Courtesy of its annual results for 2013 Arla Foods has announced the highest performance price ever in the company’s history – in tandem with an improved balance sheet.
This is the result strong European trading figures and rapid growth in Arla’s markets outside the EU. All of this comes at a time when Arla’s most important ingredient, milk, has increased in value worldwide.
Following a number of mergers in 2012, Arla’s global business benefited from a strong base in its core markets in Europe in 2013 as well as a continued significant increase in sales within its growth markets outside the EU. Globally, the demand for dairy products exceeded the supply of milk, which increased the value of milk and the overall price level of dairy products.
The most defining key figure in any Arla financial report is the Performance Price, which indicates how much value Arla has been able to generate from each kilo of milk supplied to the company by the cooperative owners in Sweden, Denmark, Germany, UK, Belgium and Luxembourg throughout the year. The 2013 Performance Price amounts to the equivalent of €0.41 per. kilo with a total volume of owner milk of 9.5 billion kilos (compared to € 0.37 per kilo with a total volume of owner milk of 7.5 billion DKK in 2012).
Arla’s total revenue rose by over €1.31bn to €9.76bn (up by 16.6 per cent). The company’s net profit was the planned three per cent of the revenue, equal to €0.29bn (compared to €0.25bn in 2012).
“Milk has become a more valuable commodity globally, and that naturally has a positive effect on our results. With this tailwind we have driven our business forward in 2013 – with a strong efficient base in Europe, promising growth rates in Russia, China, the Middle East and Africa as well as a very profitable ingredients business in Arla Foods Ingredients. Our main focus is to create the best possible milk price for our owners, and the 2013 results confirm that we have the right strategy to achieve this,” said Arla Foods’ CEO, Peder Tuborgh.
“The Performance Price is up by 12.5 per cent in 2013, and that has been much needed among our farmers. The higher milk price strengthens the economy on the farms. The milk production is rising, and the relationship between a farmer’s profits and costs has been improved. This development was necessary and must be carried on in 2014,” noted Arla Foods’ board of directors chairman, Åke Hantoft.
Measured by revenue the UK remains Arla’s biggest market followed by Sweden and Germany. Although Denmark is the country that supplies the most milk to Arla, Denmark is now Arla’s fourth biggest market.
“In Europe our focus has been on integrating the companies that we merged with in 2012, and that has already made us more efficient and given us a more complete product portfolio. European consumers are still among the most price-focused in the world, and that means tough competition between discount products and quality brands. Our organic growth on our European core markets in 2013 reached 3.5 per cent, which is reasonable given the pressure from discount,” observed Arla Foods’ Chief Financial Officer, Frederik Lotz.