Russian import ban knocked €80m off FrieslandCampina 2014 operating profit

By Mark ASTLEY contact

- Last updated on GMT

Russian import ban knocked €80m off FrieslandCampina 2014 operating profit

Related tags: Milk powder, Dairy products, Milk, European union

The Russian ban on Western food imports knocked approximately €80m (US$84m) off FrieslandCampina's 2014 operating profit, the Dutch dairy giant has estimated.

In its financial results for the twelve months ended December 31 2014, published yesterday, FrieslandCampina said the Russian trade ban "adversely affected"​ its operating profit for year.

It reported operating profit of €489m (US$515m) for the year - down from €513m (US$540m) in 2013. 

Revenue also fell from €11.4bn (US$12bn) in 2013 to €11.3bn (US$11.9bn) in 2014.

Russian Prime Minister Dmitry Medvedev introduced a one-year ban on the import of beef, pork, fruit, vegetables, milk and dairy products from the European Union (EU), United States, Australia, Canada and Norway in August 2014.

FrieslandCampina exported around €190m (US$200m) worth of dairy products, including yogurt, cheese and infant formula, to Russia in 2013 - approximately 1.6% of its revenue that year.

Cheese accounted for the majority of FrieslandCampina's Russian revenue.

Five months without access to the Russian market and subsequent price pressures impacted it to the tune of €80m.

"The estimated direct effect (loss of revenue and profit) and indirect effect (negative market effects) amounted to at least €80m,"​ the company said.

It attributed €20m (US$21m) to lost sales, and the remaining €60m (US$63m) to the impact on European cheese, butter, and milk powder prices.

Its cheese, butter and milk powder business unit reported a loss of €91m (US$95.7m) for the year, which FrieslandCampina attributed to a "steep decline in commodity prices due to increased milk supply and lagging sales as a result of lower demand for milk powder from China and Southeast Asia plus the Russian boycott."

How either situation will evolve is unsure, it said.

"China's need for dairy products and raw materials if difficult to estimate. Whether, or when, the Russian boycott of Western agricultural products will be lifted it equally unpredictable. But even if the boycott is lifted, demand in Russia is not expected to recover quickly,"​ the company said.

Despite such issues, FrieslandCampina CEO, Cees 't Haart, who is leaving to join Carlsberg in June, said the Dutch dairy remains "well positioned."

"In 2014, Royal FrieslandCampina's results were more influenced by external conditions than in other years. The year 2014 could accurately be described as 'dynamic',"​ he said.

"Although the disappearance of the EU milk quota will quie possibly lead to even more volatility on the dairy market, the prospects for FrieslandCampina and the member dairy farmers remain positive."

Related topics: Business, Dairy-based ingredients

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