FrieslandCampina Revenues Down 14 Percent in 2009 on Dairy Selling Prices

Revenue was down 14 percent to 8.2 billion euros (2008: 9.5 billion euros). Operating profit before non-recurring income and expenses was up 26 percent (71 million euros) to 347 million euros.

17 Mar 2010 --- Royal FrieslandCampina N.V. has reported a good financial performance in a challenging dairy market in 2009, with a successful integration after the merger. In particular brand products in South-East Asia, Africa and Europe, and industrial specialties contributed to this good financial performance. Due to the recession, demand for dairy products lagged behind, and both selling prices and volumes sold were under pressure. Selling prices of such products as milk powders, caseins (milk proteins) and basic cheese, in particular, were disappointing. In line with the dairy market, the milk price paid to member dairy farmers fell sharply compared with 2008.

Revenue was down 14 percent to 8.2 billion euros (2008: 9.5 billion euros). Operating profit before non-recurring income and expenses was up 26 percent (71 million euros) to 347 million euros. Operating profit was up 4 percent (10 million euros) to 258 million euros. Profit for the year was up 35 percent to 182 million euros (2008: 135 million euros). Net cash flows from operating activities increased by 406 million euros to 757 million euros (351 million euros in 2008). Member dairy farmers of Zuivelcoöperatie FrieslandCampina receive a performance payment from the profit for the year 2009 of 0.59 euro per 100 kilograms of milk and an addition to the registered reserve of 0.35 euro per 100 kilograms of milk. The milk price (guaranteed price of 26.40 euros, plus performance payment of 0.59 euro) amounts to 26.99 euros (excluding VAT) per 100 kilograms of milk (2008: milk price of 36.37 euros, guaranteed price of 35.89 euros and performance payment of 0.48 euro).

Cees 't Hart, Chief Executive Officer, is pleased with FrieslandCampina's development in 2009: "Despite the challenging market conditions, we were able to improve the company's financial result compared with 2008. We also succeeded in improving our market share in a number of markets and expanding our customer base. This constitutes the basis for our company's further growth. However, the poor selling prices of such products as milk powder, casein and basic cheese put the result under pressure. We face the challenge of becoming less dependent on those product categories." For FrieslandCampina's member dairy farmers, results in 2009 were down on 2008. The poor dairy market conditions led to a sharp decline in the milk price and, hence, in member dairy farmers' income.

In 2009, global demand for dairy products on the part of both consumers and industrial producers decreased further, due to the financial and economic crisis. Differences between continents and between product categories did show. In Europe, consumption and use of dairy products decreased, while Asia showed a lower growth rate. The strong euro and the weak dollar meant that exports of dairy products outside the European Union (EU) were difficult, due to the relatively high selling prices compared with selling price levels in other regions. Consequently, a relatively large quantity of milk remained available in the European market and selling prices of milk powder, caseins and basic cheese were under heavy pressure in the first half of 2009.

The milk price for 2009 comes to 26.99 euros (excluding VAT) per 100 kilograms of milk (at 4.41 percent fat and 3.47 percent protein) (2008: 36.37 euros) - a 26 percent decline compared with 2008. The guaranteed price for 2009 is 26.40 euros (2008: 35.89 euros). The guaranteed price is based on the level of milk prices paid including subsequent payments in Western Europe and has been calculated on the basis of the milk prices of 12 German dairy companies, the milk price of Arla Foods in Denmark, milk prices of Bel Leerdammer, Cono Kaasmakers and DOC Kaas in the Netherlands, and the milk price of Milcobel in Belgium. To calculate the guaranteed price, these milk prices are weighted in proportion to the quantity of milk processed throughout a country. Milk prices fell due to the lower selling prices of dairy products. The performance payment FrieslandCampina pays amounts to 0.59 euro per 100 kilograms of milk (2008: 0.48 euro). The performance payment was up 23 percent compared with 2008. The performance payment depends on FrieslandCampina's financial performance, which improved in 2009.

Revenue amounted to 8,160 million euros - a 1,294 million euro decrease (14 percent) compared with 2008 (9,454 million euros). The total volume of milk processed dropped slightly (6 percent). The Consumer Products International business group (Asia, Africa, the Middle East, export) posted an increase in revenue of 2 percent to 1,889 million euros (2008: 1,858 million euros), in particular due to volume growth. The business group also managed to increase its market shares. The other business groups recorded decreasing revenues. Revenue generated by the Consumer Products Europe business group fell 14 percent to 2,852 million euros (2008:3,334 million euros), caused by lower selling prices and decreasing demand and, hence, lower volumes. The sale of Friesland Foods Fresh in Nijkerk, the Netherlands, adversely affected revenue by approximately 175 million euros. The business group did manage to increase market shares for a number of its product groups. The Cheese & Butter business group faced a decline in turnover of 18 percent to 2,099 million euros (2008: 2,549 million euros), due to lower selling prices and declining sales volumes of cheese, in particular, as a consequence of  decreasing consumption. There were also fewer purchases by a number of large customers as a consequence of the merger. For the Ingredients business group, the decrease was 16 percent, down to 1,149 million euros (2008: 1,372 million euros), primarily caused by the considerable decline in selling prices of such basic products as milk powder and caseins. The business group's volumes were up, due to the stepped-up production of skimmed milk powder in view of the reduced need for milk in other business groups.

On 2 January 2009, the collaboration following the merger between Friesland Foods and Campina actually started. 't Hart: "Throughout the company and cooperative, we sense the will and the enthusiasm to turn FrieslandCampina into a success. Staff have excelled in working together from day one. Thanks to this sound cooperation and the confidence in the opportunities offered by the merger, we succeeded in handling the many integration projects in a decisive and goal-oriented way. And with success: the benefits of the merger that were achieved already exceeded expectations in 2009."