Arla Foods has reported group revenue of just over €7 billion for the first half of 2023, an almost 11% increase when compared to €6.3 billion for the same period last year.
The dairy company, owned by more than 8,400 farmers from Denmark, Sweden, the UK, Germany, Belgium, Luxembourg and the Netherlands, said the result was primarily driven by previous price increases in Arla’s retail and foodservice.
As had been expected, the company said that the first half of 2023 was dominated by continued inflationary pressure, declining dairy commodity prices, and a shift in consumer behaviours.
In the first half of 2023, Arla achieved a net profit of €103 million, or 1.5% of revenue, compared to 3% in the same period last year.
Arla
The cooperative said that it was able to “soften the negative impact of market dynamics” and deliver a performance price of 49.7c/kg of milk.
However, compared to the performance price for the full year of 2022, the performance price in first half 2023 saw a decrease of 5.4c/kg.
The company confirmed a half-year supplementary payment for Arla’s farmers of 1c/kg of milk, based on half-year volumes.
The financial results published today (Tuesday, August 29) shows Arla’s average pre-paid milk price increased to 48.2c/kg of milk in the first half of 2023, compared to 46.6c/kg in the first half of 2022 and 52.0c/kg for the full 2022 year.
Arla’s average performance price, which measures the value created per kilogramme of owner milk, remained on par with the first half of 2022 with a slight increase of 0.1c/kg to 49.7c/kg.
“During the first half of 2023, we continued to see inflationary pressure resulting in consumers moving towards discount channels and private label products and putting a pressure on our branded products,” Torben Dahl Nyholm, chief financial officer, said.
Despite the unpredictable market situation, some Arla brands maintained strong volume growth in Europe, including Starbucks (+21.6%) and Arla Protein (+51.6%).
Arla’s European business revenue increased by 15.4%, to just over €4 billion, compared to €3.5 billion in the same period last year.
Sustainability
Last year, Arla introduced a sustainability incentive programme to reward and accelerate the co-op’s farmer owners uptake of climate and sustainability initiatives on farmers.
By June 2023, 7,300 or 94% of Arla’s farmer owners had submitted theirl their climate check data and uploaded almost 30,000 documents to register sustainability activities focused on feeding, manure handling, energy optimisation and renewable electricity.
“From July 1, 2023, the incentive model will be an integral part of the monthly milk price payment, which will give farmers a clear and very tangible financial incentive to reduce their carbon footprint from month to month and from year to year,” Peder Tuborgh, Arla Foods chief executive, said.
Outlook
Arla is expecting that inflationary pressures will continue to influence consumer behaviour for the rest of 2023, keeping volumes under pressures in most markets.
The co-op said that the dairy commodity markets are still volatile and “market firmness will be uncertain for the rest of the year”.
As a result, Arla has lowered its full-year expectations for revenue to €13.2-13.7 billion and expects to deliver a profit within the range of 2.8-3% of revenue, narrowed from 2.8-3.2%, which it said would allow for another supplementary payment for farmers.