Arla Foods, the European dairy giant, has forecast its revenue will “grow significantly” in 2017 after seeing low global prices put pressure on its top line last year.
The Castello cheese and Lurpak butter owner said improved prices worldwide, as well as “continued growth” from its branded business, would lead to an improvement in revenue in 2017. Arla did not put a figure on the growth rate it expects to see.
In 2016, Arla’s revenue fell by 6.8% to EUR9.57bn (US$10.05bn). The company said the decline was “a direct result of lower sales prices in the global market due to high milk volumes in Europe in the first half of 2016 as well as unfavourable exchange rates”.
Arla’s net profit jumped 20.7% to EUR356m, a figure that corresponded to 3.6% of the cooperative’s revenue “We have maintained a tight grip on costs across the group,” CFO Natalie Knight said, noting Arla had reduced its operationals cost in 2016 by 1.4%, excluding the cost of raw milk. Knight added: “A year ago we kicked off our new efficiency programme with the target to reduce our cumulative costs by EUR400m by 2020. In 2016 that has resulted in a EUR100m cost saving during the programme’s first year, and we will continue to deliver on this agenda in 2017.”
However, the company’s 2016 “performance price” decreased 8.3% to 30.9 euro cent a kilogram, compared to 33.7 cent in 2015. Arla says the performance price “reflects the ability of the company in any given market situation to add value to its owners’ milk through innovation, brands, cost-saving programmes, global growth, and other strategic and operational efforts”. The co-op said the falling global prices for milk in the first half of the year had dampened the performance price.
Knight said: “We generated an average of five per cent more value per kg of owner milk than the average of our peers in 2016, which reflects our ability to pay a competitive milk price in the market as well as our efforts to mitigate the effects of a tough global market for our owners. While this does not change the fact that 2016 was an extremely challenging year for our farmers, it shows that we are delivering above the majority of peers in the market.”
The co-op said it is targeting “a net profit share for 2017 in the range of 2.8 to 3.2”. The company said it would continue to “focus on paying out the largest possible share of profit via the prepaid milk price to farmer-owners”.