FrieslandCampina’s profits fell 25% in the first half of the year as the Dutch dairy giant saw margins squeezed by falling prices, DairyReporter reports.

The company delivered solid volume growth across most markets, but weaker prices left revenue flat at €6.8bn. With plentiful global milk supply and softening demand pushing prices down, operating profit dropped to €269m from €363m in the same period a year earlier.

Milk supplies up

Milk supply rose 19% in the first six months, largely on the back of the merger with dairy co-op Milcobel, while member farmers were paid considerably less — €40.49 per 100kg against €55.63 a year ago. 

The co-op expects the Milcobel tie-up to deliver greater economies of scale over time, but for now the extra supply in north-west Europe is outstripping its processing capacity, CEO Jan Derck van Karnebeek said, which in turn limits output of high-value products.

Even so, van Karnebeek pointed to positive developments, saying the group’s focus on higher-value-added products, cost control and commercial execution had paid off.

Better performance in some markets

“The improved results in Europe, Asia, Ingredients and Middle East, Pakistan & Africa business groups underline the strength of these choices,” he argued.

The company now expects a stronger second half with further volume growth, particularly in higher-value products, while cautioning that although commodity dairy markets appear to be stabilising, margins and results remain sensitive to supply and demand.

H1 key figures

  • Revenue: €6.8bn — flat year on year;
  • Operating profit: €269m versus €363m a year earlier;
  • Milk supply: +19% — mainly due to the Milcobel merger;
  • Farmgate price: €40.49 per 100kg against €55.63 last year.

Source: DairyReporter