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FrieslandCampina profits rise, considers acquisition

7 Mar 2016

FrieslandCampina has announced that 2015 operating profit rose by 17.8% to €576 million. The company also said that it will start investigating a possible acquisition of up to 51% of Engro Foods in Pakistan.

FrieslandCampina has announced that 2015 operating profit rose by 17.8% to €576 million. Margins increased due to the sale of more added-value products in Asia and the increased sales of dairy ingredients and infant nutrition by FrieslandCampina Ingredients. Additionally lower purchasing costs and currency translation effects contributed positively. Net profit increased by 13.2% to €343 million. The volume of milk supplied by member dairy farmers increased by 6.4% to 10.1 billion kilo. Revenue fell by 0.7% to €11,265 million. The milk price for member dairy farmers fell by 18.9% to €34.64 per 100 kilos of milk due to the lower guaranteed price for raw milk.

Concurrently with its results announcement, FrieslandCampina said that it will start investigating a possible acquisition of up to 51% of Engro Foods in Pakistan.

“2015 was an exceptional year for the dairy sector and for FrieslandCampina,” said Roelof Joosten, CEO Royal FrieslandCampina. “On 1 April 2015 the milk quota system for dairy farmers was abolished after 31 years. In an uncertain dairy market FrieslandCampina performed well. This good result could, to some extent, offset the reduction of the milk price for member dairy farmers.”

“FrieslandCampina’s unique dairy chain underpins its activities. In recent years FrieslandCampina has performed well in a number of attractive market positions. The focus remains on sustainable growth of the most valuable product market combinations and product market combinations that absorb mainly member milk. At the same time we will continue to manage in a very cost-conscious way so that the means to achieve growth are available.”

The company said that global milk production is expected to continue to increase in 2016 and that the situation with regard to the supply of raw milk in the Netherlands is uncertain, in part because of uncertainty related to the details of the intended phosphate regulation. Whether the demand for dairy products on the world market will increase at the same rate as worldwide milk production is uncertain, FrieslandCampina said. This will depend primarily on the development of demand in China and on whether or not Russia lifts the embargo on the import of dairy products from the European Union. As a result of these developments, prices for basic dairy products are expected to remain under pressure for some time.

The result for 2016 is expected to be under pressure due to the low oil price and the resulting stagnating economies in oil exporting countries such as Nigeria and the Middle East, the geopolitical tensions in several regions and the expected increase in the quantity of raw milk. Continuous cost reductions, both at the production facilities and in the offices, are therefore also foreseen in 2016 in order to offset the pressure on results and to enable investments.

For the longer term the outlook remains positive, the company said. As the world’s population grows and prosperity increases in many regions, the demand for food, and in particular food rich in nutrients, which includes dairy products, will continue to rise.