Home Annual report Tetra Laval Comments by the chairman of the board

Excellent performance during an unprecedented year

We are pleased to report that all three industry groups exceeded expectations given the specific conditions they operated under. The Group’s net sales amounted to €13.1 billion, which is a nominal decrease of 6.0 per cent compared with 2019. The strengthening of the Euro, especially versus the Brazilian Real and the Mexican Peso, had a significant impact. At comparable exchange rates, sales decreased by 2.7 per cent. However, the operating profit increased by 2.7 per cent, mainly due to lower operating costs. The Group generated a strong cash flow, thanks to a strong operating profit and lower working capital. On behalf of the Board I want to express our gratitude to our dedicated employees for the outstanding performance and their commitment during an unprecedented year.

​“Our commitment is to support our customers to introduce more innovative products at competitive prices – to ultimately generate growth for them.”

The COVID-19 pandemic effect

Despite the disruptions brought about by the pandemic we managed to support customers in various ways to minimise disruption in their operations. We swiftly adapted our ways of working by expanding remote digital services to our customers, including virtual solutions for activities such as product trials and equipment installation. We leaped several years forward in utilising digital tools and remote working. Our supply chains proved to be robust and capable of adapting to large swings in volume as well as a changing product mix. During the year, we gained market share as customers increasingly turned to us for reliable deliveries.

During the crisis, we have taken extraordinary measures to protect our employees by encourage and facilitate for them to be working from home and in adapting workplaces to ensure safe working environments. Efficiencies and new ways of working driven by the response to COVID-19 are expected to be maintained after the pandemic. The theme of this year’s Annual Report – food security – covers both food safety and food availability. The pandemic has highlighted the vital role this and therefore our products play in any society and it has long been our mission, and we will continue to innovate to fulfil this.

Geographical development

All geographical markets were impacted by lockdowns, while China stood out in terms of the earliest and strongest recovery. Long lockdowns caused significant declines in markets like India and South East Asia. In Europe, the lockdown during the spring triggered a surge in demand for Tetra Pak’s products, but for the full year demand remained on the same level as last year. The Americas delivered a slight growth in sales. During the whole year, the Middle East struggled with political instability, declining purchasing power as well as taxes that hampered consumption, in addition to the pandemic.

Tetra Pak – Higher operating profit and cash flow

Total net sales amounted to €10.9 billion, which is an overall decline of 1.9 per cent excluding currency effects compared with 2019. At the same time, we managed to increase our market share and improve our cash flow compared with last year, driven by strong operating profit and a further reduction in working capital. We achieved great results in terms of productivity, delivering a reduction in operating costs for the first time in many years.

Packaging Solutions sales decreased 1.4 per cent, with number of packs declining by 3.7 per cent, ending the year with 184 billion packs. This was largely driven by changes in consumption patterns during the pandemic, with an overall decrease in demand across our core categories, even as we saw a reduction in ‘on-the-go’ consumption offset by an increased demand for ‘in-home’ packaging.

Processing Solutions net sales declined 4.5 per cent due to customers postponing investment decisions as well as delayed installations caused by lockdowns. The Services business recorded net sales growth of 1.6 per cent, which was a great achievement by the team, considering the effect of restrictions on the movement of people. Our services played an important role in ensuring customers could maintain their operations during the pandemic.

We continued to lead the sustainability transformation within the industry, achieving many new milestones. We sold more than one billion Tetra Rex® plant-based packages globally – the world’s first carton package made entirely from renewable materials. We continued our focus on mitigating climate change – not only with our low-carbon packaging solutions – but also through our commitment to achieve net zero greenhouse gas (GHG) emissions in our own operations by 2030. During the year, we launched a comprehensive sustainability campaign – ‘Go nature. Go carton’ – which signifies our ambition to create the world’s most sustainable food package. We will continue to make significant investments in R&D, particularly focused on sustainable packaging that is fully renewable, fully recyclable and carbon neutral.

During 2021, we expect Tetra Pak to grow both capital sales and services.

DeLaval – Record sales and profitability

Sales excluding currency effects grew 4.0 per cent compared to 2019, making 2020 an extraordinary year. 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. The cost reductions from 2019 transformation programme were in full effect in 2020.

We experienced strong growth in every region of the world. In China and South East Asia in particular, a record number of large farm contracts were signed. This was driven by increased self-­sufficiency policies introduced in Asia, and in China in particular. The need for domestic food production was already an issue due to the international trade disputes but has become even more apparent due to the pandemic. The success of the VMS™310 continues with the addition of new innovations such as DeLaval RePro™, an in-line measurement tool to increase reproduction.

With the important acquisition of milkrite | InterPuls, we are establishing a separate global channel to the aftermarket with its own assortment. The company has for many years, very successfully served dairy farmers with a very attractive offering of products and services.

The subsidy programmes that remain in place in the EU, the US and Asia ensure a stable market in 2021. The subsidies in combination with our innovative product portfolio mean that we anticipate a fourth year of consecutive growth.

Sidel – Extraordinary challenges addressed with speed and determination

The effects of the COVID-19 pandemic have been severe, both for Sidel and its customers. To overcome these challenges our organisation has shown great commitment and agility. Sales fell by 12 per cent at comparable exchange rates. Despite order intake being down by about 20 per cent on capital goods and sales of services decreasing by about 10 per cent, Sidel managed to achieve net sales of almost €1.3 billion. Region Americas as well as product group Food, Home and Personal Care delivered good growth. Through our ‘Fit for Business’ programme, we managed to substantially reduce costs and thereby achieve a small operating profit. Another achievement was to achieve a positive cash flow.

During the year, we made significant progress in digitalisation, sustainability and in aseptic technology. Moreover, we launched our own packaging design agency, Gentlebrand, to meet our customers’ branding design needs.

We have developed a number of sustainable packaging solutions. X-Lite™ is an extremely light-weight 500 ml PET bottle that is compatible with tethered caps. We have developed it with 100 per cent recycled PET (rPET), with reduced cost and impact for the environment. In addition, we are building a smaller-­scale real life PET recycling line, to serve as a service laboratory to support customers to transition to recycled PET packaging.

Given the low order backlog, we expect that 2021 will be another challenging year. We do not believe that the market will recover until 2022.

Growth, sustainability and innovation – remains our focus for 2021

Several of our customers are struggling with subdued growth and profitability due to changing consumer behaviour, combined with the effects of the pandemic. Our commitment is to support our customers to introduce more innovative products at competitive cost – to ultimately generate growth for them. Indeed, innovation is the foundation for our long-term success in our industries. Through our expertise, we also contribute to improving our customers’ operational efficiency. Finally, the Group’s initiatives within sustainability, be it the increased recycling of packaging material, light-weighting of PET bottles for reduced plastic consumption or more efficient milk production for lower CO2 emissions, will help our customers to outperform their competition.

We forecast that sales development will be slightly positive while operating profit will decline somewhat after a very good 2020.

We expect that the world have to live with the impact from the pandemic during 2021 and at best see an improved demand towards the end of the year. Hence, we will continue to prioritise the health and well-being of our employees while continuing to serve our customers with as little disruption as possible.

Lars Renström​