Arla Foods UK records revenue growth in first half of 2018
Despite globally challenging market conditions including the impact of a continued weak pound and changes in fat and protein prices, Arla Foods UK delivered a steady start to the first half of the year.
A 6.7% volume driven branded growth contributed to an overall net revenue growth of 2.3%, comparative to the first half of 2017, increasing revenue to £961m (€1.093bn).
The 6.7% strategic branded sales volume for Arla Foods UK was supported by the core Arla brand at 9.3% growth, as well as Lurpak at 2.2% growth and Castello at 8.8% growth in the UK. Within the Arla portfolio, Arla’s foodservice range Arla Pro grew by 52.8% whilst sales of B.O.B (Best of Both) grew at 38.1%.
Arla Foods UK managing director, Ash Amirahmadi comments, “Year on year, Arla’s portfolio continues to lead the way in driving growth across the UK dairy sector. Our decision to invest to build capability in the growing channels of foodservice, online and convenience is paying off and will continue to do so as we further develop the UK business.”
At a Global level across the farmer owned cooperative, total Arla Group revenue grew by 2.2% to €5.1 billion, supported by higher strategic branded sales volumes, which were up 3.0% due to strong performance by the Arla brand, Lurpak, Puck and Castello.
Each year, Arla targets an annual net profit share in the range of 2.8 to 3.2% of revenue. This allows the company to balance its retained capital for future investments and provide a supplementary payment to farmer owners, while continuing to pay out the highest possible share of our ongoing profit to our farmer owners via the prepaid milk price throughout the year.
In the first half year of 2018, Arla delivered a net profit share of 2.2%, up from last half year’s profit share of 2.1%. The company expects to reach its full year net profit share to be within the 2.8 to 3.2% target range.
Calcium begins to deliver
Early in 2018, the three year transformation and efficiency programme Calcium was announced by Arla’s management to reduce cost by €400+ million across the Group. For the full-year of 2018, Arla expects Calcium to deliver a positive contribution of at least €50 million, up from the initially forecasted €30 million.
“I’m pleased to say that Calcium is starting to deliver – every week we see steady progress across the programme. Our top management, leaders and employees are working adamantly on each initiative that will enable us to pay a more competitive milk price to our farmers, compete more effectively in the markets and categories we operate in worldwide, and boost the strategic investments that will sustain our long term profitable growth,” says CFO in Arla Foods, Natalie Knight.
Of the €400 million Calcium is expected to deliver by 2021, Arla aims to direct €300 million to its farmer owners via the prepaid milk price while reinvesting €100 million into areas that fuel growth.
Full year expectations
For the full year, Arla will remain focused on balancing branded growth in a higher retail price environment. Continued execution of the transformation programme Calcium will be the company’s other key priority. Arla’s revenue outlook for the full year 2018 is expected to be €10.0-10.5 billion and Arla’s branded growth is expected to be at the high-end of the previously communicated target range of 1.0-3.5%.
Net profit share for 2018 is expected in the targeted 2.8-3.2 range.
You can download the entire consolidated Arla Foods amba half-year report 2017 and the Groups half year results at https://www.arla.com/company/investor/half-year-results/.