FrieslandCampina wins with turnover, Arla earns more

Both have had a good year, with record turnovers and higher profits. Both have also suffered pain here and there and have had to stretch their short-term financing to keep up with the sharply increased market. They also both foresee a considerably more difficult 2023.

Evenly matched
In terms of turnover, FrieslandCampina and Arla are evenly matched. Arla saw its turnover increase from €2021 billion to €2022 billion in 11,2 and 13,8. At FrieslandCampina, turnover increased from €11,5 billion to almost €14,1 billion. After that the similarities stop for a while. FrieslandCampina has seen a strong improvement in profit from net €172 million in 2021 to €292 million in 2022. At Arla, net profit increased from €332 million to €382 million. The profit margin here has been higher in recent years. FrieslandCampina believes that its own profit should be estimated higher, because it has been reduced by €260 million due to one-off items.
At all two companies, a better result was accompanied by a lower milk supply. At Arla this fell from 13,6 billion kilos to 13,5 billion, at FrieslandCampina the supply went from 9,745 billion to 9,5 billion kilos. In terms of turnover, the Dutch dairy cooperative does more with less milk, or in other words: has a higher turnover per kilo of milk supplied.

Cash milk prices almost equal
Yet both companies pay out almost the same amount of milk money to their members. FrieslandCampina will pay a cash milk price of €2022 per 57,35 kilos for 100. Arla says it pays €55,10 per 100 kilos, but that is at lower calculation levels.

Equal contents
If the standard percentages for milk used in the Netherlands last year were applied to the Arla milk price, it would be virtually the same as that of FrieslandCampina. The structure is slightly different. FrieslandCampina pays out a larger part as an advance, Arla pays out a much bigger additional payment (€0,90 versus €2,20 per 100 kilos).

Can't make a market
No matter how large the dairy cooperatives may be, they cannot make the market, as became apparent last year. Both Arla and FrieslandCampina work hard to produce as many added value products as possible, but because milk prices rose so quickly last year, consumers abandoned them en masse. They opted for the cheaper house brands. And not only that. Profits in the consumer divisions shrank sharply in favor of the old-fashioned bulk product divisions. The highest results were achieved there. The Ingredients divisions of both companies also performed well. FrieslandCampina also saw a recovery in results in infant nutrition and specialized nutrition for the elderly. China and Mexico were the top markets.

One-time resource gain
Due to the sharp drop in prices for dairy raw materials since the fourth quarter of 2022, the good results in bulk dairy will no longer be achievable in the first half of this year, both companies calculate. In addition, the consumer market will remain under pressure as inflation continues to rise, albeit at a slower pace than last year. This also means that purchasing power remains under pressure. It will therefore be a more difficult time for dairy, with lower milk prices for the farmer.

Write-offs and balance sheet
In the case of FrieslandCampina, inventories must also be written off this year. These increased by €571 million last year to €2.064 million, while repayments also have to be made on short-term financing entered into last year (+€525 million). The share of temporary debt capital has also increased at Arla, but because the full annual report is not yet known, this cannot be quantified. FrieslandCampina reports that the balance sheet ratio of debt to EBITDA in Amersfoort is more favorable than that in Arhus, at 0,8 compared to 3,0.
Another striking point in FrieslandCampina's figures appears to be a write-down on the goodwill, but this is a cumulative number, FrieslandCampina reports in a further explanation. €204 million in goodwill has been written off over a long period of years, but not in the past year. However, minor write-downs have occurred.