Raisio Group is an international diversified company whose key products are plant-based foods, their ingredients and feeds for cattle and fish. Raisio is a significant user of renewable raw materials. Changes in quality, availability and prices of these materials are difficult to predict so they present a challenge to the Group's operations. In Europe, Raisio’s key operational area, changes affecting consumer demand are closely monitored and the company strives to adapt to these changes.
The year 2016 was marked by many long-term election results, such as the UK decision to leave the EU and the election of Donald Trump as president of the United States. In spite of the prevailing uncertainty, the world economy is expected to grow moderately in 2017 and the growth is generated primarily by private consumption and increasing investments.
The euro area economy is expected to grow moderately in 2017. The recovery is still based on private consumption, supported by low oil prices, low interest rates and the weakening euro, particularly against the US dollar. European refugee crisis continues and its effects may extend not only to politics but also to the economy.
In 2016, economic growth in Finland was based on the domestic demand, especially on the growth of private consumption. In addition, construction investment has increased rapidly. The situation on the labour market has improved and the unemployment rate trend is downward. In Finland, the economy is expected to grow moderately in 2017, supported by domestic demand.
Although Brexit is causing uncertainty, the UK’s economic growth is expected to continue, and employment and earnings are estimated to develop positively.
A large portion of Raisio's net sales and EBIT is generated in the UK.
The UK’s vote to leave the EU and related exit negotiations are creating uncertainty in the food industry’s operating conditions and long-term business planning. Changes in the pound to euro exchange rate significantly affect Raisio's net sales and EBIT, directly and indirectly, as a significant portion of the Group’s net sales and EBIT is generated in the UK.
Volatility in the rouble's external value affects the exports of feeds and oat products to Russia and may also have an impact on the utilisation rates of production plants in Finland.
The price and availability of agricultural raw materials are a major challenge for Raisio's businesses. Global warming and extreme weather events rapidly affect the crop expectations, supply, demand and price of these commodities. In addition, changes in supply, demand, availability and price of other key raw materials are possible. In terms of business profitability, the role of risk management remains essential both for value and volume.
In Europe, various health taxes are discussed and related initiatives are being set up. Sugar may be one of the taxed raw materials. In case these initiatives result in new taxes, they will probably affect Raisio’s operations.
Grocery market expected to remain stable.
Raisio expects the grocery market to remain fairly stable compared to other sectors. However, retail activities create pressure on the food industry too, through prices and sales terms.
Profitability problems in the Finnish agriculture and livestock farming weaken the purchasing power of the sector and put pressure on Raisioagro's profitability. Due to the crisis in Ukraine and Crimea, the EU’s sanctions and Russia’s counter-sanctions in 2014, especially the import ban of dairy products, will directly and indirectly hamper Raisioagro’s operations.
To ensure growth and profitability of its operations, Raisio may carry out corporate restructuring which, as rationalisation projects, may result in significant one-off expenses.
Raisio's risk management policy defines the targets, principles and responsibilities of risk management. The target of risk management is to identify risks and to secure the continuity of Raisio's operations, safety of products and operations, personnel and assets and to prevent events affecting negatively the shareholder value.
Raisio emphasises preventive measures in its risk management and strives to continuously improve the risk management in all of its aspects. In practice, the Divisions and service functions, such as financing, are responsible for identifying and surveying risks and report them to the Group's Management Team and Risk Management function. Risk Management function coordinates, develops and monitors risk management at the Group level. Possible findings of internal control and business risks are reported to the Board of Directors as part of monthly financial reporting.