FrieslandCampina profits plummet

5 Sep 2016

FrieslandCampina saw profits plummet by 16.7% over the first half-year 2016 to €160 million compared to the same period in the previous financial year as basic dairy products were produced that had to be sold below cost.

FrieslandCampina profits plummet

FrieslandCampina saw profits plummet by 16.7% over the first half-year 2016 to €160 million compared to the same period in the previous financial year. Due to the significant increase in member dairy farmers’ milk production (+11.9%), basic dairy products such as milk powder, foil cheese and butter were produced that had to be sold below cost, the company said. Growth in volume was realised in infant nutrition in China and South-East Asia, dairy-based beverages in South-East Asia and Eastern Europe and ingredients, with improved results.

Revenue decreased by 2.2%, down to €5,522 million. The decrease in revenue due to lower sales prices was largely compensated by higher volume. The milk price for member dairy farmers decreased to €30.24 per 100 kilos of milk (first half-year 2015: €36.48) due to the lower guaranteed price for raw milk and the lower value creation (performance premium and reservation in member bonds). The interim pay-out amounts to €1.170 per 100 kilos of milk (2015: €2.018).

Operating profit decreased by 18.8% to €255 million over the first half-year 2016 (first half-year 2015: €314 million). Currency translation effects had a negative effect of €30 million on operating profit.

Gross profit decreased by 5.6% to €938 million (first half-year 2015: €994 million) because sales prices incurred a quicker decrease than the cost. Sales increased in volume; however, margins were at a lower level than in the first half year of 2015. Due to the high milk supply and the lagging demand, basic products were mostly sold under cost. Direct sales of raw milk in the spot market also showed a loss.

Profit over the first half-year 2016 decreased by 16.7% to €160 million (first half-year 2015: €192 million). “We can look back on a special first half year,” said Roelof Joosten, CEO of FrieslandCampina. “FrieslandCampina is doing well in Asia and with ingredients, realising a fine 2.3% growth in volume with added value products. Due to the increased milk production, we had to process significantly higher volumes of milk into basic dairy products that we could not sell at a profit in the market. This is visible in the 17% decrease in both profits and milk price for the member dairy farmers.”

Milk prices have bottomed out, the company believes. In the second half year of 2016, worldwide supply of milk is expected to decrease compared to the first half year. Demand for dairy products is expected to only show a modest increase over the second half year of 2016. This is due to the limited purchasing power in many oil-exporting countries, political instability in many countries, the limited demand for dairy materials in China and Russia continuing to block the European Union’s dairy products, FrieslandCampina said.

The effect of the European Commission’s measures to reduce milk production in the European Union based on support measures is as yet unclear, the company continued. The impact of possible voluntary restriction of production of cooperatives or producer associations is also unclear. The Netherlands is expected to impose measures to reduce phosphate production in cattle farms to fall under the level of 2 July 2015. It is as yet unclear whether or not this may lead to a reduction of the milk production in 2016.

Related tags

Dairy

Related news

How plant-based milk brands can address taste and texture challenges

How plant-based milk brands can address taste and texture challenges

12 Aug 2022

Today’s consumers want plant-based milk products that mimic the desirable sensorial attributes of their non-dairy alternative counterparts. In response, brands and manufacturers are focusing on taste, texture, education and sustainability.

Read more 
Dairy industry explores advanced technologies to digitalise global production

Dairy industry explores advanced technologies to digitalise global production

11 Aug 2022

Dairy manufacturers are increasingly integrating automation, the Internet of Things (IoT) and artificial intelligence (AI) technologies into their production plants in order to meet growing global demand for dairy products, particularly in Asia.

Read more 
Parmesan partnership to put ‘blockchain ready’ digital chip on all cheese wheels

Parmesan partnership to put ‘blockchain ready’ digital chip on all cheese wheels

29 Jun 2022

A new line of food-safe and secure digital labels on each Parmigiano Reggiano cheese wheel will deliver previously unseen levels of traceability, product control, and quality assurance, says the Consorzio del Parmigiano Reggiano (CFPR).

Read more 
Dairy butter carbon footprint is 3.5 times larger than plant-based spreads, says Upfield

Dairy butter carbon footprint is 3.5 times larger than plant-based spreads, says Upfield

25 Apr 2022

Plant-based margarine manufacturer Upfield says its spreads have a 70% smaller carbon footprint, require half the amount of water and use two-thirds less land across the product cycle when compared to conventional butter, according to a life cycle...

Read more 
China leads the global boom for probiotics

China leads the global boom for probiotics

30 Mar 2022

Probiotics are experiencing a boom in global demand - particularly in China - as consumers look for functional ingredients in food and drink products that can improve their health. 

Read more 
Butter is Better: Keto is driving resurgence as a premium product

Butter is Better: Keto is driving resurgence as a premium product

11 Feb 2022

After years of being shunned as an ingredient, fat is back thanks in large part to the popularity of the keto diet. The market for keto products is growing steadily with the global value of this category forecast to reach $15.6 billion by 2027, accordi...

Read more 
Oats growing in popularity, winning awards and consumer favour

Oats growing in popularity, winning awards and consumer favour

10 Feb 2022

Oats have transformed from a breakfast ingredient to an increasingly common plant-based option, appearing in a multitude of applications.

Read more 
Chobani debuts plant-based coffee creamer

Chobani debuts plant-based coffee creamer

21 Jan 2022

After two years of producing dairy- and oat-based coffee creamers, Chobani is branching into plant-based coffee pairing options with the debut of Chobani Plant-Based Coffee Creamers. These creamers come in four flavors: Caramel Macchiato, Chocolate Haz...

Read more 
Animal-free dairy company raises $120M for commercialization

Animal-free dairy company raises $120M for commercialization

18 Jan 2022

Israeli animal-free dairy company Remilk raised $120 million in a Series B funding round led by Hanaco Ventures with participation from a number of other investors, including Impossible Foods backer CPT Capital, plant-based protein company Just, Yofix,...

Read more 
Chobani Sales surge as it moves closer to IPO

Chobani Sales surge as it moves closer to IPO

26 Nov 2021

Greek yogurt company Chobani saw its sales hit $1.2 billion as of Sept. 25 this year. That is only $200 million short of what the company recorded for all of 2020, when its sales rose 5.2% to $1.4 billion last year, according to a filing with the Secur...

Read more