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

Danone expands plant-based yogurt production

Danone expands plant-based yogurt production

11 Feb 2019

Danone North America has opened a new building at the company’s DuBois, Pennsylvania facility to increase production of its plant-based foods to meet growing consumer demand.

Read more 
Mintel looks at trends in yogurt

Mintel looks at trends in yogurt

7 Feb 2019

In a blog post, Amrin Walji, a Senior Innovation Analyst at Mintel who specialises in analysing trends driving product innovation and development across the food and drink industry, describes four global yogurt trends to look for in 2019.

Read more 
Ingredion extends Inside Idea Labs in EMEA to dairy

Ingredion extends Inside Idea Labs in EMEA to dairy

28 Jan 2019

Ingredion has extended its virtual lab, Inside Idea Labs in EMEA, to the dairy market, bringing its application expertise in dairy product formulation to its customers 24/7.

Read more 
Nestlé opens infant nutrition R&D centre

Nestlé opens infant nutrition R&D centre

28 Jan 2019

Nestlé has opened a research and development centre for maternal and infant nutrition in Limerick, Ireland.

The opening marks the completion of a three three-year construction program with an investment of €27 million.

Read more 
Yofix Probiotics launches dairy-free, soy-free yogurt alternative

Yofix Probiotics launches dairy-free, soy-free yogurt alternative

25 Jan 2019

Yofix Probiotics, the winner of PepsiCo’s European Nutrition Greenhouse Programme 2018, has launched its first dairy-free, soy-free yogurt alternative line with three fruit flavours.

Read more 
Mintel: India represents strong opportunity for milk

Mintel: India represents strong opportunity for milk

23 Jan 2019

India may be one of the largest milk producers globally, but the latest research from Mintel highlights strong opportunity to boost regular milk's health credentials.

Read more 
Valio gets China go-ahead for infant formula

Valio gets China go-ahead for infant formula

14 Jan 2019

Valio’s consumer-packaged infant formulas have received an export permit from the Chinese authorities. These new export permits allow Valio to export its powdered infant formulas to China.

Read more 
Arla intros 'optimized comfort' infant formula concept

Arla intros 'optimized comfort' infant formula concept

11 Jan 2019

Optimized comfort is at the heart of a new whey protein-based concept for infant formula developed by Arla Foods Ingredients which alters the amount and types of proteins in formula.

Read more 
FrieslandCampina acquires US speciality cheeses company

FrieslandCampina acquires US speciality cheeses company

31 Dec 2018

FrieslandCampina has acquired the activities of Best Cheese Corporation USA., importer and vendor of specialty cheeses in the United States.

Read more 
Mondelēz sells MEA cheese business to Arla

Mondelēz sells MEA cheese business to Arla

18 Dec 2018

Mondelēz International has announced that it has reached an agreement to sell its Kraft-branded Cheese Business in Middle East and Africa (MEA) to Arla Foods of Denmark.

Read more