Half year results 2024: Arla's robust first half of 2024 is paving the way for enhanced sustainability efforts

Arla Foods has delivered a robust half-year performance in 2024 where the positive trajectory from the later part of 2023 has continued. The performance has made it possible for Arla to increase the milk price by 5 EUR-cent/kg milk compared to the second half of 2023, and as expected, it is also possible to pay a half-year supplementary payment to farmer owners of 1 EUR-cent/kg milk based on the half-year volumes.

“We are satisfied that the momentum created by our farmer owners and employees in 2023 has continued into 2024, and today Arla is able to announce a robust half year result with a competitive milk price that paves the way for enhanced sustainability efforts going forward,” says Peder Tuborgh, CEO, Arla Foods.

In the UK market, Arla has delivered a strong performance across its branded portfolio with total volume growth of +11% and branded revenue increasing at +5.4% . This has predominantly been driven by Lurpak®, Arla Protein® and its foodservice brand, Arla Pro®. In foodservice, total volume growth was up over +13% with branded revenue up +5.6%, driven by new business wins. Total net revenue saw a decline by 11% to £1.2bn vs the same period last year, as a result of falling commodity and commercial prices.

Bas Padberg, managing director of Arla Foods UK, comments: “Following the high levels of inflation that we saw back in 2023, Arla has continuously reinvested back into our brands, to deliver value for our shoppers and ensure the necessary growth needed to return the highest possible milk price to our farmer owners. This combined with increased consumer buying power in the first half of the year has led to a strong performance across our branded range.

“Whilst we expect consumer confidence to remain into the second half of the year, trading conditions will be more challenging than we have seen in recent months as commodity markets rise again and we balance reduced global supply with the increasing demand for dairy.”

The first half of 2024 saw Arla announce major investments totalling £300m across a number of its UK sites, including state-of-the-art technology at its Taw Valley Creamery, which will allow Arla to capitalise on the opportunity for exporting mozzarella around the world.

“Arla and our farmer owners are wholly committed to the future of British dairy production. As people are increasingly looking for healthy, tasty food that is made in the best way for the environment, dairy plays a key role in this. These investments will help us futureproof our business and ensure we secure the future of our food to keep dairy staples in fridges across the country,” adds Bas Padberg.

Total Arla Group results

Arla’s strategic brands had a volume driven revenue growth of 4.1% in the first half of 2024 compared to a decrease of 6.0% in the first half of 2023. The growth was spearheaded by the Lurpak®, Puck® and Arla ® brands which respectively grew volumes by 7.9%, 4.4% and 3.8% in the first half of 2024.

The performance price for the first six months of 2024 was 47.5 EUR-cent/kg and the total Arla Group revenue ended at EUR 6.6 billion. In the first half of 2024, Arla achieved a net profit of EUR 167 million.

“We are very pleased to deliver a competitive milk price. At the same time, the return to branded growth happened with a higher magnitude than expected due to the strength of our brands and successful efforts to regain growth, so we are on a positive trajectory,” says Torben Dahl Nyholm, CFO, Arla Foods.

Rise in sustainability initiatives on farms

In the first half of 2024 Arla consolidated its various elements of sustainability work under the name FarmAhead™ Technology. It is Arla’s ambition to reduce its emissions on farm by 30% in 2030. Over the past two years, Arla has reduced nearly 1 million tons of CO2e.

An integral part of FarmAhead™ Technology is FarmAhead™ Incentive, Arla’s groundbreaking point-based system, that rewards past and future climate and environmental sustainability activities on farm directly in the milk price. Each point that the farmer achieves will trigger 0,03 eurocent per kilo of milk they deliver to Arla. Activities with the biggest improvement potential trigger the most points, and a maximum of 80 points is currently available.

Since its activation in July 2023, Arla farmers have continued to increase the points average from 49 to 53 in the second quarter of 2024. “With the competitive milk price and strong supplementary payment, our farmers are able to continue to invest in sustainability efforts on their farms. I am pleased that our farmer owners have implemented more emission-reducing actions and improved their performance,” says Peder Tuborgh, CEO, Arla Foods.

Linking Arla farmer owners’ actions with customer demands for dairy with lower carbon footprint, Arla has continued to build the commercial arm of FarmAhead™ by offering dairy with claimable CO2e reductions at a premium price. Last year, several UK customers joined a FarmAhead™ Customer Partnership and in June 2024, all of Arla’s Danish retail and foodservice customers joined.

Outlook for 2024

Looking ahead into the second half of 2024, Arla anticipates the volatile market conditions driven by geopolitical tension and uncertainty to continue. However, the positive trend on consumer purchasing power from the first half of 2024 should prolong into the second half, especially in Europe as inflationary pressure continues to subside and wages increase. This is anticipated to translate into a continued upturn in demand for dairy, although it is uncertain how consumers will react to the expected higher retail price levels following the commodity price increases. The uncertainty is also underlined by a lesser volume of available milk on a global level.

The performance price and revenue for the first half of 2024 is slightly lower than in the 2023 half year report. However, with the expectation that the strong market momentum from the first half of 2024 continues into the second half of 2024, Arla has adjusted its full-year expectations for revenue from EUR 13.2-13.7 billion to EUR 13.4-13.9 billion and still expects to deliver a profit within the range of 2.8-3.2%. Arla has also adjusted its full-year expectations for strategic branded volume-driven revenue growth from 1.0-3.0 % to 3.0-4.0 %.

Through Arla’s climate strategy, including the FarmAhead™ incentive programme, Arla expects to keep the current pace in the efforts to reduce the company’s climate impact. Arla fully expects to reach the 2030 emission reduction targets – a 63% reduction in scope 1 and 2 emissions and a 30% reduction in scope 3 emissions per kg of milk and whey.

“We are proud that Arla Foods is performing well in a volatile global market. Customers around the world are demanding our products, we are ready to deliver, and we will continue to invest in the company's future”, says Peder Tuborgh.