FrieslandCampina announces 11% revenue boost

By Jim Cornall

- Last updated on GMT

FrieslandCampina has published its first half 2017 results, which revealed higher operating profits.
FrieslandCampina has published its first half 2017 results, which revealed higher operating profits.

Related tags Milk

According to its first half-year financial report, revenue of Dutch dairy company Royal FrieslandCampina N.V. increased by 10.7% to €6.1bn ($7.3bn).

Profit increased by 1.3% to €162m ($193m). The company said revenue increased due to an increase in sales prices and the acquisition of Engro Foods in Pakistan. The pro forma milk price for member dairy farmers increased by 26.9% to €38.37 ($45.67) per 100 kilos of milk.

The interim pay-out for member dairy farmers amounts to €1.17 ($1.39) per 100 kilos of milk.

Increased revenue

While revenue increased, currency translation effects had a negative effect of €53m ($63m) on revenue. The volume of products with higher added value declined by 1.6% (exclusive of the acquisition of Engro Foods) and the volume of basic products rose by 1.2%.

Butter products displayed the highest price increases due to the increased global demand for butter and cream products with a declining supply.

Higher operating profit

Operating profit increased by 7.8% to €275m ($327m) over the first half of 2017.

The gross margin increased by 8.2% to €1bn ($1.19bn) due to the fact that the higher sales prices compensated for the increased costs. The cost of goods sold increased by 11.2% to €5.1bn ($6.1bn).

This was mainly due to the higher guaranteed price for raw milk and the increased prices for other raw materials.

The one-off items recognized in operating profit include the €9m ($10.7m) book profit on the sale of the 8.2% interest in Synlait Milk Ltd. and the impairment of €20m ($23.8m) of the 1.1% interest in China Huishan Dairy Holdings Company Ltd.

FrieslandCampina attributed the increase in profit is due to the strong recovery of the butter and cheese sales prices.

Decrease in operating cash flow

The cash flow from operating activities decreased to €29m/$34.5m (first half-year 2016: €165m/$196m). The company said this was mainly due to the higher working capital requirements and the higher guaranteed price.

Milk supply

The milk supplied by member dairy farmers decreased by 53m kilos (1%) over the first half-year 2017. During the initial months of 2017, two temporary milk volume control measures were in effect: the so-called 10-cent measure and the temporary FrieslandCampina standstill measure.

Roelof Joosten, CEO of FrieslandCampina, said the milk price for member dairy farmers recovered this year after a number of disappointing years.

“In West Europe we were successful in passing on the higher guaranteed price in the sales prices,”​ Joosten said.

“The total compensation paid to member dairy farmers increased by 24 percent in comparison to the first half year of 2016. High growth levels were realized in Indonesia and Vietnam, and with cheese and butter.

“In Germany, the Philippines and Nigeria, result trends are not as positive due to local market conditions and negative currency translation effects, the latter particularly in Nigeria.”

Related topics Manufacturers FrieslandCampina

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