China and Russia likely to put 'considerable pressure' on H2 dairy sales: FrieslandCampina

By Mark ASTLEY contact

- Last updated on GMT

China and Russia likely to put 'considerable pressure' on H2 dairy sales: FrieslandCampina

Related tags: Dairy products, Milk, European union

Lagging Chinese demand and the impact of the Russian embargo are likely to put "considerable pressure" on FrieslandCampina's sales in the second half of 2015.

Reporting its financials for the first six months of 2015, the Dutch dairy giant said it would not be making "any concrete statement regarding the expected result for the whole of 2015" ​as a result.

“Demand for dairy products in local markets and on the world market is likely to increase very little due to the lagging demand for dairy raw materials in China and Russia’s on-going boycott of dairy products from the European Union," ​it wrote.

“This is likely to continue putting considerable pressure on the sales prices of dairy products in the second half of the year.”

Russian Prime Minister Dmitry Medvedev introduced a one-year ban on the import of beef, pork, poultry, fruit, vegetables, milk and dairy products from the European Union (EU), United States, Australia, Canada and Norway on August 7 2014, 

In June, it extended the ban on Western food imports until August 5 2016.

In 2013, FrieslandCampina sold around €190m (US$215m) worth of dairy products, including yogurt, cheese and infant formula, in Russia – approximately 1.66% of its total revenue that year.

Cheese accounted for the majority of FrieslandCampina’s Russian revenue.

In yesterday's report, the Dutch dairy said branded cheese volumes were down 6% in the first half of 2015.

Excluding the impact of the Russian ban on Western food imports, branded cheese volumes actually increased 0.5%, it said.

'More dependent on export'

Despite the “current uncertain markets”​ FrieslandCampina said it was “able to achieve a good result”​ in the first half of 2015.

It reported revenue of €5.645bn (US$6.35bn) for the first six months of 2015 - up from €5.635bn (US$6.33bn) in H1 2014.

Growth in China, Hong Kong, Indonesia, Africa, South East Europe and its ingredients business offset lower volumes in Western Europe, it said. 

“A large proportion of FrieslandCampina’s revenue is generated through the export of its products from the Netherlands to other countries,"​ the Dutch dairy said. "FrieslandCampina’s result is even more dependent on export.”

Acquisitions contributed 0.6% towards revenue, it added. 

It also reported an 84.6% increase in profit for the period - from €104m (US$117m) in H1 2014 to €192m (US$216m). 

“This rise in profit was due to increased sales of products with a higher added-value, favourable currency translation effects of €17m, the lower guaranteed price for raw milk and lower operating costs.”

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