Archive: Arla’s strong half-year performance not expected to be mirrored in rest of year

Published 29 August 14

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Arla has reported strong result for the first half of 2014, although linked with a warning of lower returns and prices for the remainder of the year. Total revenue for the first half of 2014 reached a record DKK 39.8 billion (£4.38bn), up 11.3% from the same period in 2013. This has been attributed primarily to growth in non-core markets, including China and Russia, and global market price increases.

Revenue per kilogram of milk grew by 3.6% between 2013 and 2014, highlighting the impact of the growth in Arla’s milk supplies, which have increased by 7.5% to 6.7bn kgs (6.5bn litres) over the period. The higher volumes, along with higher milk prices during the first half of 2014 increased operating costs and eroded gross profits, which declined by 2.8% in the first half of 2014 compared to the same period last year.

The strong overall performance of the cooperative supported the payment of a record performance price of DKK 3.30/kg (35.3ppl) to its farmer owners during the half year compared to DKK 2.87/kg (30.7ppl) in the first half 2013. Declining commodity markets, along with the effects of the Russian ban on imported dairy products, have led Arla to reduce its on-account price from 1 September (see news story) as it adjusts to the current market situation.

Arla Foods’ Chief Executive Peder Tuborgh believes the current market challenges, arising from growing milk supplies and the absence of the Russian export market, will continue to impact markets for 18-24 months. However, he has also stated that the continued trend of a growing global middle class will continue to underpin a stable demand for dairy products, providing a promising long-term outlook for dairy companies.

 

Note:  all figures have been converted from DKK to GBP using a six-month average exchange rate (9.0825 DKK/GBP)