Profits slide despite sales gain at FrieslandCampina

Profits slide despite sales gain at FrieslandCampina

Dutch dairy group FrieslandCampina has revealed that its 2011 profits dropped by almost one-quarter, as poor consumer sentiment in Europe hit branded sales and inhibited the firm's ability to pass increased costs on to consumers.

In its annual report, released today (14 March), FrieslandCampina said that profit dropped 24% in the 12 months to end-December, declining to EUR216m (US$282m).

Net revenue rose 7% to EUR9.6bn during the period. However, profitability was hit by investments made in the group's infrastructure, poor economic conditions in Europe and the negative impact of currency exchange, the dairy firm revealed.

"The negative economic sentiment led to a shift to cheaper products, at the cost of the position of branded articles," the company said. "Declining consumer confidence and economic/political developments in a number of countries led to pressure on margin development and sales of branded cheese."

In particular, difficult market conditions meant the company's cheese butter and milk powder business, which accounts for 26.6% of sales, witnessed an increased loss in the year, which climbed to EUR97m from EUR92m in 2010.

During 2011, FrieslandCampina established global category teams to develop its infant nutrition, branded cheese and dairy-based beverages businesses. These categories have been identified as "value drivers" and the company indicated that it is accelerating growth in these areas over the next 12-months.