News Half-year figures 2019
Has FrieslandCampina recovered again?
FrieslandCampina has set itself a higher profit for 2019. The dairy cooperative is on track to achieve this, although the result must still be much better, according to CEO Hein Schumacher. For the time being, the PlanetProof milk flow does not contribute to the green figures.
The dairy cooperative can refute better figures for the first half of 2019 than in the same period last year. While turnover remained the same at €5,7 billion, operating profit rose by almost 20% to €210 million. At the bottom of the line, a profit of €121 million was made. This is an increase of 11%.
After a few lesser years, FrieslandCampina seems to have recovered. Last year, the dairy cooperative launched a new strategy and then asked for 2 years to implement it. Schumacher said during an explanation of the figures that he was satisfied that the road to the top has been resumed, but is striving for more. "Profit should improve much further in the coming years." The CEO says the progress that has been made is on track. He does not comment on specific profit targets for the coming years.
High milk price, low performance premium
The member dairy farmers benefit from the better results. For example, the (pro forma) performance premium increases by €0,24 to €0,65 per 100 kilos. However, compared to previous years, this is still quite meager. Including additional premiums (such as pasture grazing premium and interest on member bonds), the milk price based on standard components amounts to €39,60 per 100 kilos. This is €1,65 more than in the same period last year. According to Schumacher, FrieslandCampina thus pays a competitive milk price. This is also evident from the milk price comparison van Boerenbusiness† The dairy cooperative is in the top three in this regard.
Less milk drives profits up
It is known that in previous years FrieslandCampina had to sell relatively large volumes on the spot market below the payout prices. Due to the considerably lower milk supply, this problem is now partially solved. Milk supply fell by 5% in the first half of this year to approximately 5 billion kilos. One cause of the decline is, among other things, the outflow of some hundreds of dairy farmers who turned their backs on the cooperative in 2018. There were also the necessary stoppers.
Despite the smaller surpluses, FrieslandCampina says that part of bulk butter and skimmed milk powder is still loss-making. This does not alter the fact that the decline in the milk supply (268 million kilos) is even so great that the top of FrieslandCampina planned construction of a new factory, which was announced in March, has been put back on hold for the time being.
PlanetProof milk not yet profitable
The much-discussed PlanetProof dairy, which has been in Dutch supermarkets since the end of last year, is not yet contributing to the profit. Nevertheless, Schumacher is enthusiastic about the new milk flow. Meanwhile, there are such 600 dairy farmers who participate. Schumacher says that the target volume of 1 billion kilos of milk per year within this milk flow still stands.
This means that on paper there is probably extra room for a few hundred more dairy farmers. FrieslandCampina will not let go of whether and when there will be a new recruitment round. "The demand in the market determines this," says Schumacher. In any case, there are no waiting lists, as is the case with organic milk. In any new recruitment rounds, interested dairy farmers will therefore start at zero and the location of the company will also be a determining factor in qualifying for this milk flow.
Despite his enthusiasm, Schumacher recognizes that the logistics within the PlanetProof milk flow are a major challenge. Without going into details, he says total logistics costs have increased. This while significantly fewer transport movements are required on paper, due to the lower milk supply.
More difficult sales in China
What does boost profits is the sale of branded dairy. Cheese, in particular, has performed well in recent months. Sales in Africa also showed strong growth, while some Asian countries also imported more dairy. Sales in China are clearly more difficult due to increasing competition.
These are mainly Chinese parties that assert themselves more in their home market. Chinese parties take interests in foreign milk processors and then sell the dairy in their own country. Schumacher says about this: "We have to work in China to maintain our position, given that this is our most important sales market."
Battle of the arm
Halfway through 2019 it can be concluded that FrieslandCampina's results show some progress. Looking back, Schumacher is therefore cautiously optimistic. For the remainder of this year, however, he still has a lot to do.
Wouter Job
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