Double-digit growth market sales drive record Arla profits

By Mark Astley

- Last updated on GMT

Related tags: Denmark, Middle east, Arla

Double-digit growth market sales drive record Arla profits
Arla Foods has reported record high profits of DKK 1.9bn ($340m) for 2012 – an achievement it has attributed to double-digit sales growth from Russia, China, and the Middle East and Africa region.

Despite “significant price pressure” ​the Danish-Swedish dairy co-operative reported turnover of DKK 61.1bn ($10.95bn) for the year – an increase of 15% on 2011. 

While European demand for Arla consumer products continued to lag, Arla’s three core growth markets reported double-digit sales growth.

In China, sales of Arla consumer products rose by almost 57% to DKK 78m ($14m). Russian sales increased by 28% to DKK 600m ($107.5m). In the Middle East and Africa region turnover grew 22% to DKK 3bn ($537m).

Despite low growth rates in Europe, Arla’s core brands (Lurpak, Castello, and Arla) achieved overall growth, and Arla Foods Ingredients (AFI) delivered turnover of DKK 2.2bn ($395m) – a 10% increase on 2012.

“Higher level of earnings” expected

Looking ahead to 2013, the company has set itself a turnover target of approximately DKK 72bn ($13bn) and profit of DKK 2.2bn ($395m). However, based on current market expectations, Arla expects to exceed the targets.

“The forecasts for 2013 are based on there continuing to be low or no growth in the EU, where we derive most of our turnover and earnings, while the impressive growth rates outside the EU will continue,” ​said Tuborgh.

The company also expects a “higher level of earnings” ​in 2013 as a result of its recently completed mergers with British dairy co-operative Milk Link and German dairy firm Milch-Union Hocheifel (MUH).

Arla spokesman Theis Brøgger told that financial benefit of the mergers will only be seen in 2013.

“What must be considered it the two big mergers we completed in 2012 in Germany and the UK. Sales from these new businesses were only included in the last three months of our results. In 2013, we will feel the full effect of the deals.”

“We expect to drive healthy business from these mergers,” ​said Brøgger.

Impact of efficiency measures

Last month, Arla unveiled its new five-year plan – Strategy 2017. Under the plan, Arla revealed its intentions to focus on growth markets outside of the EU, and boost the efficiency of its activities in Europe.

Brøgger added that the effect of these cost-cutting measures will also be felt in 2013.

“We have measures in place in Europe which will be evident in our 2013 results. These are on-going cost-saving measures that will be felt in the next year,”​ said Brøgger.

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