Higher milk prices and growth in developing market sales have put FrieslandCampina dairy farmers on course for a "considerable" rise in payouts, despite a weak performance by the company in Europe.

The co-operative, which owns dairy brands such as Chocomel, Frico and Milli, said that a jump in profits in the first half of 2010 had warranted a payout of E1.33 per 100 kilogrammes of milk, four times that a year before.

This bonus, which will depend on the Dutch group's performance over the rest of 2010, will be added to payouts for milk itself, which came in at E30.25 per 100 kilogrammes of milk for the period, a 16.2% rise year on year, in line with that offered by other European dairy firms.

Over the full year, the improvement in both categories "could result in a considerable milk price increase for the member farmers of our co-operative compared with 2009", Cees 't Hart, the co-operative's chief executive said.

'Profit growth under pressure'

The group attributed the rise in dairy prices to a recovery in global demand for dairy products in the half year, during which supplies fell by 2%, thanks to dry weather in Australasia and the long winter in Europe, which delayed the turn out of herds back onto pasture.

Its own profits were boosted by sales of ingredients and consumer products in developing countries in Africa, such as Nigeria, and Asia, including Indonesia and Thailand, into which FrieslandCampina is expanding.

However, the co-operative struggled against strong competition and weak consumer spending in its European backyard.

"In Germany and the Netherlands consumption is reasonably stable but volumes are under pressure in Greece, Rumania and Hungary as a consequence of economic developments," the group said.

Mr 't Hart said that the performance of consumer brands in the region had been "disappointing, with "both revenue and profit growth under pressure". The division's operating profits halved to E57m.

"Economic recovery in Europe lags behind developments in other areas in the world," he added.

Auction ahead 

Group revenues rose 5.5% to $4.3bn in the six months, with profits doubling to E156m, helped by cost cuts allowed by the group's formation last year through a merger of Friesland and Campina co-operatives.

The results come shortly before the latest benchmark globalDairyTrade dairy auction by Fonterra, the New Zealand giant, which is set to begin at 12:00 GMT.

The internet auctions have shown a trend of declining prices from an April peak.