Arla Foods recorded strong sales and profit growth across
the first half of 2013 as organic growth in key emerging markets, together with
the effects of last year merger and acquisition activity paid off in the face
of a "more volatile than ever" dairy market.
"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," reported Peder Tuborgh,
CEO of Arla Foods
The Danish-based co-operative reported sales revenue totalling
DKK 35.7bn across the first half of the year, an increase of 19.4% on the same
period of 2012. The strongest growth
came from emerging markets with sales in Russia up 25% on the same period of
2012 and revenues from the Middle-East and Africa up 15% for the corresponding period.
Emerging market growth
China is also a growth area Arla are focusing on
according to Frederik Lotz. Arla's chief financial officer.
"The development of a promising business continues," adding,
"we have doubled sales of value-added child nutrition products and milk powder."
Chinese consumer confidence in the dairy industry has
been rocked in recent years following the scandal in 2008 when baby milk powder,
contaminated with melamine, led to the death of six babies and left thousands ill. Confidence in imported milk powder has also
suffered following the recent botulism scare at New Zealand dairy giant
Earlier this month, five international milk powder firms
and one Chinese company were fined a record $110m following a probe into price
'Arla has amassed extensive production knowledge and can
deliver the quality that has ensured a good reputation in the industry,' according
to the groups growth strategy.
Arla undertook two major mergers last year to become the largest
dairy company in the UK and the third largest in Germany. In addition the group
has been keen to maintain a tight grip on costs.
"The process of integrating the companies with which
we have merged is progressing faster than expected," said CFO Frederik Lotz.
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.
"Efficiency improvements are being delivered on
schedule resulting in savings of about DKK 500 m in capacity costs on an annual
basis," said Lotz.
"I am therefore pleased that Arla's relative cost level
for 2013 will be lower than in 2012. This plays an important role in our
efforts to pay a competitive milk price to our owners," added Lotz.
Arla Foods has increased prices paid to mild producers
three times since January, with a fourth scheduled for September. The milk price paid to the groups members increased
to DKK 2.87 per kilogramme compared with DKK 2.64 per kilogramme for H1 2012.
Arla said that its earnings for last year rose 3% to DKK2.2bn,
ahead of forecasts in spite of the increasingly volatile nature of the market.
However, profits per kilogramme of milk supplied by the
group's 12,300 members is expected to reach DKK3.00 by the end of the year.