Danish dairy co-operative Arla Foods has booked a drop in first-half profits as a decline in global milk prices put “significant” pressure on earnings.

In the six months to the end of June, net profit slid 16.2% to DKK513m (US$86.5m), Arla said today (3 September).

The dairy firm said the world commodity market had proved “more unfavourable than foreseen”, primarily due to an “unexpected” increase in world milk production. There had been pressure on prices and therefore earnings from commodity trading and global e-auction sales, affecting 25% of its milk.

Operating profit in the period amounted to DKK669m, a 6.4% decline on the prior-year period.

Sales, however, climbed 12% to DKK29.91bn due to a combination of organic growth within core and growth markets and the benefit of recent M&A.

For the full year, Arla reiterated it expects to deliver revenue of DKK60bn, a figure which excludes the effects of the potential mergers. Earnings, however are expected to be “slightly below the level of Arla earnings pr. kg of milk in 2011”, the group said.

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