​UK’s leading dairy business announces interim results

Arla Foods UK sees strong growth in key brands and as the UK’s leading dairy business reaffirms commitment to product innovation

• The UK, Arla’s biggest market, saw volumes increase driven by investment in branded products and innovation
• The outlook for the second half of 2016 is positive for Arla Group
• Expects improvement in market situation

Arla Foods amba ‘the Group’ has today released its 2016 half-year results announcing strategic branded sales grew 6.1 per cent in the first half of 2016, although decreasing market prices in Europe negatively affected Group revenue to EUR 4.9 billion, a decrease of 5.3 per cent compared to the first half of 2015.

The outlook for the second half of 2016 is positive, and the Group maintains its full-year expectation regarding profit. In the UK, despite challenging market conditions, Arla Foods UK has strengthened its like-for-like business performance during the first half of 2016 compared to the same period in 2015.

Volume driven revenue¹ in the UK increased by 1.5 per cent year-on-year, as a result of a strong focus on its branded portfolio and the launch of a range of innovative products dialling-up the goodness of dairy.

Key UK highlights include:

• Lurpak increased by 5 per cent in volume growth²
• Castello grew by 24 per cent in volume terms²
• Arla Lactofree continues its double digit volume growth, up 20.9%²; and
• Having entered the UK yogurt category in 2015, Arla has significantly grown Arla skyr (+42.9%³) and Arla Protein (+72.8%³) brands.

The first half of 2016 continued to see product innovation within the Arla brand portfolio underpinning its focus on healthy and natural. This included Arla Best of Both in January, quickly followed by further innovations including Arla skyr yogurt drinks and Arla Protein Snack Pots, Arla Protein Cottage Cheese, Lactofree Natural Yogurt and Arla Cravendale 250ml bottle in the on-the-go aisle.

Tomas Pietrangeli, managing director, Arla Foods UK, said: “In the UK, we have driven growth through our portfolio of branded products which include our three key global brands Lurpak, Arla and Castello. We also launched a range of products which are performing well and which we are confident will positively impact our full year performance.For the rest of the year, we will focus on implementing the key principles of our newly launched UK Strategy 2020, where we will continue to champion British dairy.This, in turn, will help generate greater returns for our farmer owners.”

Commenting on the recent EU referendum, Tomas added: “Despite the potential challenges of Brexit, the UK remains a hugely important market for Arla and the outcome has not changed this.While we are uncertain of the implications, I hope to see our products continue to move freely to and from the UK across the markets in which we operate.We are in a strong position to not only weather any storms that may arise, but also take advantage of any opportunities.”

Strong Group performance

Arla’s total milk volume in the first half of 2016 increased by 1.9 per cent to 7.2 billion kg. While taking in more milk, Arla managed to utilise that increased volume in the most profitable sales channels, retail and foodservice.

Arla’s strategic branded volume-driven revenue growth of 6.1 per cent is up from 3.1 per cent in the corresponding period last year.

Peder Tuborgh, Arla Foods CEO, said: “In a very difficult market environment, we have continued to improve the quality of our business by relentlessly pursuing our strategic direction. Our dairies have effectively processed 119 million kg of extra milk from our owners and our commercial teams in all markets have proactively ensured that this extra volume has been sold into retail and foodservice channels, avoiding it being used for the production of less profitable commodity products. This is crucial at a time when Arla and our farmer owners continue to be challenged by the global market decline.”

During the period, increasing milk volumes across Europe generated downward pressure on market prices, and global milk prices reached their lowest level for many years. A more stable market situation is expected in the second half of 2016 with milk volumes flattening in Europe and, as a result, market prices are levelling out.

Peder Tuborgh continued: “Looking at the second half of 2016, we see a positive trend taking hold as the milk production is declining again in Europe and prices are starting to go up. This will be a much welcomed development for Arla and for our farmer owners. We have already announced our first increase in the on-account milk price to our farmers, with effect from September, and we expect an improving market situation as we move towards the end of the year. Our success in the second half of 2016 is reliant on our ability to continue to deliver our Good Growth 2020 Strategy, and thereby improve the milk price to our hard-pressed farmers.”

Arla expects revenue for the full year to be within the range EUR 9.5 - 9.8 billion and the profit share to be within the target range of 2.8 - 3.2 per cent of revenue by the year-end.

Ends

Notes to editors:

• You can download the entire consolidated half-year report 2016 at www.arla.com
• Read the Group’s half-year results press release here
• The Group expects to announce its full-year results for 2016 on 22 February 2017
• The trademarks Arla, Castello, Lactofree and Cravendale are registered trademarks of Arla Foods





¹ Volume-driven revenue growth excluding price impact – H1 2016 versus H1 2015 (internal Ala data)

² Volume growth, six months to 30 June 2016 versus equivalent period 2015 (internal Arla data)

³ Volume growth, six months to 30 June 2016 compared to six months to 31 December 2015 (internal Arla data)

Arla Foods is a global dairy company and co-operative owned by 12,700 dairy farmers with circa 2,700 of whom are British.

Dating back to 1881, Arla’s purpose is to secure the highest value for its farmers’ milk, while creating opportunities for their growth. With production facilities in 11 countries and sales offices in a further 30, Arla is the world’s fifth largest dairy company and largest supplier of organic dairy products. Arla has a total of more than 18,000 colleagues and its products are sold under the well-known brands Arla®, Lurpak® and Castello® in more than 100 countries.

Arla Foods UK is the largest dairy company in the country and is home to leading dairy brands Anchor®, Cravendale, and Lactofree® with a turnover of €2.9 billion. As well as being a leading supplier of fresh milk, number one in butter, spreads and cream, Arla is the UK’s largest cheese manufacturer. It has also built the world’s largest fresh milk facility located at Aylesbury and has plans for it to be the first zero carbon site of its kind. The UK business has a team of approximately 3,500 colleagues located at its dairies, distribution centres and head office.