Lousy market for baby food leaves a gap in FrieslandCampina’s profit | Financial

FrieslandCampina booked a profit of €62 million in the first half of this year, a decrease of 42.6% compared to the first six months of 2020. This decrease in profit is mainly the result of poor conditions in the normally lucrative baby market. and infant nutrition, particularly in Asia.

In addition, the Dutch dairy cooperative had to reserve an amount of €57 million due to a lost lawsuit in Thailand. FrieslandCampina was fined by the Thai court last month because the group allegedly charged too many costs to a customer between 2009 and 2019. FrieslandCampina has lodged an appeal.

Falling Birth Rates

FrieslandCampina expects the infant nutrition market to remain difficult for some years to come. “There is clearly a trend of rapidly declining birth rates in countries such as Malaysia and Vietnam of up to 20%, something that also affects our competitors,” says FrieslandCampina CEO Hein Schumacher. “China has simply disappeared as a market, because we cannot supply it because of the closed border with Hong Kong. It’s just zero there.”

Nevertheless, Schumacher does not see the poor prospects as a reason to withdraw from the Asian infant nutrition market. “Only in China are we now looking at how we can best serve that market and whether it might be better to look for a partner.”

All in all, the dairy giant has been able to maintain a reasonable level of turnover. That amounted to €5.5 billion in the past six months. That is a slight decrease of 1.8% compared to the same period last year, but excluding currency effects, it is an increase of 0.8%. Operating profit decreased 8.6% to €202 million.

Horeca

FrieslandCampina saw the food and beverage trade pick up sharply, but it cannot make up for the loss in lucrative baby food. “With corona measures being eased in many European markets, out-of-home activities are recovering and global demand for dairy is picking up sharply, resulting in rising basic dairy prices,” explains Schumacher.

The CEO remains cautious about the rest of the year. “In recent weeks, we have seen the infection figures rise rapidly in various countries. For the second half of the year, we are cautiously optimistic about the initiated recovery of the consumer and out-of-home channels, on the other hand, a recovery of the Asian infant nutrition market is not expected.”

FrieslandCampina announced a reorganization in November last year that should yield at least €100 million in savings. The dairy giant says it is on track. Until the end of this year, a thousand jobs must disappear, of which seven hundred have already been created by June.

milk price

The increased demand for dairy by consumers, both at home and in the catering industry, also has an effect on the price that farmers receive. Member dairy farmers received €37.25 for 100 kilos of milk delivered in the first half of this year, compared to €36.59 in the first six months of 2020. The price of organic milk rose from €48.73 per 100 kilos to €49 ,16.

It should be noted that less milk was supplied. Due to the cold weather in the first months of 2021 and higher animal feed prices, dairy farmers delivered a total of just over 5 billion kilos, 2.2% less than in the first half of last year.

On the other hand, the farmers do not receive an interim payment because of the disappointing results. In the first half of 2020 they still received 22 cents per 100 kilos of milk.

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