February 20, 2014

As a result of a strong European business and rapid growth in its growth markets outside the EU, Arla Foods reported its highest performance ever in its history and an improved balance sheet for 2013.

Following the mergers in 2012, Arla's global business benefited from a strong base in its core markets in Europe in 2013 as well as a continued significant increase in sales within its growth markets outside the EU. Globally, the demand for dairy products exceeded the supply of milk, which increased the value of milk and the overall price level of dairy products.

The most defining key figure in any Arla financial report is the Performance Price, which indicates how much value Arla has been able to generate from each kilogramme of milk supplied to the company by the cooperative owners in Sweden, Denmark, Germany, UK, Belgium and Luxembourg throughout the year. The 2013 Performance Price amounts to DKK3.05 (US$0.56) per kilogramme with a total volume of owner milk of 9.5 billion kilogrammes as compared to DKK2.71 (US$0.50) per kilogramme with a total volume of owner milk of 7.5 billion kilogrammes in 2012).

Arla's total revenue rose by over DKK10 billion (US$1.8 billion) to DKK73.6 billion (US$13.5 billion), an increase of 16.6%. The company's net profit was the planned 3% of the revenue, equal to DKK2.2 billion (US$404 million) as compared to DKK1.9 billion (US$350 million) in 2012.

"The Performance Price is up by 12.5% in 2013, and that has been much needed among our farmers. The higher milk price strengthens the economy on the farms. The milk production is rising, and the relationship between a farmer's profits and costs has been improved. This development was necessary and must be carried on in 2014," says Arla Foods' board of directors' chairman, Åke Hantoft.

Measured by revenue the UK remains Arla's biggest market followed by Sweden and Germany. Although Denmark is the country that supplies the most milk to Arla, Denmark is now Arla's fourth biggest market.

Three strategic growth markets have been prioritised outside the EU, where Arla has an increased focus on investments and higher growth ambitions than on other export markets: Russia, China, the Middle East & Africa. In 2013 Arla's revenue grew 35% in Russia, 60% in China, and 10% in the Middle East & Africa.

The subsidiary Arla Foods Ingredients increased its revenue by 8% to DKK2.4 billion (US$441 million) in 2013, and its sales of milk-based ingredients for the global food industry remains one of Arla's most profitable areas of business. The target is to double the revenue by 2017.

Following two mergers and a series of acquisitions and the financial costs that came with it in 2012, another focus throughout 2013 was to reduce Arla's leverage and thus improve the creditworthiness of the company.

In 2014, Arla expects to reach a revenue of DKK79 billion (US$14.5 billion) and a net profit of the targeted 3% of the revenue, equal to DKK2.4 billion (US$441 million). Given the current market expectations it is Arla's ambition to deliver a Performance Price in the area of DKK3.25 to DKK3.35 (US$0.60 to US$0.62) per kilogramme.