FrieslandCampina cancels supplementary payment. How did that happen?

The corona pandemic is putting a heavy burden on FrieslandCampina's financial performance, financial CEO Jaska de Bakker emphasizes during the presentation of the annual figures on Tuesday morning (March 2). "The impact of the corona crisis on FrieslandCampina is greater than many may realize." Due to the crisis, profits for the globally operating dairy group are significantly lower due to the geographical mix, Schumacher said. "We have made profits in countries where we have to pay relatively high taxes, which means the tax burden on profits is high."

Direct and indirect effects
The profit and loss account for 2020 therefore shows a profit of €79 million, no less than €199 million less than for 2019. After taxes, this results in a total result of €50 million loss, no less than €309 million less than in 2019. 2020. The corona pandemic has a 'major influence', according to Schumacher. According to him, this is reflected in direct and indirect effects that have put significant pressure on the profitability of the dairy group in XNUMX.

For example, the price of basic dairy products (such as milk powder and butter) took a 'huge hit' due to the crisis in the second quarter of 2020, which was devastating for the Dairy Essentials division. "Prices of basic dairy fell by 33%, while in the same period the guaranteed price for members fell by 3%. That difference remains within the company." 

Schumacher also mentions the loss of food service (catering) due to the lockdowns for a long period of time in the past year as a direct effect. As a result, the group lost sales on which a high margin can normally be achieved. In bulk production and retail, FrieslandCampina's margins are relatively low; the group earns most of its income in food service and infant nutrition. Schumacher mentions, among other things, the sales of a specific line of dairy products for chefs in restaurants that largely disappeared. "Very important for our fat rating with products such as whipped cream, panna cotta and tiramisu."

Clap in Hong Kong
The developments in Hong Kong also meant a major financial setback for the group. Due to the corona crisis and political developments, China has closed its borders with Hong Kong, meaning that FrieslandCampina no longer has direct access (via the port) to this market. "Hong Kong was one of the most important profit makers in that region for us, but that has now de facto been reduced to zero," says Schumacher.

For example, FrieslandCampina's regular distributor in Hong Kong has also gone bankrupt. The dairy group is now trying to reach consumers in Hong Kong directly digitally for the sale of infant food, among other things. On mainland China, the market is developing favorably for FrieslandCampina, Schumacher emphasizes. "For example, we have gained market share in infant nutrition." And that is no easy feat, the CEO calculates, because the number of babies born in China has fallen drastically by 40% in recent years. This makes the competition fiercer.

Currency headwinds in Nigeria
In Nigeria, FrieslandCampina faced currency headwinds. Due to the economic problems in the African country due to the loss of oil revenues, the Nigerian naira devalued and a shortage of dollars emerged. This led to import restrictions. "We also had to lose a feather there," sighs Schumacher, "even though the company is doing well there with our best year ever. However, the conversion to hard euros was unfavorable."

In addition, FrieslandCampina has reserved €150 to €175 million for a reorganization of the company. Approximately €2020 million of this was invested in 106, which is therefore also charged to the result. However, this so-called restructuring is going well, Schumacher and De Bakker indicate. Costs have been reduced by approximately €2020 million since the second quarter of 75. "We will ultimately need the lower end of our budget to complete our program this current year," Schumacher expects.

Gloomy about the first part of 2021
The CEO emphasizes that FrieslandCampina is financially healthy and robust. Only the so-called resilience of the group can still be increased. Member financing can contribute to this, among other things, which the cooperative will vote on in June. "A few collective fallouts as a result of the corona pandemic have put significant pressure on our results, but progress has been made in many parts of our company. For example, sales of infant nutrition are growing in China, Indonesia and Africa and we are seeing growth in 28 of our 41 markets good growth. We are also gaining market share there. We are also taking the digital revolution well."

This does not mean that profits will recover to 2021 levels in 2019. CEO Schumacher is even decidedly gloomy about the first half of this year for 'his' company. "The negative structural effects of the corona pandemic are still present and will not be resolved quickly. We therefore have to implement our restructuring and programs well. Ultimately, we have to wait and see what this year brings us, but it will be one with black edges anyway."