Pressure on prices, unfavourable foreign exchange rates and a decline in German sales mean that Scandinavian dairy company Arla will have difficulty meeting its profit targets for 2003, according to Arla Foods' managing director Jens Bigum speaking earlier this month.
Although profits for the two domestic divisions, Denmark and Sweden, are largely in line with expectations, the ingredients and production divisions have experienced significant falls, he said. This means that profits from dairy operations are currently falling short of the budget.
"It's too early to predict the outcome for the year as a whole, but it seems likely that we'll not reach the budgeted target this year," Bigum said.
Since the start of the year, US dollar, sterling and Saudi riyals rates have all fallen, with the weak dollar rate alone cutting some DK300 million off export earnings.
In addition, the economic crisis in Germany has put the brake on Europe's economy and made consumers more reluctant when buying food products, Bigum said. Both butter and cheese are now achieving lower prices.
"Only a marked improvement in the economic situation within the new few months will change this," he added.