January 24, 2013

 

In order to increase global production of its most profitable products, Arla will invest in a number of dairy expansions in 2013.

Arla also intends to increase efficiencies within production while also reducing its environmental impact. Its Board of Directors has approved the Group's investment plan for 2013. The plan includes investments totalling over DKK2 billion (US$357 million), for capacity expansion, rationalisation measures, environmental improvements, maintenance, quality and innovation.

The 2013 investment level is approximately 3% of expected revenue, and is also an ambition within Arla's Group strategy for 2017 (compared with approximately 3.4% in 2012). The objective is to contribute to the increased profitability of Arla's activities, and therefore improve long-term earnings for Arla's owners.

"This year, the largest proportion of our investments will be devoted to expanding the production capabilities of a number of our dairies which manufacture products for export to the growth markets outside the EU, for example. Our ability to improve profitability for Arla's owners is dependent upon us increasing sales of quality products all over the world, which is why, during 2013, we are investing in new production and expanding existing facilities," says Povl Krogsgaard, who has responsibility for Arla's investment plan.

Almost 40% of Arla's total investment plan will be devoted to expanding the production facilities. The second-largest focus area for Arla's investments in 2013 is production rationalisation initiatives.

"Arla's Group strategy includes the objective to reduce our production costs by DKK2.5 billion (US$446 million) by the end of 2015, via investing in projects to streamline production at our dairies. This year, we are investing approximately DKK370 million (US$66 million) in such projects," says Povl Krogsgaard.

The largest single investment for Arla in 2013 will be the construction of a completely new production facility at Nr. Vium in Denmark, which will manufacture highly-processed whey-based lactose products. These ingredients will be used in products in areas including child nutrition, and will also be sold globally by Arla's subsidiary, Arla Foods Ingredients.

"To date, we have been able to utilise and process all the constituents of the raw milk supplied by our owners, with the exception of one - the lactose that is released when we concentrate the protein from the whey. Going forward, the new lactose facility will enable us to achieve optimum processing of all the constituents of milk and therefore produce profitable lactose products for the food industry," says Henrik Andersen, CEO of Arla Foods Ingredients.

Overall, Arla is investing approximately DKK900 million (US$161 million) in the new facility, of which approximately DKK275 million (US$49 million) will be invested in 2013. The facility becomes partly operational at the end of 2014, and fully operational in 2016 and 20 new jobs will be created.

Among the dairies that will receive the bulk of Arla's investment in 2013, is the Pronsfeld dairy in Germany, where Arla will invest approximately DKK232 million (US$41 million) in initiatives to increase production of milk powder and butter. The expansion of Taulov dairy in Denmark will be completed in 2013 with an investment in yellow cheese production totalling approximately DKK215 million (US$38 million).

Approximately DKK140 million (US$25 million) will be invested in reducing the environmental impact of production within Arla. Arla currently has 71 dairies globally and all are working to reduce their CO2 emissions. Arla's investments in 2013 will make it possible to reduce dairies' total CO2 emissions by 2% in 2013.

Arla's investments in environmental improvements are also expected to cut the Group's total energy consumption by 1.5% in 2013, which corresponds to a reduction of 36,863 MWh, which is equivalent to approximately 8,200 households' annual electricity consumption.