Arla Foods reports sharp decline in sales and profits
For the first six months of the year, Denmark-based Arla reported a 10.7 per cent drop in sales to 22.324bn kroner (€2.998bn). The company said the fall was due to unfavourable exchange rates and consumers buying fewer and cheaper dairy products
Net profit was hit even harder falling to 263m kroner from 481m kroner last year. Arla said the factors putting downward pressure on profits included lower sales, intense pressure on dairy products and fierce competition in the retail sector.
“The economic downturn is more extensive and prolonged than expected and has impacted all Arla’s markets,” said Arla CEO Peder Tuborgh.
Cost cutting
Earlier in the year, the company launched a 1bn kroner cost-reduction programme, which it expects will start to bear fruit towards the end of the year. It said the restructuring should help the company reach its full year profit forecast of 900bn kroner.
“The half-year results are in line with our budget,” said Tuborgh. “The results demonstrate that the savings programme and the reduction in the milk price paid to our co-operative members were, unfortunately, necessary and appropriate measures. We are on the right course and we must continue to deliver the savings we identified in April.”
Despite the cost cutting Arla is continuing with other investment plans. In the UK, the company said its £70 million expansion at its flagship dairy in Leeds is progressing well with the installation of bespoke processing kit taking place in the coming months.
Arla remains committed to its full year profit target but Tuborgh was reluctant to predict a full scale recovery.
He said: “We are seeing some positive signs. Should these become stronger, the pressure will ease, but the uncertainty is making it difficult to predict the future.”
