FrieslandCampina profits rise on lower revenue

6 Mar 2017

FrieslandCampina has reported higher profit on lower revenue in what it described as a “turbulent year”. Profit increased by 5.5% to €362 million, while revenue declined by 1.9% to €11.0 billion.

FrieslandCampina profits rise on lower revenue

FrieslandCampina has reported higher profit on lower revenue in what it described as a “turbulent year”.

Profit increased by 5.5% to €362 million, while revenue declined by 1.9% to €11.0 billion due to unfavourable currency effects. Lower sales prices, down by 2.7%, were compensated by a positive volume mix effect, which was up 2.8%.

Milk production by member dairy farmers increased by 7.1% to 10.8 billion kilos of milk, while the milk price for member dairy farmers dropped 6.9% to €32.26.

“We are looking back on a turbulent year,” said Roelof Joosten, CEO Royal FrieslandCampina. “Political and economic instability has increased in Africa and in the Middle East. Protectionism is increasing throughout the world. In the first half of 2016, the supply of milk in the European Union was of such magnitude that basic products could only be sold below cost. Starting in May, the dairy sector recovered somewhat due to declining milk production in a number of European countries and the relatively low stocks held by buyers. FrieslandCampina anticipated this development by introducing timely price increases in the cheese and butter segment. For the coming year, the company’s decisiveness will become even more key to be able to respond to the rapid changes in the market on a timely basis.”

Global milk production is expected to rise somewhat in 2017, the company said. A marginal increase in milk production is expected within the European Union. In the Netherlands, milk production is expected to decrease due to the introduction of phosphate reduction measures. The demand for dairy products in Europe is expected to remain stable or stay on a slightly declining trend. In Africa, the Middle East and South America, a further decline in demand is foreseen. In Asia, particularly in China, a slight increase in the demand for dairy products is expected. As a consequence of the abovementioned trends, it is expected that the prices for basic dairy products will continue to fluctuate around the year-end 2016/beginning of 2017 level.

Revenue is expected to increase in 2017 due to the acquisition of the controlling interest in Engro Foods, the higher price levels of dairy products and further volume growth in added-value products. Due consideration is provided to an increase in the purchase prices of most raw materials.