Multinational dairy business Arla Foods has reported revenue for 2023 of €13.7 billion, a slight decrease on the 2022 figure of €13.8 billion.
According to the Swedish-Danish co-op, which announced its annual results for 2023 today (Tuesday, February 20), its revenue was impacted by negative currency effects, primarily on the Swedish Krone, Pound Sterling and US Dollar.
The cost of goods and general inflation led to a performance price decrease of 8.1c/kg to 47c/kg against an all-time high performance price in 2022. Although lower than 2022, the 2023 figure is 15% above the business’ five-year average.
These figures allowed Arla to record a net profit of €380 million, 2.8% of its revenue, for 2023, which was “towards the bottom end” of its target margin range of 2.8% to 3.2%.
This financial performance allowed the Arla board of directors to propose a supplementary payment, including interest on contributed capital, to its roughly 8,400 across seven countries, of 2.07c/kg of milk delivered, equating to €270 million in total, “well-above” the level set in the business’ retainment policy.
In what Arla called “a year of two halves”, 2023 started with high inflation and a high cost of living, resulting in consumers, especially in Europe, “trading down” to discount brands, cheaper products, and generally buying less dairy products, resulting in a flat development in retail dairy consumption across the region.
In Africa and southeast Asia meanwhile, negative currency effects significantly affected consumer purchasing power.
The decline in retail dairy consumption slowed down during the year as inflation started to ease off and consumer incomes increased, and towards year-end dairy consumption increased again, resulting in a flat development in retail dairy consumption across the EU region in 2023, Arla said.
In terms of the financial outlook for 2024, Arla said it is expecting volatile market conditions – driven by factors such as reduced consumer purchasing power; currency developments; and geopolitical tension and uncertainty – to continue to impact the business.
The group is expecting a reduced revenue of between €13.2 billion and €13.7 billion for 2024, with reduced sales prices compared to early 2023 and further adverse currency effects to be responsible for the revenue reduction.
Arla climate targets
Arla also provided an update on its progress towards meeting 2030 carbon emissions reductions targets.
On average, Arla’s farmers saw a 3.6% cut to carbon emissions compared to 2022, leading to a drop in on-farm emissions from 1.12kg to 1.08kg of carbon dioxide (CO2) per kilogramme of milk.
Arla said that the business, and its farmers, have reduced CO2 emissions by almost one million tonnes across the three years 2021 to 2023 inclusive, and is on target to meet its 2030 targets.
Last year, Arla also launched its Sustainability Incentive Model – which ties a part of the milk price farmers receive directly to sustainability actions on-farm – and the Customer Sustainability Programme (CSP), which creates farmer and customer collaboration through projects to deliver progress on climate targets.
Under the former initiative, payments began issuing in 2023, with farmers earning up to 3c/kg. A total of €226 million was distributed through this initiative, based on ‘points’ farmers had collected, according to Arla.
Commenting on the business’ sustainability efforts in 2023, Arla CEO Peder Tuborgh said: “We have launched very important initiatives together with our farmer owners that have an impact on our emission reductions.
“We are on track towards our 2030 reduction target with close to 1 million tonnes CO2 cut in the last two years. At the same time, this approach also brings added value to our customers,” Tuborgh added.