Further falls in the milk price likely
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- 12 February 2004
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Although the first quarter results are largely in line with the budget, the falling dollar and stronger competition in Scandinavian markets mean that Arla Foods’ budget targets for the first half year are unlikely to be met.
”Everything points to the fact that, in addition to the reduction of 4 Danish øre, which is already accounted for in the budget, there may have to be a further cut in the on account price,” said Group Finance Director Jørn Wendel Andersen.
With the current dollar rate 50 øre below the budgetted rate of DKK 6.50, the dollar has impacted on Arla Foods’ substantial exports of milk powder, cheese and butter to a number of overseas markets. In addition, competition has hardened in the Scandinavian market to a point where Arla Foods expects to see losses running into millions of DKK in the Danish and, in particular, Swedish markets.
In both these markets competition from foreign-based rivals and emerging discount chains is putting prices under pressure. Consequently, Arla is initiating a range of counter measures such as the launch of DanMælk liquid milk in Denmark.
On the positive side, a series of price increases have been implemented in the UK market where sterling has recovered against the Danish krone.
Arla Foods is an international dairy company owned by 9,700 farmers from Denmark, Sweden, the UK, Germany, Belgium, Luxembourg and the Netherlands. Arla Foods is one of the leading players in the international dairy arena with well-known brands like Arla®, Lurpak®, Puck® and Castello®. Arla Foods is focused on providing good dairy nourishment from sustainable farming and operations and is also the world's largest manufacturer of organic dairy products.