Despite turnover at dairy manufacturer FrieslandCampina growing 10 % in the first half of 2017, its profit only grew 1.3 % compared to the year before. Price hikes lifted turnover, but problems in China lowerd profits.
Price increases
The company’s net turnover grew 10.7 % to 6.1 billion euro in the first six months of 2017. Higher prices (+ 10.3 %) and the acquisition of Engro Foods in Pakistan contributed to the improved results. Exchange rates however had a negative effect of 1 %. The smaller profit increase to 162 million euro is partially because of a 20 million euro devaluation of Chinese Huishan Dairy. FrieslandCampina has a 1.1 % stake in that company. Member dairy farmers’ total fee increased by 24.1 % to 2.1 billion euro, despite milk production dropping 1 %.
“The milk price for member dairy farmers recovered this year after a number of disappointing years. The higher sales prices for primarily butter and cheese lie at the root of this recovery. In West Europe we were successful in passing on the higher guaranteed price in the sales prices. This is reflected in the increased revenue. […] High growth levels were realised in Indonesia and Vietnam, and with cheese and butter. In Germany, the Philippines and Nigeria, result trends are not as positive due to local market conditions and negative currency translation effects, the latter particularly in Nigeria”, CEO Roelof Joosten said.
Stabilized China
FrieslandCampina’s turnover stabilized in China, mainly because of the enormous competition. Children’s food legislation will soon alter, banning a wide range of brands that have flooded the market with cheap alternatives. That is why FrieslandCampina now forecasts strong Chinese growth, a market that currently contributes 5 % to its turnover.
Several weeks ago, FrieslandCampina sold its fruit juice division to a Dutch investment firm, but that sale will only feature in 2017’s second half financial results.
