FDBusiness.com

International dairy co-operative Royal FrieslandCampina increased revenues by 10.7% to €6.1 billion over the first half-year 2017 and profit by 1.3% to €162 million. Revenue growth was due to an increase in sales prices and the acquisition of Engro Foods in Pakistan at the end of 2016. The increase in profit resulted from the strong recovery of the butter and cheese sales prices.

The pro forma milk price for member dairy farmers increased by 26.9% to €38.37 per 100 kilos of milk. The interim pay-out for member dairy farmers amounts to €1.17 per 100 kilos of milk.

Roelof Joosten.

The volume of products with higher added value declined by 1.6% (exclusive of the acquisition of Engro Foods) and the volume of basic products rose by 1.2%. On balance, this had a negative mix effect of -1.0% on revenue. Butter products displayed the highest price increases due to the increased global demand for butter and cream products with a declining supply.

Operating profit increased by 7.8% to €275 million over the first half of 2017, with currency translation effects having a negative effect of €13 million.

Roelof Joosten, chief executive of Royal FrieslandCampina, comments: “The milk price for member dairy farmers recovered this year after a number of disappointing years. The higher sales prices for primarily butter and cheese lie at the root of this recovery. In West Europe we were successful in passing on the higher guaranteed price in the sales prices. This is reflected in the increased revenue. The total compensation paid to member dairy farmers increased by 24 percent in comparison to the first half year of 2016. High growth levels were realised in Indonesia and Vietnam, and with cheese and butter. In Germany, the Philippines and Nigeria, result trends are not as positive due to local market conditions and negative currency translation effects, the latter particularly in Nigeria.”

Over the second half of 2017, Royal FrieslandCampina expects the worldwide supply of milk to increase slightly in comparison to the second half-year of 2016. The demand for dairy products is also projected to increase slightly worldwide over the second half-year of 2017 due to the increased demand for dairy raw materials in China. It is also expected that dairy product prices will continue to rise driven by the higher butter and cheese quotations due to the persisting strong demand for fat-related products. Further revenue growth is consequently expected. However, increased price competition, particularly on the infant nutrition market in China, could put margins under pressure.