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May 16, 2012updated 06 Apr 2021 5:25pm

DENMARK: Arla Foods considering further synergies

Arla Foods has indicated it is mulling further efficiency gains having yesterday (15 May) announced 250 job cuts as it restructures its global business.

Arla Foods has indicated it is mulling further efficiency gains having yesterday (15 May) announced 250 job cuts as it restructures its global business.

A spokesperson for Arla told just-food this morning that while the cuts revealed yesterday were related to the administrational function of the organisation, the company is also undertaking a review of its production operations, which may lead to further job cuts.

In January, the dairy giant announced plans to invest DKK1.88bn (US$333m) this year to increase capacity, improve efficiency and make the company more competitive. Half of this money, Arla said, will go to “capacity and rationalisation projects”.

The spokesperson told just-food today this is an “ongoing process” at each dairy site.

“[We are] looking at how to make them more efficient. [Yesterday’s restructuring] is looking at administration but we are also in the midst of looking at our production value chain and there might also be other synergies to be had in our production globally.”

He said this “might” involve job cuts, but added “it is too soon to say”.

“I can’t say it will and can’t say that it won’t. We are not unlike any other dairy company in that we are constantly looking at efficiency measures in the production side of our business.

“Right now, analysis on that part of our business is ongoing and therefore it’s not possible to say at this point when [we will have a decision], but we do expect maybe around early next year there will be some conclusions on that analysis, but it is an ongoing process.”

The dairy co-operative said the administrative restructuring announced yesterday will see the firm cut annual costs by DKK500m (US$86m) in order to “keep up with international competitors”. The company plans to discontinue around 250 administrative positions globally before the end of 2012, and around 150 administrative positions will restructured within the organisation.

The spokesperson said the move is “simply a reaction” to the firm’s growth and preparation for future growth.

“We are competing internationally with various companies, some of which have had few but large mergers, which has enabled them to find a lot of synergies making them efficient in certain areas. We have also grown very rapidly and will continue to do so but in a lot of smaller steps. We’ve had mergers here and acquisitions there, but so far we haven’t had the most obvious occasion to find synergies and streamline like we would have in say a one-off large merger.”

He added the restructuring was seen as “the most appropriate timing assessed by the management”.

“We have now reached a size in various countries that enables us to find the synergies in our organisation and … we do anticipate our growth will continue and it’s not a success in itself to grow internally, we have to make sure that costs are not growing at the same pace as our turnover.”

Arla yesterday insisted that it was producing “significant” growth in turnover, despite the restructuring, and in February the company had indicated that 2012 profits would be “on par” with last year. The spokesperson today emphasised that the cost-cutting programme gave the group no cause to alter this forecast.

“There is a stable development in our profit levels compared to what we’ve announced it will be and this is what management is aiming for throughout the year. Yes, we are still on course for that, but these changes are more permanent in their impact, it’s not just about this year but about going forward in general, which is why we’ve gone for restructuring which has a permanent effect.

“No matter how much we expect from our business going forward, we will do so DKK500m lower in cost, and that give us an edge on the international competition and within that competition is our ability to compete for raw milk in Europe,” he added.

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