Better than expected result for Arla Foods

A net result of DKK 1,161 million against DKK 1,157 million last year is highly satisfactory. The result should be seen on the backdrop of a rise in turnover from DKK 38.1 billion in 2000/01 to DKK 39.4 billion in 2001/02.

Arla Foods’ Managing Director Jens Bigum told the meeting of the Group’s Board of Representatives in Århus, Denmark, on Tuesday:
Arla Foods' Managing
Director Jens Bigum “At the beginning of the year, we faced the end of the boom in dairy markets inside as well as outside Europe. However, although we realised that we were facing some difficult times ahead, Arla Foods has not been affected quite to the extent that the declining trends might have indicated.”

The overall result per kg standardised milk ex farm in Denmark was 261.14 Danish øre per kg and 311.28 Swedish øre in Sweden. This represents a modest rise on last year’s milk price for both Danish and Swedish co-operative owners.

The Board of Representatives set the supplementary payment at DKK 575 million. DKK 586 million was set aside for consolidation.

In his report Jens Bigum emphasized the impact of the synergies stemming from recent years’ two mergers.

”The merger with Kløver Mælk has lived up to our expectations and we have exploited the synergies fully,” Jens Bigum stated. ”In respect of the Arla merger, the synergies are now beginning to materialise. We were well aware that a cross-border merger would raise complex issues and that the benefits accruing from such mergers would take longer to appear. However, the year has demonstrated that the benefits from the merger are clearly exceeding the disadvantages.”

Jens Bigum also pointed to the higher ratio of added value products as a contributory factor to the result. He also emphasised that Arla Foods’ export products are sold at a higher price point than that achieved by bulk suppliers.

Jens Bigum also drew attention to Arla Foods’ strong position in its two large domestic markets and to the fact that the reorientation from traditional milk powder towards stronger focus on speciality products has reduced the price sensitivity of some Arla Foods’ products.

Europe has seen cheese prices fall sharply, partly because sales of meat products have recovered after the BSE and Foot and Mouth outbreaks the previous year. In addition, European consumers have been somewhat cautious in their spending habits in the months following the launch of the euro.

World market prices for milk powder and butter for bulk have also declined. In overseas markets the fall of, in particular, the dollar, gave rise to some problems. The significant fall in the dollar rate since the beginning of 2002 is likely to continue in the current financial year.

The impact from pressure on prices in overseas markets was, however, cushioned by the increasing focus on valued added products in a number of selected markets.