOUGH TIMES IN KEY CATEGORIES

To compound the challenge, some of our key categories continued to perform weakly during 2015. Growth in demand for Juice, Nectar and Still Drinks (JNSD) and Liquid Dairy Products (LDP) have softened significantly during the past three years. JNSD has been hit by rising concerns surrounding sugar content, while the LDP sector has been relatively slow in providing innovative new products to meet shifting consumption habits and lifestyle choices, enabling other beverage formats to take ground.

SEVERAL IMPORTANT INITIATIVES

Against this backdrop, and with competition in our packaging material business expanding further, the importance of our 2020 strategy once again became clear. Launched in 2011, the drive to accelerate growth in areas beyond packaging material, and to sharpen our focus on productivity and innovation, have unquestionably paid dividends; strengthening the top-line, securing margins and helping to ensure a bright, but different, future for the company.

PACKAGING SOLUTIONS

Our packaging solutions business reported sales of €10.1 billion in 2015, a year-on-year increase of just 0.6 per cent, when the positive impact of favourable exchange rates is removed. In volume terms, sales climbed 2.4 per cent to 184 billion packages, taking us past the milestone threshold of 500 million packs sold every day. The year saw the successful launch of several new products, particularly in the portion pack segment, plus a number of formats specifically designed to serve new categories where we see strong growth potential. Tetra Rex® Bio-based​, our flagship carton made entirely from plant-based materials, gained significant traction following its launch at the start of the year, with strong demand from customers and consumers alike, particularly in north Europe. During the year, we also launched our ground-breaking Tetra Pak® E3 filling machine platform, featuring a totally new package sterilisation technology that uses electron beams, rather than the traditional hydrogen peroxide. Compared with our existing A3 platform, the machine lowers operational costs, improves environmental performance and allows far faster production… with the potential to achieve filling speeds of up to 40,000 portion packages every hour. The company’s long-standing commitment to innovation continues to deliver results. Since the turn of the decade we have seen a significant increase in the overall vitality index for our packaging portfolio. For packaging material and additional materials, the index, which measures the share of sales coming from products launched during the past five years, has risen from 2% to 17% since 2010, reflecting strong demand for new shapes, new closures and new materials. For our filling machines and distribution equipment, the index is also up, climbing from 8.5% to 12.5% through the same period.

PROCESSING

Our Processing Solutions business had another solid year, with sales topping €1.7 billion in 2015, a year-on-year increase of 4.1 per cent, excluding the uplift from positive exchange rates and acquisitions. During the year, the business took further steps beyond its traditional dairy and beverage core, particularly in the cheese, ice cream and prepared food categories. We completed the acquisition of Obram, a Poland-based company that has broadened our capability in the rapidly-expanding cheese sector, allowing us to be even more responsive to the needs of our customers. We continue to explore opportunities to expand this area of our business. We also added a range of products to our processing equipment portfolio, addressing the needs of large and small customers alike. Most notable among these were a new, highly-flexible pasteurizer for prepared food, that switches between ambient and hot filled products at the touch of a button, and the world’s highest-capacity ice cream extrusion line, producing up to 43,200 ice cream sticks an hour, or 12 every second.

DRIVING COMPETITIVENESS

Through the past few years, we have taken measured steps to enhance the effectiveness and efficiency of our operations. In 2012 we launched our competitiveness programme, targeting improvements in both direct and indirect costs to help fund the pricing actions needed as one part of our response to ever-more aggressive competition, particularly within our packaging business. The programme has been very successful. We have achieved significant savings through actions taken to streamline our industrial base, optimise our organisational structure and trim unnecessary expense. Perhaps most importantly of all, however, we have shifted the mind-set within the company when it comes to managing investments and expenses. In 2015, non-allocated expenses as a percentage of sales was 14.7 per cent, down from 15.1 per cent in 2014. This compares with 17 per cent in 2010.

RECOGNISED ENVIRONMENTAL LEADERSHIP

On the environmental front, in 2015 we changed the way in which we calculate the recycling rate for Tetra Pak carton packages, to ensure we track what is most critical to enhancing the industry’s performance in this area. We implemented new reporting guidelines across the whole company, to improve the data collection process, and also took the decision to exclude recycling reports from third party sources that we are unable to validate. The effect of this change has been to reduce our recycling rate for 2015 to 23.6 per cent, or 43 billion packs, compared with 25.7 per cent, or 46 billion packs, in 2014. The underlying trend, however, remains positive. The year saw further progress in our efforts to introduce Forest Stewardship Council​​(FSC™) labelled products to the market. All of the wood fibres used in our paperboard are now obtained from FSC-certified or controlled sources, and 29 per cent of the packages we sold in 2015 carried the FSC logo, up from 25 per cent in 2014, and from less than 6 per cent just five years ago. As momentum builds, particularly among our major customers, and consumer recognition increases, we expect this percentage to rise swiftly. Trending in the opposite direction are the CO2e emissions that we measure across the value chain, which in 2014 stood at index 84 compared with 2010, reflecting a reduction in total annual emissions of 2.2 million tonnes. During that same period, production from our factories increased 14 per cent. We expect to see similar progress when we receive the 2015 statistics later this year.

FOCUS FOR 2016

Looking ahead to the rest of 2016, we see no respite from the volatility, uncertainty, complexity and ambiguity that has characterised the business environment of the past few years. Against such headwinds, we expect that growth will continue to be hard-won and modest. We will continue to explore “nearcore” opportunities, using our existing technologies and know-how in categories and markets that we have previously overlooked, or failed to develop to their full potential. We will focus even more effort on building our business in packaged food, through our Tetra Recart portfolio, and on expanding the range of products offered within our Technical Service businesses. And we will continue to grow our Processing operations, both organically and through acquisitions, with a sharper focus on harnessing opportunities to provide fully integrated solutions that deliver greater value to our customers, and more business for us. The foundations on which we are building our business are strong, as is our determination to deliver sustainable, profitable growth through the years to come.​

​Dennis Jönsson​​​​


“The company’s long-standing commitment to innovation continues to deliver results. Since the turn of the decade we have seen a significant increase in the overall vita​lity index for our pa​ckaging portfolio. For packaging material and additional materials, the index, which measures the share of sales coming from products launched during the past five years, has risen from 2% to 17% since 2010, reflecting strong demand for new shapes, new closures and new materials. For our filling machines and distribution equipment, the index is also up, ​climbing from 8.5% to 12.5% through the same period.”​