Arla Foods has insisted its cost-cutting programme will leave the company well-positioned when the crisis in the dairy market is over, the Danish dairy giant has told just-food.
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The group, which today (2 September) booked a 45% drop in first-half profits, has been squeezed by falling demand for dairy products, pressure on prices due to the global recession and an imbalance between supply and demand.
However, Arla claimed an “extensive” DKK1bn (US$190.8m) cost-cutting programme is expected to boost its second-half performance, allowing the company to retain its profit guidance for the full year of DKK900m.
A spokesperson said the group was “confident” of hitting its savings target by the end of the year.
“It is a very extensive programme. We have put certain investments on hold, unfortunately we have 100 redundancies at our head offices in Denmark and the UK and every single corner of the business has been asked to detail its purpose and look at where savings can be made. When you are talking about a company the size of Arla, such savings are very substantial,” the spokesperson said.
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By GlobalData“These cost-saving initiatives have been set and launched and we expect them to deliver results primarily in the back half of this year,” he added.
While Arla does not anticipate a material improvement in market conditions in the short term, the spokesperson said that the price increases seen at Fonterra’s latest online auction – of 28% – was “important” because it offered a “glimmer of light”.
“It may indicate the bottom of market starting to move upward again, which is I think something that the entire dairy industry would be relieved to see,” he suggested.
“We do expect tough times will last through this year, possibly into 2010. But with our savings programme we believe that we will be able to ride them out and even position our business well for when the good times return.”
