FrieslandCampina pledges to reduce dependence on dairy basics

In financial results published today, the dairy co-op reported a 14 per cent drop in total revenue to €8.2bn as selling prices and volumes came under pressure in a weakened global dairy market.

The only part at the company to report revenue growth for 2009 was the Consumer Products International business group. Selling in Asia, Africa, and the Middle East, the business was able to take advantage of emerging market growth and post a 2 per cent increase in revenue to €1,889m.

The larger Consumer Products Europe group was less successful in 2009, reporting a 14 per cent drop in revenue to €2,852m. But the worst performers were the Cheese & Butter group, which endured an 18 per cent reduction in sales to €2,099m, and the Ingredients Group with a 16 per cent drop to €1,149m.

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Recession victims​

FrieslandCampina said the biggest victims of the recession were milk powders, caseins (milk proteins) and basic cheese. FrieslandCampina’s CEO Cees ‘t Hart said the company would be looking to steer away from these categories.

He said: “​The poor selling prices of such products as milk powder, casein and basic cheese put the result under pressure. We face the challenge of becoming less dependent on those product categories.”​

Despite weakness in certain areas and an overall decline in volumes, Hart said market share improved in a number of consumer product categories in Europe and internationally.

FrieslandCampina also succeeded in increasing its operating profit in spite of the double-digit drop on the top line.

Improved profits ​

Lower raw material costs and the reduced milk producer price contributed to a 4 per cent improvement in operating profit to €258m. And excluding non-recurring items associated with the merger of Friesland and Campina in 2008, operating profit was up 26 per cent to €347m.

Improved operating profit helped FrieslandCampina deliver a 35 per cent increase in net profit to €182m. The increase in the share of profits from non-consolidated associates and lower financing income and costs also contributed to the higher bottom line.

Lower milk prices may have bolstered profits but farmer income suffered in 2009. FrieslandCampina said the milk price paid to member farmers amounted to €26.99 (excluding VAT) per 100kg of milk in 2009 compared to €36.37 the year before.

Looking ahead, the co-op said it expects demand for dairy products to edge up slightly around the world in 2010 but minor supply and demand fluctuations could have a substantial impact on performance. FrieslandCampina said it is therefore difficult to forecast future results. No statement was made about the expected result for 2010.