Arla Foods today (26 August) touted the strength of its branded products, pointing to a 6% rise in sales from that part of its portfolio, as the European dairy group announced a set of half-year results that showed its total revenue fell in the first six months of 2016.
The Lurpak and Castello owner saw its half-year profits rise, though its bottom line was given a boost from a EUR120m (US$135.5m) gain from the sale of juice business Rynkeby Foods in May.
Arla’s total revenue in the six months to the end of June was down 5.3% at EUR4.85bn. However, a focus on costs and the Rynkeby Foods gain saw its EBIT grow from EUR166m in the first half of 2015 to EUR308m.
Net profit stood at EUR244m, versus EUR122m a year earlier. Without the Rynkeby Foods proceeds, Arla said its first-half profit from ordinary activities was EUR124m.
“In a very difficult market environment, we have continued to improve the quality of our business by relentlessly pursuing our strategic direction. Our dairies have effectively processed 119 million kg extra milk from our owners and our commercial teams in all markets have proactively ensured that this extra volume has been sold into retail and foodservice channels, avoiding it being used for the production of less profitable commodity products. This is crucial at a time when Arla and our farmer-owners continue to be challenged by the global market decline,” Arla CEO Peder Tuborgh said.
Revenue from Arla’s namesake brand was up 5%. Lurpak saw its sales rise 7.6%. However, Castello sales dipped 0.7%.
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Arla stuck to its forecasts for 2016. It estimates revenue will be EUR9.5- 9.8bn and the profit share to be 2.8-3.2% of revenue. In 2015, Arla generated revenue of EUR10.3bn and a profit share for the co-operative of 2.8% of revenue.
Tuborgh added: “Looking at the second half of 2016, we see a positive trend taking hold as the milk production is declining again in Europe and prices are starting to go up. This will be a much-welcomed development for Arla and for our farmer-owners.”