FrieslandCampina 2019 results: Higher profit and growth for branded products in a tough market

27 Feb 2020 --- FrieslandCampina has reported a slight decline in revenue, attributed to a 3.4 percent dip in milk supply, in a newly released 2019 financial overview. In the home markets (The Netherlands, Germany and Belgium), the company notes growth and profitability were under pressure. However, the Dutch multinational cooperative has reported a rise in profit by 36.9 percent to €278 million (US$304 million), mainly as a result of one-off gains and improved operating profits in Consumer Dairy and Dairy Essentials.

“The transformation we initiated in 2018 has enabled us to enhance our market-oriented way of working and make more effective use of available resources. We have realized more value from basic dairy and we grew our total branded sales by 3.1 percent. Consumer Dairy increased branded sales by a strong 5.4 percent,” details Hein Schumacher, CEO of FrieslandCampina.

“As a result, leaving the one-off proceeds from the sale of businesses aside, operating profit improved by 7 percent. This result has to be seen in the context of a challenging market, geopolitical developments and the headwind we experienced in the second half of the year due to the unrest in Hong Kong. This is an encouragement for us to continue the path we have taken and in close cooperation with our member dairy farmers take further steps in making our company future-proof,” he adds.

The company outlines that its 2.2 percent decline in revenue is mainly attributable to a 3.4 percent decrease in the milk supply in comparison to 2018 due to a decrease in the number of affiliated dairy farms and due to the termination of unprofitable private label products. Revenue of the Consumer Dairy and Ingredients business groups both increased, with branded sales in Consumer Dairy in particular rising by 5.4 percent. 

As a result of a shortage in lactoferrin and unrest in Hong Kong in the second half of the year, the Specialised Nutrition business group’s revenue declined. Dairy Essentials’ revenue was lower, but the business group improved its sales mix with higher volumes for added-value products (e.g. cheese) and lower volumes for commoditized product categories (e.g. basic milk powder, butter).

Operating profit and profit rose
The operating profit in 2019 increased by 26.3 percent to €432 million (US$473 million), compared with €342 million(US$374 million) in 2018. As a result of the increase in operating profit, profit increased by 36.9 percent to €278 million. The higher profit is in part due to an increase in the revenue from added-value products and due to one-off gains, such as the sale of the activities of cream liqueur producer Creamy Creation and the sale of the interest in CSK Food Enrichment C.V. The companies acquired at the end of 2018 in Spain, the Netherlands and the US were successfully integrated and contributed to revenue and profit. A considerable number of operating companies achieved brand growth.

Sustainability on track
In 2019, FrieslandCampina spearheaded targets to be more sustainable. The company reports that all ten sustainability targets have been met, with a decline in emissions throughout the supply chain. The greenhouse gas emissions from production and transport decreased by 10.6 percent to 723 kt CO2 equivalent (2018: 809 kt CO2 equivalent). The greenhouse emissions from member dairy farms decreased by 3.5 percent to 11,964 kt CO2 equivalent (2018: 12,398 kt CO2 equivalent). 

The percentage of green electricity worldwide rose to 94 percent (2018: 90 percent). 100 percent green electricity has been used in Europe (74 percent of total electricity consumption) since 2017. Of all green electricity, 25 percent was purchased from member dairy farms. And of the agricultural raw materials purchased, the percentage qualified as sustainable rose to 87 percent in 2019 (2018: 77 percent).

By Benjamin Ferrer