Analysis milk
FrieslandCampina is laying the foundation for a top year
FrieslandCampina's results for the first half of 2024 should provide relief to both the company itself and its members. Turnover decreased, as did milk supply, but results improved in almost all business units. The net bottom line also remains a nice amount at €183 million. There is even a sausage in front of the members again, in the form of a pro-forma additional payment of €1,31 per 100 kilos of milk.
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Yet the company is not paying out anything for the time being, which is a bit of a pain, but seems like a sensible move. After all, the second half of 2024 is still full of uncertainties, both politically, economically and monetaryly.
Political uncertainty is a problem
According to CEO Jan Derck of Karnebeek, "the current political uncertainty" does not help and there is a need for a clear framework first. He is mainly referring to more certainty regarding manure policy and derogation. The company believes that it must quickly become clear where Dutch dairy farming stands.
Chinese setting
There are also plenty of uncertainties internationally, such as the situation in various sales markets. The CEO of FrieslandCampina is remarkably optimistic about the important Chinese sales market, where Friso's premium infant food is doing very well. He calls it a privilege to be able to supply products for the Chinese market and admits that "the Chinese setting" is not entirely predictable due to trade policy disputes between Brussels and Beijing. However, according to him, China also attaches the necessary value to the high quality infant nutrition that FrieslandCampina can supply.
New factories
In addition to the Chinese infant nutrition market, there are other markets where things are not going badly. Such as the dairy market in Indonesia, Malaysia and other countries in this region. FrieslandCampina has in the first two countries new factories opened and sales are going well. Partly thanks to the strong markets that the company has there. Van Karnebeek characterizes the markets there as "marginal, with brands that appeal to the imagination." The latter is different from Europe, where FrieslandCampina focuses more on private label and achieves improved results with cheese.
Control over cheese
The latter is a great relief for the company, because regaining control of the cheese market and being able to make money from it instead of constantly focusing on it was a persistent problem at FrieslandCampina. Van Karnebeek and CFO Hans Janssen rightly think it is one of the best achievements of their employees. In fact, things are going well in almost all business units, even where the results are lower than in the first half of last year, such as in Ingredients. The decline is due to an exceptionally high result from subsidiary DFE-Pharma at the beginning of last year. Van Karnebeek and Janssen presented in front of the members the results are therefore quite relaxed. Only the Europe business unit really lagged slightly behind. But with a profit of €183 million, the highest first half-year profit ever was achieved.
Cut back further
The company's stronger results aren't just due to better sales. Savings also contribute significantly. More than €150 million has been saved in the past six months. That is a significant amount, but still far from the €400 to €450 million that needs to be achieved in total. Janssen believes that it is not an unattainable goal after all. According to him, there is still a lot of room to save on purchasing and significant additional savings can be made, among other things, by adjusting formulations. Factory closures can never be ruled out, but they are not part of the savings plan.
All in all, a good foundation has been laid for an excellent annual result, with a good subsequent payment, but the second half of this year should not bring any new surprises.
Recruitment as a counterbalance
Van Karnebeek and Janssen do not dare to say how the milk supply will develop further. They refer once again to politicians, who are responsible for the preconditions under which dairy farms must operate. Furthermore, FrieslandCampina is working hard to retain existing members and recruit new members and suppliers. This must be achieved with the help of a high milk price and a larger working area.
For the latter, the search region has been expanded in Belgium and Germany. This has already produced the necessary results, according to Van Karnebeek, but he does not want to mention numbers yet. The recruitment campaigns are intended to counterbalance the decline in the number of members due to company closures and member departures. Only when this has been achieved will there be long-term relief at FrieslandCampina again.