Dairy firm Arla Foods has posted a 3.4% increase in revenue to €5 billion in the first half of 2017, which the group says is due to increased sales prices and the continued growth of branded sales.
Arla's performance price, which measure the value the company has generated from each kilo of milk supplied by the farmer-owners, increased by 19% over the period to €35.8 per kilogram, compared to €30 per kilogram in the same period last year.
“As the global dairy market improved, we have responded to the sustained rally in global dairy prices while continually improving our product mix across key markets," said Peder Tuborgh, CEO of Arla Foods.
"As a result, we have increased the prepaid milk price to the farmers who own our company by 42% over the last twelve months. They needed that, as the past two and a half years have been tough for most dairy farmers around the world.”
Performance Growth
The company says that the first half of the year showed a 'much-needed recovery' in global milk prices, due to improved demand for milk and dairy products in Europe, the US, and emerging markets.
Europe remains the group's core business area, with revenue of €3.2 billion in the first half of 2017. Higher sales prices and improved share of branded sales had a positive impact, however these were offset by lower milk volumes and adverse currency developments, primarily British sterling.
Arla is also aiming to 'substantially expand' its sales outside Europe. In the first half of the year, the company's international business grew 10% to €792 million, driven by strong performance in sub-Saharan Africa (+32%) and China and Southeast Asia (+36%).
Arla Foods Ingredients, the company's fully-owned subsidiary, also experienced strong growth during this period, with revenue up 24% to €313 million.
Outlook
Arla expects further improvement in its performance prices for the full year. Revenue is expected to be around €10-€10.5 billion, up from €9.6 billion in 2016.
“The improving market conditions, driven by increasing milk fat and protein prices, particularly in Europe over the recent months, is indeed good news for Arla and our farmers," said Tuborgh. "As the market continues to improve, the second half of 2017 should be even stronger."
"We expect to meet our targets on revenue, profit share, leverage and strategic brand growth. We expect the positive price trends to continue and we have introduced further increases in our prepaid milk price to our farmers in July, August and September and expect to sustain this high level for the rest of the year.”
© 2017 European Supermarket Magazine – your source for the latest retail news. Article by Sarah Harford. Click subscribe to sign up to ESM: The European Supermarket Magazine.
