Arla Foods credited cost cuts and a late recovery in dairy prices for diluting the impact of a DKK3.27bn ($594m) slide in revenues, and creating a bonus pot sufficient to hand its farmers a bumper payout.

The Danish dairy co-operative, owner of the Lurpak brand, has proposed a bonus payment of DKK0.107 ($0.019) per kilogramme of milk, more than four times higher than last year's.

"Given that our members may supply 1m kilogrammes of milk each this can add up to a considerable amount," an Arla spokesman told Agrimoney.com.

"However, it comes after a very, very tough year for them."

The milk price Arla paid its members was, until November, DKK2.193 per kilogramme, about 20% lower than the average for 2008.

'Savings were necessary'

The reductions reflected a weaker dairy market which drove group revenues down 6.6% to DKK46.2bn.

However, earnings jumped 75% to DKK971m, reflecting the impact of a DKK1bn cost cuts programme announced in April, which axed 300 posts, and higher prices of dairy commodities.

"If we hadn't implemented a major savings programme, and if bulk industrial product prices had not begun to recover in the last quarter, our owners' earnings would have been even lower," he said.

"The savings were necessary and we avoided a further reduction in the milk price."

Advertising splurge 

He added that Arla had started 2010 as a "sound" business, pursuing a strategy which will boost marketing spending by 30%.

Arla last month unveiled moves to raise spending on brands including Lurpak and Castello to fight back in a market in which rivals such as Dairy Crest have achieved significant gains in share through advertising campaigns.