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Revenue Grows at FrieslandCampina But Profits Fall

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Revenue Grows at FrieslandCampina But Profits Fall

Revenue Grows at FrieslandCampina But Profits Fall
August 29
10:02 2014

Royal FrieslandCampina has reported a 3.5% increase in revenue to Eur5.713 billion for the first half of 2014. However, operating profit fell by Eur102 million (37.1%) to Eur173 million with currency translation having a negative effect of Eur59 million.

The revenue growth was due to higher sales prices (6.4%) and acquisitions (1.7%) which offset a negative currency translation effects of minus 3.2% and lower volumes (down 1.4%). Organic revenue growth was 5.0% for the first half.

The most robust growth was achieved in China, Hong Kong and the Philippines. The sales volume of infant nutrition increased. Sales volumes of dairy-based beverages, cheese and ingredients decreased due to unfavourable market conditions in Europe, Indonesia and Vietnam. Exports of cheese to Russia also decreased.

The first half drop in operating profit was due to the sales prices of commodities such as foil cheese, butter and milk powder, being too low to offset the high guaranteed price for the member dairy farmers. On top of that, difficult market conditions in Asia and Europe plus negative currency translation effects amounting to Eur59 million put volumes and margins under pressure. Operating costs in the first half of 2014 rose by 5.5% to Eur5.54 billion due to higher raw materials and packaging materials costs.

Profit over the first half year fell by Eur60 million (37.1%) to Eur104 million due to unfavourable currency translation effects of Eur44 million and higher operating costs.

The pro-forma milk price over the first half of 2014 was up by 9.1% to Eur44.19 per 100 kilos of milk.

Cees ’t Hart, chief executive of Royal FrieslandCampina, comments: “The combination of a strong euro, a high milk price, falling sales in a number of Asian markets and general political unrest all affected FrieslandCampina’s results during the first six months of 2014. Despite these developments, higher sales prices led to a further growth in revenue. In the consumer market, infant nutrition, which is one of our strategic growth categories, performed especially strongly.”

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