Arla Foods reports growth in revenues amid volatile global dairy market

DENMARK – Arla Foods has reported growth in revenues during the six months period ending June 2019 to €5.2 billion (US$5.74bn) despite a period of “rare stability” in the volatile global dairy market.

The Danish dairy giant recorded a 2% growth in revenue driven by higher strategic branded sales volumes and an increase in sales prices.

During the period under review, Arla delivered a net profit share of 2.3%, up from last half year’s profit share of 2.2%. The company expects its full year net profit share to be within the 2.8 to 3.2% target range.

The company’s performance in the first half marks its highest performance price in three years, reflected by improved profitability and continued growth of strategic brands in both the European and International zones.

Arla’s performance price – which measures the value Arla creates per kilogram of owner milk –grew to 36.1 EUR-cent compared to 34.7 EUR-cent in the first half of 2018, mainly due to the transformation and cost savings program Calcium delivering ahead of expectations.

The Denmark headquartered company divides its business into two commercial zones, Europe and International.  It recorded growth across all commercial segments.

Arla’s international zone realized double digit in sales and branded growth with sales increasing by 11.9% to €839 million (US$926.16m) in the first half of 2019 compared to €750 million (US$827.91m) in the same period last year while strategic branded sales volumes grew 10.6%.

In Arla’s biggest international market, the Middle East and North Africa (MENA), the company increased market share in all key product categories. In China, the company recorded more than 50% growth in both volume and revenue.

It is expected the formal takeover of the Kraft branded cheese business from Mondeléz International will have “great strategic importance for the international zone going forward”.

The European zone delivered a branded volume growth of 2.3%, driven by product categories such as Lactofree and milk-based beverages under the Arla brand.

However, retail and foodservice sales in Europe declined 1.5%, mainly due to the strategic decision to step out of selected loss-making private label contracts and the negative currency development of the Swedish krona.

Meanwhile, Arla Foods Ingredients grew revenue by 13.1% by moving more volumes into value-added protein segments.

“The rare stability in the global dairy market has allowed Arla to build on the momentum we created in 2018,” said Arla Foods CEO Peder Tuborgh.

“We have strengthened our competitiveness relative to our peers and improved our profitability while launching our ambitious climate goal to become carbon net-zero by 2050.

“We are focused on delivering on our ambitious targets for 2019 while remaining alert and prepared for the continued uncertainties around Brexit.”

Arla said it expects to post full-year revenue between €10.2 billion (US$11.26bn) and €10.6 billion (US$11.7bn) but stressed that a potential no-deal Brexit could negatively impact the outlook.

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