Arla Group’s revenue hits €7.06bn in HY1 2023
By Ibidunni Banjoko
Arla Group has released its half year 2023 financial report which indicated that sales across the UK business’s global parent Arla Group fared better in the first half of 2023, with total revenues climbing by 10.7% to €7.06bn and branded revenues up 6.9% – driven by Lurpak with 7.2% growth and the Arla masterbrand with a 3.6% uplift.
But amid ongoing inflationary pressures across the business, plus commodity price volatility, the group saw pre-tax profits fall by 46% year on year, from €230m to €123m. Net profit fell by 46% to €103m, or 1.5% cent of revenue, compared to 3.0% in the same period last year.
“This was below our full-year expectations for the overall group,” Arla said, and meant it had adjusted its full-year revenue expectations down from the €13.6bn-€14.2bn bracket to between €13.2bn and €13.7bn.
As a result, Arla said it expected to deliver a full-year profit within the range of 2.8% and 3.0% of revenue, narrowed from between 2.8% to 3.2%.
While commenting on the report, Peder Tuborgh, CEO of Arla said: “As expected, the powerful external dynamics continued to make their mark on the dairy industry in the first half of 2023. Due to the persistent inflationary pressure consumers continued their shift from supermarkets to discount channels particularly in Europe, and traded down or even out of certain dairy products.
“The declining consumer spending combined with increasing global milk production pushed more milk volumes into the less profitable industry sales channels across the sector. Commodity prices drove down fast from an all-time high to seek a new market balance.”
He continued: “As anticipated, the market conditions put sales of our branded products under further pressure. However, during the decline we were able to protect our relative market shares against competitors. Relative to the downward development, we secured group earnings and a competitive milk price to our farmer owners, who experienced easing feed, fuel and fertiliser costs compared to 2022 levels, but were challenged by rising interest rates and growing labour costs.”
Peder further said: “Our revenue of EUR 7,067 million was 10.7 per cent higher compared to the first half of 2022. Arla’s average performance price remained much the same with only a slight decrease of 0.1 EUR cent/kg to 49.7 EUR-cent/kg. Compared to the full year 2022 however, the performance price saw a decrease of 5.4 EUR cent/kg.
“Negative currency effects, particularly from the historically low SEK, challenged us further As anticipated, our net profit of EUR 103 million ended below our full-year expectations at 1.5 per cent of revenue, down from 3.0 per cent last half year.”
Explaining further, the Arla CEO added: “Due to an unwavering focus in all markets on the extraordinary dynamics and Aria’s general efficiency and robustness we were able to soften the negative impact of the market dynamics and deliver a half-year supplementary payment to our owners of 1 EUR-cent/kg of milk for the -year volumes as planned.
“The general drop in dairy volumes sold in retail continued in the first half year. high level, our strategic branded me growth decreased, particularly in Europe, but also in International, leading to a total of 60 per cent. During the decline, we were able to protect our relative market share against competitors.”
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