FrieslandCampina underlined the poor conditions in the
European dairy market, even while highlighting demand growth elsewhere –
attested to by Glanbia, which flagged a shortage of milk for its US cheese
Dutch-based FrieslandCampina highlighted "positive" hopes
for the dairy market long-term, underpinned by rising population and consumer
"At the moment, the global demand for dairy products is
greater than the supply," the group's chief executive, Cees t'Hart, said.
The co-operative, owned by more than 19,000 dairy farmers,
also said that "rapid urbanisation will reduce people's degree of
self-sufficiency even further and the demand for food, including dairy
products, will increase".
'Still not promising'
By region, FrieslandCampina highlighted growing Asian demand
for dairy, and raised Africa as "continent with enormous potential", with the
spread of supermarkets also helping distribution of milk products.
However, the group warned over Europe, for which Mr t'Hart
noted that "economic forecasts are still not promising".
"In 2014, Europe is expected to have to continue contending with
consumers who limit their expenditure because their incomes are under pressure from
higher costs and increasing unemployment," the co-operative said.
"In such times, to remain attractive and have brands and
propositions that can hold their own against private labels and discount
outlets, a brand producer such as FrieslandCampina must manage on the basis of
cost reduction and, at the same time, invest selectively."
The group warned that "as a result of the continuing crisis
the result expectations in Europe have been adjusted downwards".
The downgrade had prompted it to take a E200m charge against
the value of the Nutricia Dairy & Drinks business bought in 2001, bringing FrieslandCampina
brands including Chocomel, Fristi and Milli, and offices in Belgium, Germany,
Hungary, the Netherlands and Romania.
The charge left FrieslandCampina swallowing a 44% slump to
E157m in profits for last year, despite a rise of 10.8% to E11.42bn in revenues.
Excluding the charge, profits would have risen 17.6% to
E327m, Mr T'hart said, terming 2013 a "good year".
competition for milk'
Separately, Irish-based Glanbia attested to the difficulty
that the squeeze on milk supplies was posing to its Idaho-based US cheese
business, facing "challenges related to increased competition for milk".
The tussle for supplies "is expected to lead to higher milk
costs and some year-on-year volume declines", Glanbia said, in comments which
come two days after the US Department of Agriculture raised forecasts tor
domestic dairy prices, noting increased export demand for cheese and butter.
The group raised to $21.40-22.00 per hundredweight, from
$20.85-21.55, its forecast for all-milk prices this year, putting a rise of
potentially 10% in value on the cards.
However, Glanbia said that its outlook overall for 2014 was "positive",
led by its global performance nutrition arm, and forecast 8-10% growth in
underlying earnings per share this year.
The group reported earnings of 55.46 euro cents for 2013, a
rise of 8.0%, on revenues up 8.0% at E3.28bn.
Glanbia had enjoyed a "strong end to 2013", Jack Gorman at Dublin-based
broker Davy said, restating an "outperform" rating on the group's shares.
The shares stood 1.9% higher at E11.19 in afternoon deals in