2015 dairy markets too unpredictable to call – Arla

Arla has said that 2015 dairy markets will be too unpredictable for it to announce any expectations for its revenue or performance price in 2015.

“The global dairy industry has never been as unpredictable as it is now, but we believe that our strategy is the right one to take us forward,” said the CEO of Arla Foods, Peder Tuborgh.

He said Arla will continue to rigidly streamline and control costs, while investing significant sums in marketing and new products.

“Arla’s ability to profitably handle larger milk volumes will define the success of the business in 2015.”

Last year, it says, was a complex year for Arla. It reported that the farmer-owned company achieved one of its best results ever in a market impacted by volatility and international politics. A strong first half of the year produced record-high earnings, but the global market shifted in the second half, reducing the farmer milk price significantly.

“Seldom has a business year been split in two so opposing halves. 2014 was a year that first saw strong economic tail winds in the global market that carried Arla into the summer with record-high milk prices for its cooperative farmers in Sweden, Denmark, Germany, the UK, Belgium, Luxembourg and the Netherlands.

“Then things changed. The tail winds became head winds as global supplies rapidly outstripped demand, Chinese consumption ebbed off, and inventories were full. Finally, when Russia imposed a ban on dairy products from the EU, the headwinds grew in strength.”

Arla posted its highest-ever revenue of €10.6 billion, with much of it attributable to organic growth of 6.7%.

Brands
“We are seeing growth for Arla’s strategic brands and our overall market shares in an otherwise stagnating or declining European dairy market. Throughout 2014 we have worked hard to move more milk into value-added brands, by enhancing our portfolio to our customers through further investment in innovation.

“Our grip on costs has never been more firm. Our owners gave us more milk in 2014, and we managed to absorb the extra volumes without increasing the share of sales to the less profitable commodity category, and we are ready to shift up to 500 million kilo of additional owners’ milk into value-added products in 2015,” says CFO Frederik Lotz.

New markets
While Arla continues to move more milk into branded products, the company is also working hard to move those branded products into new markets. Arla’s international operations and ingredients business had yet another strong year with growing opportunities.

“We saw 14% growth in our international business despite the Russian embargo. There has been steady growth in China, and we have created growth of 20% in the Middle East and Africa.

“In 2014 we have begun to enter new markets in Asia and Africa, and in 2015 we will continue to move into new markets where safe and high-quality dairy products are in growing demand,” says Frederik Lotz.

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