Arla Foods’ Strategy Delivers Increased Earnings
Arla Foods is posting significant growth in earnings, revenue and profit for the first half of 2013. The effect of last year’s mergers and acquisitions are beginning to be realised and the company has also capitalised on the upturn in the global market for dairy products.
For the first six months of the year, Arla increased revenue by 19% to DKr35.7 billion (Eur4.8 billion). The increase is being driven by organic growth in Arla’s core and growth markets in addition to the effect of last year’s mergers and acquisitions, for example, in the UK and Germany.
The milk price paid to Arla’s owners was increased three times during the first half of the year, and a further increase is due in September. Arla’s Performance Price for the first half year increased to DKr2.87 per kg of cooperative owner milk (against DKr2.64 per kg for the equivalent period in 2012). Net profit of DKr1.05 billion for the first half of 2013 is double that delivered for the first half of 2012 and is in line with the group’s determined aim that its profit is equivalent to three per cent of its revenue.
Peder Tuborgh, chief executive of Arla Foods.
“Arla has delivered a strong performance in a global market which, generally, has been characterised by higher prices due to milk production being unable to match the growth in demand. We have strictly adhered to our corporate strategy both inside and outside Europe, and in the first half of 2013 this has enabled us to increase the milk price paid to our owners three times, which has increased earnings for farmers,” says Peder Tuborgh, chief executive of Arla Foods.
Last year, Arla undertook two major mergers, resulting in it now being the largest dairy company in the UK and the third largest in Germany. The benefits of the two mergers are now beginning to show, including increased production efficiencies and enhanced product portfolios, both of which further strengthen Arla’s position in Europe.
“The process of integrating the companies with which we have merged is progressing faster than expected, and the positive results that we intended are now beginning to be realised. In less than a year, we have succeeded in increasing the profitability of the additional billions of kilograms of milk that we are now processing as a result of the mergers, and this is strengthening the combined earnings from our core business in Europe,” says Arla’s chief financial officer Frederik Lotz.
