February 27, 2013

 

Arla posts significant rise in its 2012 turnover

 

 

Despite significant price pressure on the global market in the first half of the year, Arla delivered results in line with expectations buoyed by mergers, acquisitions and strong brands boosting its turnover in 2012.

 

The year 2012 saw strategic developments in Arla's growth markets and historic expansion in Europe. This was despite a first half-year during which prices in the global dairy industry were under severe pressure due to an unexpected increase in global milk production, which affected earnings across the industry.

 

Turnover rose 15% to DKK63.1 billion (US$11.1 billion) against DKK54.9 billion (US$9.6 billion) in 2011. As expected, consolidated net profit amounted to 3% of turnover and totalled DKK1.9 billion (US$333 million) in 2012 against DKK1.4 billion (US$245.4 million) in 2011.

 

For each kilogramme of milk supplied to the company by the owners, the 12,300 cooperative members in Sweden, Denmark, Germany, UK, Belgium and Luxembourg, Arla generated earnings of DKK2.71 (US$0.47) in 2012, the performance price. It was 4% lower than in 2011 at DKK2.81 (US$0.49) due to tougher market conditions in the first half of the year.

 

"The year 2012 was a landmark year for Arla. In a tough market, Arla has continued to develop a strong cooperative with promising new positions in several core markets and strong brands. The Arla performance price is below the 2011 level, but it should be noted that it is at the high end of the European spectrum for dairy companies, which have all had to operate under the same market pressure," says Arla Foods' CEO, Peder Tuborgh.

 

The net result of DKK1.9 billion (US$333 million) is the highest in Arla's history, and the performance price the third highest ever. However, Arla's management team is committed to improving the bottom line further still to the benefit of the company's cooperative members, some of whom are under serious financial pressure due to rising costs on farm.

 

While growth in European markets for food products is low, markets outside the EU are experiencing double-digit growth rates. Arla delivered growth in both turnover and earnings in almost all markets outside the EU in 2012. In Russia, Arla's turnover increased by almost 28% to over DKK600 million (US$105 million), and in the Middle East and Africa, sales of dairy products to consumers grew by 22% to approximately DKK3 billion (US$526 million).

Despite the generally low growth rates in the EU dairy market, Arla's global brands, led by the Arla^® brand and Lurpak^®, achieved overall growth. Arla Foods Ingredients (AFI), which is responsible for its global production, sales and development of whey proteins and ingredients to the food industry, achieved 10% growth in 2012, delivering DKK2.2 billion (US$386 million) in turnover.

 

"Overall, the group delivered organic growth of 2.1%, which was primarily driven by the growth markets of Russia, the Middle East and Africa as well as our whey and ingredients business. These three areas have not only shown impressive sales figures, they are also where earnings growth has been greatest," says CFO at Arla Foods, Frederik Lotz.

 

In 2013, Arla forecasts that it will achieve a turnover of around DKK72 billion (US$12.6 billion) and a profit that is 3% of turnover, equivalent to DKK2.2 billion (US$385.5 million). Based on current expectations for the markets, the company's ambition is to deliver earnings to its members that exceed those in 2012.

 

"The milk price is influenced by factors we cannot always predict or control. We saw this clearly in 2012. The forecasts for 2013 are based on their continuing to be low or no growth in the EU, where we derive most of our turnover and earnings, while the impressive growth rates outside the EU will continue. Regardless of market developments, we are confident in our ability to deliver for our owners. Having taken the decision to deliver several major mergers and acquisitions, Arla's owners have enabled us to create a platform from which we can deliver increased earnings. We must now deliver this uplift to them," says Peder Tuborgh.