NETHERLANDS – Dutch dairy cooperative Royal FrieslandCampina N.V. has reported 42.6% drop in half-year profits, attributing the huge decline to a €57m ($67.2m) provision for a court ruling in Thailand and an underperforming infant nutrition market.
Provision for the court ruling was arguably the biggest driver of the profit drop as the company’s underlying operating profit, excluding provision for the court ruling in Thailand and currency translation effects, decreased by 8.6% to €202m ($238.3m).
While the company’s profits recorded a double-digit drop, the company’s revenue only dropped 1.8% to reach €5.5bn ($6.49bn).
Probing results in detail revealed a resilient business with both consumer retail and e-commerce sales showing recovery from the pandemic.
Recovery of the out-of-home channel, improved performance in Pakistan and an effective market approach in large parts of Africa also contributed to revenue growth for Food & Beverage.
Revenue of the Food & Beverage business group rose by 1% and excluding currency translation effects by 4.1% while revenues of Specialised Nutrition and Ingredients were under pressure due to the difficult infant nutrition market and decreased by 14.9% and 3.9%, respectively.
The Parrano, Chocomel, Valess brands, and Friso Prestige, in particular, performed well while Sales of Friso Gold decreased in China and Hong Kong.
The company further highlighted that higher volumes and price increases drove an increase in revenue in the medical, seniors, and sports nutrition segments.
Revenue of the business group Trading fell by 3.9% due to lower milk supply and lower sales of liquid products such as raw milk, cream, skimmed milk, and milk concentrate.
Meanwhile, FrieslandCampina said that during the first half of the year, it accelerated implementation of the Our Purpose, Our Plan 2.0 strategy, adding that associated structural cost reductions of at least €100m ($118m) per year starting in 2022, were on track.
In November 2020, FrieslandCampina announced it would accelerate its transformation with a focus on growth, structurally lower costs, and an optimization of the organizational structure.
The cooperative expects to cut approximately 1,000 jobs before the end of 2021 in line with the restructuring strategy which will also see the company sell its non-core activities such as Nutrifeed.
In addition, the sale of Russian consumer activities to Ehrmann has already been announced and Friesland expects the transaction to be completed in the third quarter.
For the second half of 2021, FrieslandCampina expects a continuation of the situation in the second quarter.
The company said it is cautiously optimistic about the recovery of the consumer and out-of-home channels, however, the Asian infant nutrition market is not expected to recover.
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