Operating profit fell 8%, landing at €110m. Profit for the first half of 2009 was up 30%, rising to €78m thanks to an improved performance on finance income and costs, and share of profit of associates. Branded products and industrial labels performed well.
Owing to disappointing selling prices of basic products such as milk powders, caseins (milk protein) and cheese in particular, the milk price paid to dairy farmers has come under severe pressure. Due, in part, to this development, FrieslandCampina paid its member farmers a guaranteed price of €26.04, exclusive of VAT, per 100 kilograms of milk for the first half of 2009. This represents a 32% drop compared with the same period last year.
Cees ‘t Hart, CEO of Royal FrieslandCampina, described the first half-year earnings of the newly merged company as “encouraging, given the difficult dairy market”. At the same time, he also noted that “the guaranteed milk price for our member dairy farmers is at a worryingly low level”.
“The half-year figures show a clear division between branded products and industrial specialities on the one hand, and basic products on the other,” he said. “We managed to achieve good results under the circumstances from both our branded products and our industrial specialities. Branded products showed a particularly positive trend in southeast Asia and Africa, and we saw volumes grow and market share increase in most countries in these regions.
“In Europe, we managed to improve our market position. We’re particularly concerned about trends in prices for basic products such as milk powders, caseins and cheese. The selling prices for basic products such as milk powders, caseins and cheese are exceptionally low due to lagging demand. The price levels not only have a major impact on our results, they also determine to a significant extent the guaranteed price for our member dairy farmers.
“In the first half of 2009, demand for dairy products from consumers and industrial customers dropped further around the world due to the economic crisis, though there were differences between regions and product categories. In Europe, fewer dairy products were consumed and used, where Asia showed growth stagnation. The strong euro and the weak dollar got in the way of exports of dairy products outside the European Union, because prices were high relative to price levels in other regions. Selling prices of milk powder, caseins and cheese were under heavy strain in the first half of 2009. This had a gradual effect on price developments in other product categories as well.
“Supermarkets in Europe are again starting to focus on price competition, which is causing more and more pressure on selling prices of dairy products in the supermarket segment.”
Source: FrieslandCampina
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