FrieslandCampina have announced plans to combat falling profits

FrieslandCampina have announced plans to combat falling profits

Dairy group FrieslandCampina hopes to revive profits in Europe after negotiating new contracts with retailers.

Last week, just-food reported how the group reported a fall in half-year profits because of intense competition in Europe and high prices for raw ingredients.

The Netherlands-based processor announced that profits fell to EUR127m (US$180.9m) in the first six months of 2011, down from EUR156m in the same period last year.

Its European consumer products division only broke even in the first half of the year, a stark contrast to profits of EUR57m a year ago.

A spokesman for FrieslandCampina refused to speculate on milk prices over the coming months but says the group is optimistic about the remainder of 2011.

He said: "In the last few months we were able to raise prices in new contracts with retail partners, so we expect a better second half year in Europe due to the higher sales prices and improvement of margins."

He added that the first six months of 2011 were difficult because of higher prices for raw materials, which could not be passed on to buyers in Europe.

However, higher raw milk prices have benefited the ingredients division, which saw sales and earnings rise.

FrieslandCampina's profits were also affected by a 10% hike in the percentage of profits allocated to co-operative members.

The spokesman said: "Starting 2011, 50% of profit is at the disposal of the co-operative's members. In total this had a negative effect of EUR18m on the the profit because the farmers receive more in their milk payments."