Arla recovery fails to stop profit drop

By staff reporter

- Last updated on GMT

Related tags: Arla uk, Milk, Arla

Arla UK ended its three-year strategic plan with a three per cent
drop in full year profits, after higher selling prices failed to
save the dairy group from high input costs in the first half.

Arla, one of the UK's top three dairy processors, said it raised liquid milk selling prices to all customers and made job cuts at head office in order to recoup higher plastics and energy costs.

The results show Arla UK has improved slightly after a loss of more than three per cent in the first half, but again reveals the precarious situation of the UK dairy sector.

Arla said discussions with Scandinavian parent group, Arla Foods, over a possible buyout were progressing. Arla Foods warned its UK arm earlier this year that performances had not been satisfactory.

Arla UK retaliated this week, saying its recently completed strategic plan had set it up well for the future, even though 2006 had proved difficult.

The group's fresh milk production costs were now at record lows, it said, having been cut by 28 per cent in three years thanks to five dairy closures and improvements in distribution. It also sold the loss-making doorstep delivery business, Express Dairies, to rival Dairy Crest this year.

Branded product growth drove a six per cent rise in the firm's sales, as it has done for rivals.

Added value product sales, including Lactofree, a new lactose free dairy drink launched in January, and Cravendale milk, were up nine per cent. Around £6m will be invested to promote Cravendale, which grew 19 per cent in value, over the next year.

There were also more strong performances for the Anchor and Lurpak butter brands, and particularly Lurpak Spreadable Unsalted, which has doubled Arla's expectations since its launch this year. The product did not cannibalise sales of other Lurpak products, the group said.

Total fresh milk sales only crept up one per cent, however, because of lost business with some supermarkets and the discount sector.

Related topics: Manufacturers, Arla Foods

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