Raisio Group is an international company whose key products are plant-based foods and cattle and fish feeds. Raisio is a significant user of renewable raw materials. Changes in quality, availability and prices of these materials are difficult to predict and 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 world economy is expected to grow moderately in 2016 and the growth is generated primarily by private consumption. The euro area economy is expected to grow moderately in 2016. The recovery is still based on private consumption, supported by low oil prices, low interest rates and the weakened euro. European refugee crisis continues and its effects may extend not only to politics but also to the economy.
The Finnish economy is growing very slowly. Growth expectations are based on domestic demand, supported by low interest rates, low inflation and reduced energy prices. The unemployment rate is expected to remain high. Consumers' confidence in their own economy started to decline in the autumn 2015. In the UK, economic outlook remains strong, and both employment and earnings are expected to grow positively. In Russia and Ukraine, business environment is likely to remain difficult.
Large part of Raisio's net sales and profits generated in the UK
Changes in exchange rates may considerably affect Raisio's net sales and EBIT, directly and indirectly, as a significant part of the Group's net sales and EBIT is generated in the UK. Volatility in the rouble's external value affects the export of feeds and oat products to Russia. It may also have an impact on the utilisation rates of production plants.
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, setting of various taxes for public health purposes is discussed and sugar will be one of the possibly taxed raw materials. In case these initiatives result in new taxes, they will probably affect Raisio's businesses.
The UK will arrange a referendum on Britain's membership of the European Union possibly already in 2016, 2017 at the latest. If the UK leaves the Union, it would eventually affect Raisio's local operations, taking into account, however, that the majority of production and sales takes place in local markets.
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 purchase power in the field and create pressure on Raisioagro's profitability. Due to the crisis in Ukraine and Crimea, the EU's sanctions and Russia's counter-sanctions, 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.