1H up, but full year 'uncertain' for Arla Foods

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Related tags: Arla food ingredients, Denmark

Fall in milk price paid to farmers brings gains in first half for
Arla Foods, the owner of Arla Food Ingredients, but the
co-operative warns the full year remains 'uncertain'.

The Danish group, that last month announced it will not merge with fellow dairy Campina, saw profits rise by 11 per cent to DKK 323 million (€43m) for the first six months of 2004/05, up from DKK 290 million the previous year.

"The increase derives in part from the lower milk price paid to the group's co-operative members,"​ the dairy said in a statement this week.

EU farm reform means that co-operative members now receive less money for their milk from their dairy company, instead receiving compensation as a direct subsidy.

But looking forward to the rest of the year, Arla said "tough competitive pressures"​ in the group's domestic markets and the impact of the low dollar on earnings have led to "uncertainty"​ for full year results.

In April talks collapsed over a merger between the mothers of Arla Food Ingredients and DMV International after negotiations between Campina and Arla Foods failed to reach a 'satisfactory result'.

Combined the two leading European dairy co-operatives would have had 27,000 employees, and an annual revenue of €10bn.

Set against the backdrop of slashed milk prices and reduced subsidies from Brussels, the move to merge was seen as a positive move for both firms, creating the world's second largest dairy company behind Swiss giant Nestle.

But it is believed the two dairies fell out over financial terms, unable to agree on conditions, with members in both camps unable to get to grips with "unresolved issues."

At €6.2 billion in dairy turnover for 2003 Arla Foods, against Campina's €3.7 billion, would have contributed the largest chunk to the merger.

The ingredients division consolidated through DMV and Arla Food Ingredients would have contribute about a tenth of this figure, some €1.38 billion, rolling over 665 000 tonnes of ingredients.

Arla Food ingredients is enjoying growing attention for its low calorie sweetener tagatose: not yet approved on EU markets the sweetener is used in a growing number of food formulations in the US, as food makers develop their product lines to feed the increasingly health-conscious consumer.

Related topics: Market Trends

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