Arla downgrades the 2008 result
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- 10 December 2008
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Developments in the second half of this year have had a serious impact on earn-ings. As a result, Arla has downgraded its expectations for 2008 from profits of approx. 900 million DKK to 600-700 million DKK.
The financial crisis is affecting Arla in several ways:
During this autumn, it became clear that the financial crisis had developed into an economic crisis with consumers opting for cheaper dairy products and, in certain markets, avoiding buying them altogether. The latter especially has had a strong impact on Arla’s trading business.
In addition, earnings were hit by losses on securities as a result of the general fall in share prices and foreign exchange adjustments in relation to Arla’s two main cur-rencies: Sterling and the Swedish Krona.
Also, the market situation changed from a global shortage of milk in 2007 to a milk surplus at the end of 2008, which caused global market prices to fall. The trend was further intensified by the financial crisis.
Other factors include provisions for losses in the Chinese market as a result of the melamine crisis.
Arla Foods wants to maintain the on account price throughout the year, but the re-duced earnings mean that the amount available for distribution is expected to fall from 15.6 DKK øre to 10-12 DKK øre per kg milk.
“At the beginning of the autumn, we still believed that we would meet the budget. In recent months, however, global market prices for milk have fallen at a rate that nobody could have predicted only a few months ago - a fall that has been intensi-fied by the financial crisis,” says CEO Peder Tuborgh, Arla Foods
The Board of Directors will assess the situation when the annual accounts for 2008 are available and will propose how profits should be allocated at the Board of Rep-resentatives’ meeting in early March.
To alleviate the effects of reduced earnings, the leadership will be focusing on cost savings in its 2009 budget.
“The economic crisis is developing dramatically. As we’re preparing the budget for 2009, it seems that we’re taking a snapshot that may be superseded by subse-quent events,” says CFO Jørn Wendel Andersen.
At its meeting in January, the Board of Directors will consider the budget for 2009 and a reduction in the Arla price.
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.