Arla defies squeeze on spending to deliver top results

YORKSHIRE-based dairy company Arla UK yesterday delivered full year results which beat expectations, despite a challenging market in which consumer spending was squeezed.

Arla’s UK business group – Consumer UK – achieved a turnover of around £1.7bn in 2012, compared with £1.5bn in 2011.

A spokesman for Arla Foods UK, which is based in Leeds, said this improvement had been achieved at a time when discount stores were continuing to increase their market share.

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In a statement, Arla UK said yesterday: “This has resulted in significant retail price competition on products such as fresh milk and heavy promotions within the butter, spreads and margarine category, which Arla UK has successfully managed.”

During 2012, Arla became the UK’s largest dairy company following the completion of its merger with Milk Link, another UK dairy cooperative.

Work also started on the company’s one billion-litre dairy in Aylesbury, Buckinghamshire.

The statement added: “There was good growth for Arla’s branded products, and despite very challenging market conditions, Cravendale maintained its strong foothold.

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“In addition, there were significant gains within the own label milk, cottage cheese, cheddar and speciality cheese categories.

“The launch of Lurpak Lightest in January 2012 has been a resounding success, delivering £13.5m in first-year sales. Production at the dedicated butter making facility at Westbury Dairies has continued to increase with the transfer of Anchor block butter in the autumn.”

In September, Arla announced its new milk pricing and sourcing model, which includes sharing all liquid milk premiums to ensure that all members of Arla Foods Milk Partnership can benefit.

Peter Lauritzen, the executive vice president for Consumer UK, said yesterday: “I am delighted that we have achieved our vision of becoming the UK’s number one dairy company and that, despite the tough conditions in which we are operating, have made good all round progress in terms of our strategic objectives.

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“We anticipate that the 2012 market challenges will continue throughout 2013 and, as such, have clearly defined objectives for the coming 12 months to improve the bottom line in order to enhance returns for our co-operative owners.

“These focus on realising the benefits of the merger and exploiting the growth opportunities this presents, generating supply chain efficiencies...increasing the market share of our brands and delivering our new dairy at Aylesbury on time and to budget.”

Altogether, Arla UK employs around 4,000 people.

Jan Pedersen, Arla UK’s finance director, said yesterday: “Regarding Arla UK’s outlook for 2013, it is anticipated that the 2012 market challenges will continue throughout 2013 and we forecast a turnover this year of £2.1bn.

“Our focus for the year is to improve the bottom line in order to enhance returns for our co-operative owners.”

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Arla UK is still recruiting staff for its new dairy at Aylesbury, which has created 700 jobs, and will be operational in the autumn.

Arla UK is also on a farmer recruitment drive, to secure an extra 500 million litres of milk in the UK.

Since April 2007, Arla Foods UK has been a subsidiary of Arla Foods amba, a co-operative owned by around 9,400 Danish and Swedish milk produc- ers.

Arla Foods amba is one of Europe’s largest dairy companies, sourcing around 8.4 billion litres of milk a year.

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It employs 16,500 people worldwide, with Arla products sold in more than 100 countries.

In 2009, Arla invested more than £70m at its flagship dairy in Stourton, near Leeds.

In September 2010, it was also announced that Arla Foods UK and Milk Link had entered into a joint venture to operate a skimmed milk powder and bulk butter facility which is based in Westbury, in Wiltshire.

A landmark year for company

During 2012, Arla Foods amba continued to grow through mergers and acquisitions.

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Turnover rose 15 per cent to DKK (Danish Krone) 63.1bn, against DKK 54.9bn in 2011.

For each kilogramme of milk supplied to the company by the owners – the 12,300 cooperative members in Sweden, Denmark, Germany, UK, Belgium and Luxembourg – Arla generated earnings of DKK 2.71 in 2012, the performance price.

It was four per cent lower than in 2011 at DKK 2.81 due to tougher market conditions in the first half of the year.

Arla Foods’ CEO Peter Tuborgh described 2012 as a landmark year.