FDBusiness.com

Increased prices in the global market, rising foreign exchange rates as well as strict control of costs have allowed Scandinavian dairy group Arla Foods to post a hugely increased profit of DKr697m (Eur93m) on a turnover of DKr23.8b for the first half of 2010, while still increasing the ongoing payment to its co-operative owners. This compares with a 2009 interim profit of DKr263m on a net turnover of DKr22.3b.

“Arla Foods has had a good half-year during which we increased the milk price paid to our owners three times,” says Frederik Lotz, chief finance officer of Arla Foods. “Last year’s extensive savings campaign trimmed the group’s costs and we’ve succeeded in maintaining the low cost levels achieved by the savings campaign in 2009. The accounts demonstrate that we have a sound platform for growth.”

He continues: “We are maintaining good market positions in our biggest markets in the UK, Sweden and Denmark, and the significant part of the growth in the first half year was also created by external factors such as the positive foreign exchange rate developments for our key export currencies. We are continuing to see increasing growth in markets such as Russia, China and the Middle East as well as the potential for further growth in a number of our markets going forward.”

Having recently decided that its annual results should represent 2.5% of turnover (compared to 2% previously), Arla Foods has revised this year’s profit target from DKr950m to DKr1.2b.

Although both turnover and earnings increased in the first half of the year, Arla Foods expects the next six months to be challenging. The first half of the year was characterised by higher prices in international commodity markets where Arla Foods sells butter, cheese and powder to industrial customers. However, it is not anticipated that these high prices will continue for the remainder of the year.

”We have to expect lower earnings from the commodity markets in the second half of the year and at the same time we will see the full effects of the increases in the Arla price,” Frederik Lotz points out. “A decisive factor will be how consumer confidence develops. European consumers still bear the scars of the economic recession – many are still cautious and prefer discount products to brands and this obviously impacts on earnings.”