FrieslandCampina’s Profit up by 85%

27 Aug 2015 --- In the first half of 2015 the profit of Royal FrieslandCampina N.V. rose by 85 percent to 192 million euro (first half of 2014: 104 million euro). Margins rose due to the sale of more products with a higher added-value, positive currency translation effects, lower purchasing costs and the lower guaranteed price for raw milk. At 5,645 million euro revenue was at the same level as in the same period in 2014 (5,635 million euro). The milk price for member dairy farmers fell to 36.48 euro per 100 kilos of milk (first half of 2014: 44.19 euro) due to the lower guaranteed price for raw milk. Value creation (performance premium plus issuance of member bonds) rose by 2.49 euro to 4.22 euro (first half of 2014: 1.73 euro). The interim pay-out amounted to 2.018 euro per 100 kilos of milk (2014: 0.825 euro).

Roelof Joosten, CEO of Royal FrieslandCampina N.V.: “In the current uncertain markets we were able to achieve a good result. This proves the success of the route2020 strategy, aimed at achieving sustainable growth and value creation, which we have followed since 2010. Thanks to our strong market positions and cost reductions we have managed to compensate the drop in the guaranteed price for the member dairy farmers to an extent in the milk price. As a result we will be able to pay the member dairy farmers an interim pay-out of just over 2.00 euro.”

Considerably higher profit, stable revenue in uncertain market
• Revenue stable at 5,645 million euro due to 1.6 percent positive volume-mix effect, 6.4 percent lower sales prices and favourable currency translation effects of 4.4 percent
• Growth in China, Hong Kong, Indonesia, Africa, South-east Europe and in the FrieslandCampina Ingredients business group
• Lower volumes in Western Europe due to difficult market conditions
• In the second quarter of the year lagging demand coupled with an increased supply of milk puts pressure on prices, especially of commodities
• Operating result up by 81.5 percent to 314 million euro in part due to the lower guaranteed price for raw milk and lower purchasing costs: positive currency translation effects on the operating result amount to 23 million euro
• Profit up by 84.6 percent to 192 million euro; positive currency translation effects amounting to 17 million euro
• Cash flow from operating activities up to 319 million euro (first half of 2014: -192 million euro) in part due to the higher profit

Milk price significantly lower, interim pay-out considerably higher
• Guaranteed price for the Cooperative’s member dairy farmers down by 24.3 percent to 31.84 euro
• Value creation (performance premium of 2.69 euro and member bonds reservation of 1.53 euro) up by 144 percent to 4.22 euro (first half of 2014: 1.73 euro)
• Milk price down by 17.4 percent to 36.48 euro
• Interim pay-out (75% of the pro forma performance premium) to member dairy farmers in September 2015 up by 145 percent to 2.018 euro per 100 kilos of milk
• Milk produced by member dairy farmers up by 1.8 percent to 4,905 million kg of milk compared to first half of 2014
Per 100 kilos of milk excluding VAT at 3.47% protein, 4.41% fat and 4.51% lactose. The milk price, performance premium and reservation of member bonds are all pro forma.

route2020 strategy
• Achievement of the strategy forms the basis of the good results
• Volume mix improvement of 1.6 percent
• 15.8 percent volume growth with Friso and B2B infant nutrition
• Dairy-based beverages volume down by 0.5 percent due to difficult market conditions
• Volume of cheese for the retail segment up by 14.0 percent and margins improved. Volume of branded cheese down by 6.0 percent. Excluding the effect of the Russian boycott the volume of branded cheese rose by 0.5 percent
• Investment level down
• A further reduction in the number of accidents at FrieslandCampina facilities

Investments in efficiency and the organisation
• Friesland Huishan Dairy joint venture established on 1 April 2015. The company will exploit a fully-integrated chain of infant nutrition suppliers in China
• 182 million euro invested in increasing interest in FrieslandCampina WAMCO Nigeria Plc. from 54.58 to 67.81 percent
• 25 million euro provision for reorganisation costs related to the closure of Den Hollander Food in Lochem and efficiency measures in the Beilen, Leeuwarden and Gütersloh production facilities
• First phase of the new FrieslandCampina Ingredients production facility for special milk powders and ingredients in Borculo completed and the sustainable energy provision (pyrolysis installation) goes into service

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