Arla Foods delivers strong results in the UK as cooperative steers through pandemic
Arla Foods UK reports revenue growth of 4.7 per cent in the first half of 2020 with a net revenue of £1bn (€1.2bn). The growth comes as foodservice closures shifted demand into shops and supermarkets with dairy proving a high priority product as the nation went into lockdown.
Consequently, the company underlines that the high revenue figures mask a complex story of changed profitability, operating costs and temporary demand which may not be sustained across the rest of the year.
Ash Amirahmadi, Managing Director Arla Foods UK explains, “As British consumers were asked to stay at home, many turned to our household brands like Arla Cravendale®, Lurpak® and Anchor®. With more people cooking and dining at home to stay safe, demand spiked and our retail sales grew. However, at the same time our foodservice business almost came to a complete standstill overnight as restaurants, coffee shops and canteens closed. So there was a dramatic shift in our business for most of the half-year, but our colleagues have adapted extremely well to working through difficult conditions and I am very grateful for their support and efforts to help feed the nation.”
In the first half of 2020, Arla achieved an overall Strategic Branded Revenue Growth of 16 per cent compared to the first half of 2019. The most significant increase came from Cravendale which grew 22 per cent, Lurpak at 20 per cent and Anchor at 17 per cent.
However, Arla Foods warns that whilst overall performance has been good in the first half of 2020, the lack of profitability in the liquid milk category in the UK market remains a challenge.
Cooperative values driving Arla’s COVID-19 response
Whilst dairy was quickly recognised as a priority purchase for shoppers as lockdown began and health concerns grew, Arla’s cooperative values drove many of its decisions. Capacity at its Settle site was allocated to the provision of UHT milk for the Government care packs while the Cravendale brand established a new partnership with Magic Breakfast to ensure that the most vulnerable children were still able to access nutritious milk.
All ten of Arla’s UK production sites, along with its distribution centres, remained open through the pandemic. Additional training for its key workers and farmer-owners ensured the business was able to operate and continue to feed the nation during the lockdown.
Full-year expectations maintained
Despite the challenging global market circumstances throughout the first half of 2020, the milk price to farmer owners remained stable at a competitive level. The Arla Group performance price – which measures the value Arla creates per kilogram of owner milk – was at 37.0 EUR-cent compared to 36.1 EUR-cent first half year of 2019.
Peder Tuborgh, CEO of Arla Group, comments, “It has truly been abnormal times this year and I am very proud of our people and our results. The Covid-19 pandemic is one of the most severe crisis situations I have experienced as CEO of Arla, and we – as many other food companies - saw a very quick change in consumers eating habits as countries shut down around the world. We quickly channeled milk from our Foodservice business into retail and successfully maintained a steady flow of products in demand while our Foodservice business found creative solutions to support their customers. This shows just how robust and agile our cooperative really is for our dairy farmers.”
Despite the uncertain external factors, the Arla Group still expects to meet its expectations for the full year with revenue outlook for 2020 in the range EUR 10.4 billion – EUR 10.8 billion, a net profit of 2.8 to 3.2 per cent of revenue and a year-end leverage at the bottom or below target range of 2.8 - 3.4.
To read or download the full Arla Group financial Half Year Report go to www.arla.com/investor