European dairy giant Arla Foods today (25 August) posted a 3% increase in first-half revenue as global milk prices increased following three years of low prices across the industry.
With group revenue coming in at EUR5bn (US$5.9bn) in the six months through June, the co-op representing 12,000 farmers said it expects to achieve its full-year target of EUR10bn-10.5bn, compared to EUR9.6bn in 2016. Underlying revenue growth excluding currency effects and divestments was 6.6%. EBIT fell 49% to EUR157m.
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Net profit dropped 54% to EUR112m in the first half as the Denmark-headquartered company increased the pre-paid milk price to farmers, which CEO Peder Tuborgh said was much needed after a “tough” two and a half years. Arla expects to pay a net profit share for the year of 2.8 to 3.2 as it continues to focus on paying out the biggest possible portion to its members.
Arla’s performance price, which measures the value generated from each kilogram of milk supplied by the farmer-owners, increased 19% to 35.8 cent/kilo, compared to 30 during the first half of 2016.
Commenting on the outlook, Tuborgh said: “The improving market conditions, driven by increasing milk fat and protein prices, particularly in Europe over the recent months, is indeed good news for Arla and our farmers. As the market continues to improve, the second half of 2017 should be even stronger.”
With respect to geographical regions, the company’s key European market generated revenue of EUR3.2bn in the first half, excluding Arla Foods Ingredients and trading, and represented 63% of total revenue.
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By GlobalDataThe maker of Lurpak butter and Castello cheese said higher sales prices and improved share of branded sales had a positive impact on its European income, but were offset by lower milk volumes and adverse currency developments, particularly the British pound, which reduced revenue by EUR135m.
In the UK, the co-op’s largest market accounting for about 20% of total revenue, sales rose 4% underpinned by growth of 10% across its leading brands. The Arla brand posted an increase of 15% driven by the yogurt category, with Arla Protein and Arla Skyr seeing gains of 59% and 82%, respectively.
UK highlights during the year included a plan to invest GBP37.5m in sites, the launch of Arla Organic Free Range Milk and the extension of the Arla Protein range. The company also agreed a new three-year deal with supermarket chain Morrisons set to begin in March 2018.
Tomas Pietrangeli, the managing director of Arla’s operations in the UK, said: “The strong growth of the Arla, Lurpak and Castello brands shows that we were right to focus on these as part of our UK Strategy 2020. This success is likely to be welcomed given the wider turbulence of the last six months. We are entering a defining time for British dairy as the UK finds its place outside the EU.”
Internationally, the company is seeking to expand sales outside of Europe – in the Middle East and north Africa, China and south-east Asia, sub-Saharan Africa, the US and Russia. The business segment grew 10% to EUR792m for the first half of the year.
