Forecast reports
Performance bonus much better than anticipated
After the turbulent year 2016, everything was possible with regard to FrieslandCampina's annual figures. The fact that the performance bonus turns out better than expected after the summer is therefore largely due to the second half of 2016.
3,44
euro
In total, value creation yields the member dairy farmers 3,44 euros per 100 kg of milk. A decrease of 2,5 percent compared to a year earlier, but better than previously anticipated. In September, for example, a total of 2,45 euros per 100 kg of milk was assumed. This includes a EUR 0,89 reservation for member bonds and EUR 1,56 performance premium. The final outcome turns out to be a EUR 2,19 performance premium and EUR 1,25 reserve for member bonds.
A year earlier, the dairyman was also wrong pro forma, but then in the wrong direction. For example, the half-year figures assume a performance premium of EUR 2,69 and EUR 1,53 in reserve for member bonds. At the end of the year, however, the outcome turned out to be lower. There remained 2,25 euros performance and 1,28 euros reservation. Both Roelof Joosten, CEO FrieslandCampina, and Frans Keurentjes, chairman of the dairy cooperative FrieslandCampina, indicated that the results, which were lower compared to 2015, were partly compensated by the extra liters of milk.
It is the best illustration for the first half of 2016. When the processor had to deal with more milk than processing could handle, milk was sent to the free market at rock-bottom prices. To contain the losses, the processor paid a premium for less milk until more processing became available. As the comparison shows, the guaranteed price was below the value of basic dairy for the first half of the year. Which means that the dairy processor had to take a loss. After July, the balance turned.
For the whole of 2016, milk production rose to a record 10,77 million tons of milk. An increase of 7,1 percent, which is mainly due to a plus of 11,9 percent in the first half of the year. The extra liters of milk translated into 204 million euros extra milk money, which was paid out in comparison with 2015. The lower guaranteed price compensated for this with 231 million euros, but then there is the performance bonus, which is also supported by extra liters and amounts to an amount of 15 million euros. An additional 14 million euros was paid out on the basis of fat and protein and 4 million euros extra for other items. A special item this year is the 2 and 10 cent scheme. That was good for 24 million euros. This brings the total member milk compensation to EUR 3.544 million, an increase of 0,9 percent compared to 2015.
In total, the processor recorded a profit of 362 million euros, a plus of 5,5 percent and a 1,9 percent lower turnover. This amounts to 11 billion euros. A challenge is seen especially in Germany. Joosten also thinks it is good for that market that it is expected that 100 million liters less milk will be supplied to member dairy farmers. There the company struggles with a limited number of customers versus a lot of supply, which does not alter the fact that it is the largest market and FrieslandCampina would like to maintain its position there.
In the short term, Joosten foresees that the current level of the guaranteed price is sustainable. He then states that steps are still needed to continue the performance of 2016. As things stand now, milk reduction is no longer necessary.
Herman van den Pol
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