Arla Foods records impressive H1 results, raises full year guidance despite higher input costs

DENMARK – Danish multinational dairy cooperative Arla has recorded a rise in half-year revenues driven mainly by continued high branded sales volume growth across all dairy categories, particularly in the retail sector. 

Total Arla Group revenue increased slightly by 1.2 percent to €5.441 billion (US$6.4 billion), compared to €5.377 billion (US$6.3 billion) in the first half of 2020. 

The Arla brand grew 6.9 percent delivering revenue of €1,626 million (US$1.9 million) driven by sub-brands such as LactoFREE and in the “fill ‘n fuel” category.  

According to Arla, brand performance is currently being supported by the company’s digital strategy, which is focused primarily on building its e-commerce and in-house digital marketing capabilities and innovation in its production facilities.  

Notably, Arla’s e-commerce business grew 33 percent by revenue compared to the same period last year.  

Arla’s stable of licensed brands also performed well, led by its ready drink Starbucks portfolio, which grew 43 percent in volume across Europe, the Middle East, and Africa.  

Arla’s European segment delivered revenue of €3,199 million (US$3.8 million) compared to  €3,178 million (US$3.7 million) in the same period last year with contributions from all markets. 

Arla’s international segment, on the other hand, delivered branded growth of 12.2 percent across all regions and main brands. 

Arla Foods Ingredients (AFI), a fully owned subsidiary of Arla, saw its revenue grow to €387 million (US$455 million) compared to €360 million (US$423 million) in the first half of 2020. 

Despite the impressive half-year run, the inflationary environment fuelled by COVID-19 is creating new challenges for the global dairy giant.  

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Many of Arla’s farmer-owners are for instance experiencing increased production costs as global prices of fuel, energy, and feed going up.  

On average, feed prices have increased by 13 percent per cow in the first half of 2021. 

“In the first half of 2021 we have continued to manage our business effectively across our commercial segments. However, the high inflationary pressure will be a challenge in the second half of the year,” remarks Arla’s CFO, Torben Dahl Nyholm.

Despite these headwinds, the farmer-owned dairy cooperative has adjusted its expectations for full-year revenue for 2021 to the range of €10.6 billion (US$12.5 billion) to €11 billion (US$12.9 billion). 

The company has further increased the guidance of its branded sales volumes growth to around 3 to 4 percent, and its year-end leverage to no more than 2.8. 

Its net profit forecast is maintained at 2.8 to 3.2 percent of revenue. 

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