Analysis Insights
FrieslandCampina and Arla earn more with less
The two largest North-West European dairy cooperatives Arla and FrieslandCampina both had a good first half of 2024. Both companies are cautiously optimistic about the second half of the year. Arla is slightly more outspoken about this than FrieslandCampina. But that is not very surprising, given the fact that the Scandinavians are a month later in presenting their figures and a lot has changed in the dairy market in that month.
However, Arla also remains cautious amidst all the news about rapidly rising dairy prices. The company is concerned that consumers and retailers will struggle to keep up with the significant upward movements that the dairy market is currently experiencing.
Decrease in Turnover
Both Arla and FrieslandCampina saw a decrease in turnover compared to the first half of 2023; FrieslandCampina by around €370 million, Arla by roughly €500 million. The turnover of the former amounted to €6.433 billion, while that of the latter was €6.6 billion. However, both also saw an increase in their profits. FrieslandCampina's profit rose from €8 million to €183 million. Arla's profit increased from €103 million to €167 million.
The milk price started to rise again, although it was still significantly lower at FrieslandCampina than in the first half of last year. Adjusted for varying fat and protein contents, both cooperatives paid a roughly similar milk price in the first half of this year.
Of course, there are differences. Arla is more dependent on the retail sector in Europe for the sale of its products. Moreover, branded products are a more important focus for Arla. The company saw a further decline in retail sales but also noted a recovery in branded product sales. According to Arla, the trend reversed because the purchasing power of most European consumers improved. On average, 4.1% more Arla-branded products were sold, with sales in the Benelux and France increasing by almost 15%.
Cheese Business
Cheese is not such a big deal for Arla, although the company also sees an increasing demand for Gouda foil cheese, a product that is very important for FrieslandCampina but not necessarily under a brand. FrieslandCampina, on the other hand, saw a strong recovery in cheese sales. The Dutch dairy giant relies more on dairy sales outside Europe, where it experiences significant growth. FrieslandCampina also benefits greatly from the sales of ultra-premium infant nutrition in China. This is something Arla does not have. Both companies continue to derive significant profits from their ingredient divisions, although both experienced a decline in revenue and profit in that sector.
Arla remains the company with the largest and most stable milk supply. In the first half of 2024, around 7 billion kilograms of milk were supplied, almost the same as in the first half of 2023. In contrast, FrieslandCampina lost about 3% of its milk supply, with a total supply of 4.7 billion kilograms. Since both companies are almost equal in terms of turnover, it is easy to calculate that FrieslandCampina added the most value to the milk and, based on profits, also had the highest margin in the past half-year.
Difference in Bonus Payment
However, this is still a mid-term assessment, with FrieslandCampina also benefiting from the major clean-up that CEO Derck Jan van Karnebeek initiated almost immediately after taking office at the Amersfoort-based company. Now it is important to maintain the positive developments. Therefore, the company has not yet paid out a partial bonus payment for the first half of the year, while Arla continues to pay according to schedule, at least 1.5% bonus payment, possibly more. FrieslandCampina also needs to ensure that its equity does not further decrease. Arla has already secured this.
