Analysis Milk
FrieslandCampina and Arla are evenly matched
FrieslandCampina and Arla have both published their annual report for the previous year. Arla seems to have done slightly better than FrieslandCampina in terms of turnover and profit. At first sight, the latter paid a slightly higher milk price. How about that?
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FrieslandCampina still beats rival Arla when it comes to turnover: FrieslandCampina achieved a turnover of €11,5 billion last year, while Arla's turnover stood at €11,2 billion. Moreover, dairy cooperative FrieslandCampina still achieved higher turnover with a much smaller number of kilos of milk. Last year, Arla collected almost 3 billion kilos more milk from its own members.
It is striking that Arla's turnover grew faster than FrieslandCampina's turnover last year (+5,2% versus 3,2%). In terms of profit, Arla is doing better, especially when it comes to net profit.
The large cooperative dairy companies are similar in a number of respects, but are partly in different markets. For example, last year Arla achieved 60% of its turnover in Europe and 19% beyond. Furthermore, 7% of turnover came from the 'ingredients' business and 15% from bulk products. At the FrieslandCampina cooperative, 53% of its turnover was achieved in the European Union, 32% in Asia and Oceania and 11% in Africa and the Middle East. FrieslandCampina is more export-oriented, from a smaller base (the Netherlands and part of Germany). Arla has members in six European countries.
Member loss is not only an issue in the Netherlands
Both companies lost quite a few members last year. Arla saw its membership decline by 450 to 8.945 members, FrieslandCampina lost 536 member dairy farmers and had 10.564 members at the end of the year. The number of members decreased due to both business closures and departures to other customers. The latter was more important at FrieslandCampina than at Arla.
The remaining members produced more milk on average last year. At FrieslandCampina, the company average increased from 907.000 kilos to 922.000 kilos, according to the annual report. At Arla the average rose from 1,34 million kilos to 1,4 million kilos. Milk production per company is increasing faster at Arla than at FrieslandCampina.
Arla's milk price seems worse than it is
At first glance, member dairy farmers at the dairy cooperative FrieslandCampina received a slightly higher cash milk price last year than their colleagues at Arla. But the published prices are not entirely comparable. Everyone uses their own fat and protein levels, which makes the Arla price seem worse than it is.
FrieslandCampina saw its total equity fall slightly from 40,4% to 40,1%, but managed to strengthen its so-called 'resilience' from 15,6% to 17%. Arla, unlike FrieslandCampina, has a clearer equity and managed to increase this from 35% to 37% of the balance sheet total.
Both have a lot of goodwill
Both companies also have a considerable amount of goodwill on the balance sheet. This represents intangible values, tied to, for example, brands or sub-activities. Its value can sometimes fluctuate considerably and must also be regularly revalued, for example when selling activities.
If FrieslandCampina were to sell the Friso infant nutrition activities, part of the goodwill would have to be re-examined and part of the sales proceeds might also have to be settled. FrieslandCampina currently has more than €1 billion in goodwill on its books. Of these, more than 33% have to do with child feeding activities. Arla has more than €700 million on its books, mainly related to British brand operations.