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FrieslandCampina sees OP rise, revenue decline

For 2019, FrieslandCampina hs reported that operating profit increased by 26.3% to €432 million. Profit rose by 36.9% to €278 million mainly as a result of one-off gains and improved operating profits in Consumer Dairy and Dairy Essentials.

Revenue declined by 2.2% to €11.3 billion due to a decline in the milk supply by 3.4%. Revenue from branded products rose by 3.1% in total with Consumer Dairy brands up by 5.4% and cheese brands up globally by 8.8%.

Hein Schumacher, CEO Royal FrieslandCampina, said: “y taking leadership with sustainability and innovation, we managed to improve our market positions globally. The transformation we initiated in 2018 has enabled us to enhance our market-oriented way of working and make more effective use of available resources. We have realised more value from basic dairy and we grew our total branded sales by 3.1%. Consumer Dairy increased branded sales by a strong 5.4%. As a result, leaving the one-off proceeds from the sale of businesses aside, operating profit improved by 7%. This result has to be seen in the context of a challenging market, geopolitical developments and the headwind we experienced in the second half of the year due to the unrest in Hong Kong. This is an encouragement for us to continue the path we have taken and in close cooperation with our member dairy farmers take further steps in making our company future-proof.”

The 2.2% decline in revenue is mainly attributable to a 3.4% decrease in the milk supply in comparison to 2018 due to a decrease in the number of affiliated dairy farms and due to the termination of unprofitable private label products. Revenue of the Consumer Dairy and Ingredients business groups both increased, with branded sales in Consumer Dairy in particular rising by 5.4%. As a result of a shortage in lactoferrin and unrest in Hong Kong in the second half of the year, the Specialised Nutrition business group’s revenue declined. Dairy Essentials’ revenue was lower, but the business group improved its sales mix with higher volumes for added-value products (e.g. cheese) and lower volumes for commoditised product categories (e.g. basic milk powder, butter).

Operating profit in 2019 increased by 26.3% to €432 million (2018: €342 million). As a result of the increase in operating profit, profit increased by 36.9% to €278 million. The higher profit is in part due to an increase in the revenue from added-value products and due to one-off gains, such as the sale of the activities of cream liqueur producer Creamy Creation and the sale of the interest in Royal CSK Food Enrichment C.V. The companies acquired at the end of 2018 in Spain, the Netherlands and the United States were successfully integrated and contributed to revenue and profit. A considerable number of operating companies achieved brand growth.