Dairy giant Arla Foods closed its half-year in line with expectations, despite a “challenging environment” and a loss in revenues.
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Net profit for the period January to June 2008 was DKK481m (US$94.8m).
Despite the good result, Arla said that the cancellation of EU export subsidies in the first half of 2007 resulted in the company losing substantial revenues, coupled with foreign exchange rates falling significantly below those for the same period last year.
In the Middle East consumers are still uncertain about Danish products and this remains a concern for the company. Also, rising cost inflation and higher energy prices continue to put pressure on earnings.
“We anticipate that 2008 will be more profitable than 2007, however the market will be more volatile with frequent price variations – partly due to the elimination of the EU’s regulatory mechanisms,” said Peder Tuborgh, CEO of Arla Foods. “The pressure on the price will be maintained during the second half of the year.“
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By GlobalDataOffsetting these challenges and inflationary pressures on milk and commodities, Arla worked to recover higher costs from its customer base by increasing prices.
The company’s results come on the back of an announcement by Arla in June that it is increasing payments to farmers looking to focus more on organic production.
The dairy giant said it hopes to get more conventional milk producers to convert to organic production and has targeted an annual increase in organic milk production of 55m kg in Denmark, to 375m kg, and 100m kg in Sweden, to 226m kg, before 2011.
