FrieslandCampina sees revenue growth

By Jim Cornall

- Last updated on GMT

Pic: FrieslandCampina
Pic: FrieslandCampina

Related tags Frieslandcampina frieslandcampina ingredients Dairy

Despite the impact of the pandemic, revenue at FrieslandCampina N.V. increased by 4.3% in 2021.

This was primarily driven by higher commodity dairy prices, price increases and the cautious recovery of out-of-home business in Europe. Currency translation effects had a negative impact of 1.1% on revenue. Reported revenue rose by 3.2% to €11.5bn ($12.7bn) in 2021.

Revenue of the Food & Beverage business group rose by 4.3% to €7.891bn/$8.74bn (2020: €7.565bn/$8.38bn), driven by price increases and the growth of out-of-home activities, primarily in Europe. Before currency translation effects, growth was 5.8%.

The declining birth rate trend in Asia accelerated as a result of the pandemic and the revenue of the Specialised Nutrition business group dropped by 3.5% to €1.086bn ($1.2bn). In China, Friso Prestige showed growth, despite increasing local competition. Before currency translation effects, revenue fell by 3.8%.

At €1.279bn ($1.42bn), the revenue of the Ingredients business group was up 1.5%. The infant nutrition segment was under considerable pressure due to declining birth rates and difficult market conditions in Asia. However, this was offset by growth in premium ingredients and the positive performance of the medical, seniors and sports nutrition segments.

The constant increase in prices on the commodity dairy market between March and the end of 2021 resulted in historically high price levels and revenue growth of 4.8% to €1.244bn ($1.38bn) for the Trading business group.

The pandemic still had a significant impact on the operating profit and profit in 2021. However, lower restructuring charges, initial recovery of out-of-home markets in Europe and improved results of the Trading business group resulted in a 32.5% improvement in operating profit to €355m ($393.4m). Operating profit before currency translation effects, adjusted for other income and expenses, declined by 1.6% to €380m ($421.1m). Due to the higher operating profit, combined with a lower effective tax burden, FrieslandCampina’s profit in 2021 rose by 117.7% to €172m ($190.6m).

The member milk supply decreased by 3.2% to 9.745bn kilos, primarily due to the relatively cold weather in the first months of 2021 and the impact of high feed costs.

The improved business result enables a subsequent cash payment of 0.14 euro per 100 kilos of milk to member dairy farmers over 2021. In addition to the FrieslandCampina guaranteed price, €14m ($15.5m) will be paid to member dairy farmers in 2022 over the year 2021.

The total compensation paid to member dairy farmers for their supplied milk increased by 6.2% to €3.835bn ($4.25bn) in 2021.

The acceleration of the transformation of FrieslandCampina announced in November 2020 is on track. The focus is on growth, structurally lower costs, and optimization of the organization structure. The company also completed its three-year supply chain optimization program, Supply Chain Unlock, which focuses on improving its supply chain, resulting in cost savings, cash flow improvements and optimization of the production network. In total, the program delivered more than €400m ($443.2m) in cost savings.

Hein Schumacher, CEO Royal FrieslandCampina N.V., said, “The year in which we celebrated our 150th anniversary, the result, and therefore the subsequent cash payment to members, still fell short of our objectives. However, we did make excellent progress in strengthening the company’s foundation. The cost saving measures were effectively implemented and completed ahead of schedule. Excellent results were obtained across the entire line in relation to sustainability. The adopted new member financing has strengthened the company’s equity. 

At the same time, infant nutrition activities were under severe pressure and consequently the results of our Ingredients and Specialised Nutrition business as well. A declining market due to a strong decrease in the birth rate and strong local competition were the key reasons for a weak start to the year. This was contrasted by sharp growth in revenue and an improved result for FrieslandCampina Professional, particularly in the second half of 2021. 

For 2022, inflation and price increases are the key challenges in terms of keeping the result up to par. We are cautiously optimistic about the recovery of the Professional market, as well as continued high commodity dairy prices. Combined with a slightly improved market for infant nutrition, we expect an increase in revenue of two to four percent with constant margins in comparison to 2021 for the year as a whole.”

 

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