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We are very well prepared

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09.04.2020
CFO Dr. Frank Claassen wants to make the DMK Group less exposed to market fluctuations – and bring it safely through the coronavirus crisis

Dr. Claassen, nobody could have predicted this crisis we are in due to the coronavirus outbreak. How difficult will this be for DMK?

As things stand today, we should come through the crisis in good shape. That’s very optimistic because nobody knows what will happen next – but we are prepared for two possible scenarios. One is that the situation will calm down and slowly return to normal. The second is that the crisis will continue, or get worse. That could require tougher measures, and that’s something we should all be aware of. But we are very well prepared for both of these possibilities.

When you took up your post, you promised to make a big difference in 2020. Have you started that already?

I would say that we already made a lot of progress in 2019. Last year, though, we were still very busy making DMK fit for the future. We had to push forward with many measures for greater transparency in order to be able to manage the company better. We also invested a lot. That kept us pretty busy. 

How do things look for the milk prices?

In 2017, we paid above the average, and almost the average in 2018. In 2019 we were below the average, for reasons we are all aware of. In the year to come, we want to close this gap and reach the average.

Farmers will be glad to hear that. Looking back once more, how do the figures look for 2019?

According to preliminary calculations, the DMK Group’s turnover reached € 5.8 billion. That’s up from € 5.6 billion in 2018. Our equity ratio is stable at around 30 %. At group level, our net profit reached € 24.5 million. That’s a solid result for a year of restructuring.

How come the investments were so high – wouldn’t the money have been better spent on other things?

The investments were absolutely necessary. Take the new plant in Strückhausen, where we invested around € 145 million in a new plant that has been making baby milk powder for the Humana brand for the past few years. The spray tower in Beesten also started operating at the beginning of the year.

What impact did lower milk volumes have?

We lost around 1 billion kilos of milk at the start of 2019. It was an enormous challenge for us and impacted almost every part of the company. We managed to adapt by closing plants and introducing wage models. Both of these measures cost money but they also help us to stay competitive.

Were there other problem areas and how are you dealing with them?

We also pushed ahead consolidating the ice cream business – what was important here was concentrating on two locations, Everswinkel and Prenzlau. We will sell the plant in Waldfeucht-Haaren. And we are increasing Everswinkel’s production capacity from the current level of 65 million liters of ice cream, to 100 million liters. We make the same amount of ice cream at just two locations – that’s an investment that will pay off quickly.

But that’s all, hopefully?

We still have a lot of work ahead of us. We have to keep working on being able to manage our processes more precisely. We also have to make sure that we are producing sufficient amounts of our most profitable products. We’re carrying out extensive restructuring as well. Unfortunately, the market didn’t help us much in 2019. But strategically, we are aiming to become more independent of short-term market fluctuations, by focusing more on products with higher margins rather than standard products.

As CFO, your job is to ensure the company spends as little money as possible – is that also the plan for 2020?

I would say my job is to make sure that we only spend money when it makes sense to do so. We are basically still keeping the brakes on, especially in terms of personnel. We’re still going to make as few new hires as possible, and keep using natural fluctuation. We’ve managed to fill 70 % of vacant positions with current staff or not fill them at all.

That alone can’t be enough, can it?

Right. Purchasing is another area we are focusing on, and we can cut costs here the fastest, and win time for longer term optimization. We are looking closely at purchasing throughout the company in our Pacesetter program. We are redesigning numerous supply relationships and service contracts, and we are bundling purchasing volumes. That will help us obtain better conditions when we negotiate prices.

Are you DMK’s top penny pincher?

Saving is not an end in itself – that wouldn’t be very imaginative. My main task is to support Vision 2030, and we cannot reach that through savings alone – our business model is very challenging. For our standard goods, we have to make sure we’re producing large quantities at a low cost. At the same time, we need to produce and sell specialty products which have higher margins. That’s why I focus on how easily we can steer the company, meaning internally, we have to improve the way we organize our processes, skills and abilities. One thing that will help us with that is the financial transformation we started, the One Finance program.

What are your personal goals for 2020?

I want to help DMK come through the coronavirus crisis in good shape. Even if the real effects of the virus pass, we will still have to deal with the economic consequences. That’s something we are all working hard on – and we have to accept that there will be consequences for us, too. However, after the crisis, we will make a full recovery and continue pursuing our change projects. And one of my personal goals is that I will be moving to Bremen with my family this year, to focus our lives here.

PACESETTER: IMPROVING PURCHASING

A new project of DMK Group

The “Pacesetter” project has been running at full speed throughout the DMK Group since January. It aims to save a sum in the double-digit millions in purchasing. In order to do so, DMK is relying on the knowledge and networks of everybody involved, as all the measures are being coordinated with buyers at the subsidiaries. So far, the team has defined 64 measures and has designed fact sheets that are filled out jointly. The strategy is to negotiate better prices by bundling products and buying larger quantities of items that so far were being ordered individually. It will work if everyone combines their purchasing volumes and we put these out to tender again. So far, there are plans to jointly procure goods in the areas of merchandise and Baby. Despite all the cost pressure, DMK still wants to act as a partner: In return for lower prices, suppliers will get larger purchase volumes, enabling them to plan better. The coronavirus crisis will mean delays for some of the individual measures at Pacesetter. But CFO Dr. Claassen is confident that the overall targets will be achieved, even if slightly later than at the start of the year, as was initially planned.

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