FrieslandCampina Reports Improved Results in Most Areas of the Business for 2013

13 Mar 2014 --- FrieslandCampina has reported strong results for 2013, with its member dairy farmers receiving a historically-high milk price, according to the company. Nearly all areas of the business saw improved results for 2013 compared with previous years.

All the strategic growth categories except dairy-based beverages in Europe improved their performance. The infant nutrition category achieved the strongest volume growth. The Cheese, Butter & Milkpowder business group achieved the greatest result improvement in 2013. Due to the persisting crisis in Europe a goodwill impairment of 200 million euro was charged to the result.

“2013 was a good year for FrieslandCampina,” said ceo Cees’t Hart. “The improved result was due primarily to volume growth in the three strategic growth categories (infant nutrition, dairy-based beverages and branded cheese), the passing on of the higher guaranteed price, far-reaching efficiency improvements in production, and cost control in the European operating companies.”

Hart explained the company is ahead of schedule with its route2020 strategy. “At the same time we are continuing to improve our processes and will pay even closer attention to costs. We will also continue investing in the renewal and expansion of our milk processing capacity so as to ensure that we can continue processing all the milk supplied by our members, now and after the withdrawal of the milk quota in 2015, into dairy products for which there is a demand elsewhere in the world. All in all we have invested 1.8bn euro during the past three years.”

Also in 2013, the group opened its new Innovation Centre in Wageningen and it acquired Zijerveld and Veldhuyzen BV and G den Hollander Holding BV, to strengthen its position in cheese. It restructured its business in Europe to improve its position there and it repurchased Friso infant nutrition brand name in Benelux. The company also acquired 7.5% interest in Synlait Milk in New Zealand.

Total volume rose by 3% compared with 2.4% in 2012. Volume growth within the three growth categories of infant nutrition, dairy-based beverages and branded cheese, amounted to 5.4%, compared with 4.1% in 2012. Most of the organic growth was achieved in the infant nutrition category in which a total of 10.8% volume growth was achieved in the consumer market and business-to-business market. The dairy-based beverage category also achieved volume growth, mainly in Asia and Africa where 10.8% volume growth was achieved (2012: 9.5%). In Europe the development of dairy-based beverages lagged behind due to the economic crisis and volume declined by 3.4%. The volume of branded cheese rose by 9.5% due to increased export outside Europe (2012: 4.4%).
Hart said that 2013 proved how difficult it is to predict what the dairy market will do. “The rapid rise in the listed prices for commodities and the persistently high price level throughout the year took producers and customers around the world by surprise. FrieslandCampina is, therefore, remaining cautious in its forecasts and is not making any predictions regarding the expected results for 2014.”
In 2014 FrieslandCampina anticipates achieving further growth with infant nutrition and dairy-based beverages in Asia and Africa and has taken increasing competition from local suppliers of dairy products into account. In 2014 Europe is expected to have to continue contending with consumers who limit their expenditure because their incomes are under pressure from higher costs and increasing unemployment.  

The worldwide offering of milk is expected to increase slightly in 2014. Weather conditions and the availability of dairy cattle remain the key factors for milk production. New Zealand is expected to produce more milk, but production in North and South America is expected to continue lagging behind. In the European Union growth is expected to be below the available quota set in the previous milk quota year (2014 – 2015). In the Netherlands, Denmark and Germany milk production will probably increase further in advance of the ending of the milk quota in 2015.  
The long-term forecasts for the dairy market remain positive. As the world’s population grows and welfare increases in many regions the demand for dairy products will continue rising. Growth in Asia is expected to remain positive. Africa is a continent with enormous potential. Currency developments, weather conditions, political unrest and differences of opinion between sections of the population could, however adversely affect developments. The far-reaching globalisation is affected product price development and is leading to more market volatility. This can lead to increasing exchange rate differences.  

By Sonya Hook