FrieslandCampina achieves robust profit increase and record revenue in 2012

14 March 2013


  • Profit up by 26.9 percent to 274 million euro
  • Cash flow from operating activities up by 334 million euro (65.7 percent) to 842 million due to higher profit and better working capital management
  • Net revenue up by 7.1 percent to 10.3 billion euro through shift in volume from commodities and basis products to growth categories (infant & toddler nutrition, dairy-based beverages and branded cheeses), acquisitions and currency translation effects
  • Operating profit up by 19.6 percent to 482 million euro, while the meadow milk premium rises by 25 million euro to 28 million euro (2011: 3 million euro)
  • Improved results from Consumer Products International, Ingredients and Consumer Products Europe business groups
  • Cheese (branded cheeses and basis cheese) performs well, the Cheese, Butter & Milkpowder business group result drops due to lower results from butter and milk powder
  • The economic situation in Europe puts pressure on volumes and margins


Milk price for member dairy farmers:
Per 100 kilos of milk excluding VAT, at 4.41 percent fat and 3.47 percent protein.

  • Performance premium (1.42 euro) and distribution of member bonds (0.95 euro) up by a total of 0.54 euro (29.5 percent) to 2.37 euro
  • Guaranteed price down by 3.07 euro (8.3 percent) to 33.87 euro
  • Milk price for Cooperative members down by 2.53 euro (6.5 percent) to 36.24 euro
  • Milk price + premiums down by 2.24 euro (5.8 percent) to 36.68 euro


Cees ’t Hart, CEO Royal FrieslandCampina N.V.: ”FrieslandCampina can look back on a good year. The route2020 strategy has delivered results faster than expected. The focus is on the future. Every year the Company invests around 400 to 500 million euro. Much of the investment is to achieve growth so that the expected increased quantity of member milk can be processed. The Company is financing this production capacity expansion with its own means. Most of the investments are taking place in the Netherlands and, in particularly, in the area of expanding the production capacity of infant & toddler nutrition – the segment in which the most robust growth is being achieved by responding to the increasing demand from Asia for high-quality dairy products.”

Click image below for larger view 


















Record revenue
In 2012 revenue rose by 7.1 percent to 10,309 million euro. The key reason for the higher revenue was the shift in volumes from commodities to products within the growth categories of infant & toddler nutrition, dairy-based beverages and branded cheese. The 10.2 percent volume growth of infant & toddler nutrition and the 9.5 percent volume growth of dairy-based beverages outside of Europe were positive. The branded cheeses category achieved a volume growth of 4.4 percent through increased export. The volume of dairy-based beverages in Europe and commodities dropped.
The sales prices of the majority of the products rose. The sales prices of butter and milk powder fell by 10.7 percent, which meant the average sales price dropped.
The acquisition of dairy company Alaska Milk Corporation in the Philippines and of IDB Belgium contributed 237 million euro towards the revenue growth. Currency translation effects had a positive effect on revenue of 1.4 percent (139 million euro).

In Europe reduced consumer spending as a result of the economic crisis in many European countries put pressure on volumes and revenue. Sales prices in Europe have remained under the 2010 level due to the economic crisis.

Improved operating profit
Operating profit rose by 19.6 percent to 482 million euro (2011: 403 million euro), despite the amount paid out in meadow milk premium (charged to the result) increasing by 25 million euro to 28 million euro (2011: 3 million euro).

Operating profit rose because, unlike in 2011, more of the increases in raw material and packaging could be passed on in the sales prices. Far-reaching efficiency improvements in production and cost management by the European operating companies also contributed towards the increased profit. In the Cheese, Butter & Milkpowder business group the sales prices for butter and milk powder were considerably lower due to the low world market prices for these products.

In 2012 operating costs rose by 6.5 percent to 9,842 million euro as a result of higher packaging, raw materials and energy costs. By contrast, in 2012 the milk price + supplements paid for the milk supplied by the member dairy farmers fell by 5.8 percent due to the lower guaranteed price for milk.

Higher profit
Profit for 2012 rose by 26.9 percent to 274 million euro (2011: 216 million euro) due to a higher operating profit and lower financing costs and despite higher taxation as a result of higher profit and the writing-down of deferred tax assets in Germany. The profit attributable to the Company’s shareholder (the Cooperative) amounted to 158 million euro (2011: 122 million euro).

Substantially improved cash flow
Cash flow from operating activities improved substantially to 842 million euro (2011: 508 million euro), thanks to the improved results and structurally improved working capital management. Cash flow expenditure from investing and financing activities rose due to the acquisition of Alaska Milk Corporation and IDB Belgium N.V. and the extensive investment programme.

Financial position
As at 31 December 2012 net debt amounted to 685 million euro, 14 million euro less than at the end of 2011. The increased need for financing for acquisitions was partly financed out of the high operating cash flows.

At the end of 2012 equity amounted to 2,514 million euro (end of 2011: 2,264 million euro). Equity has been strengthened by the reservation of profit. Solvency (equity as a percentage of the balance sheet total) fell to 36.8 percent (2011: 39.4 percent) mainly due the higher balance sheet total due to the acquisition of Alaska Milk Corporation and IDB Belgium and investments in capacity expansion in the context of route2020.

Net finance income and expenses improved by 15 million euro to 57 million euro negative. The improvement was due primarily to the positive currency translation effect on temporary short-term financing. The net interest expense amounted to 33 million euro (2011: 40 million euro).

Taxes amounted to 167 million euro (2011: 128 million euro). The increase was primarily due to the higher profit and the writing-down of deferred tax assets in Germany.

Implementation of the route2020 strategy
In 2012 FrieslandCampina took further major steps towards achieving the route2020 strategy aimed at growth and value-creation in selected markets and product categories. The most important are:

  • Total sales volume rose by 2.4 percent primarily due to acquisitions and also due to a shift from commodities to the growth categories infant & toddler nutrition, dairy-based beverages and branded cheeses, which meant volume growth within these growth categories amounted to 4.1 percent.
  • Organic growth of infant & toddler nutrition (10.2 percent) and growth of dairy-based beverages (9.5 percent) and branded cheeses (4.4 percent) as a result of increased export outside of Europe.
  • The acquisition of Alaska Milk Corporation in the Philippines and IDB Belgium N.V., the intended acquisition of Zijerveld en Veldhuyzen B.V. and G. den Hollander Holding B.V., and the cooperation with Bongrain in France strengthen positions in dairy-based beverages and cheese.
  • Investments of 423 million euro primarily in capacity expansion for infant & toddler nutrition and milk processing.
  • In the field of sustainability a sustainability programme for the Company and Cooperative started, cooperation with major clients, steps taken in the field of the purchasing of sustainable raw materials and efficiency measures in the field of energy, water and waste. Cooperation with the Dutch Red Cross and Agriterra commenced.
  • Various adjustments to the organisation including the integration of sales activities in the Netherlands into a single organisation as of January 2013 and the integration of the export activities of FrieslandCampina Cheese Specialities in the new FrieslandCampina Export organisation in Wolvega as of 1 January 2013;
  • Concentration of the activities in Singapore aimed at developing consumer and ingredients markets in Southeast Asia, the Middle East and Africa.
  • To improve competitive position reorganisation programmes started in Germany and Hungary.
  • Safety and safety awareness improved further.


Milk price 36.24 euro
For the raw milk they supplied in 2012 the member dairy farmers received a performance premium of 1.42 euro per 100 kilos of milk excl. VAT. This was 29.1 percent higher than the performance premium for 2011 (1.10 euro). The distribution of member bonds for 2012 was 84 million euro. This amounts to 0.95 euro per 100 kilos of milk (2011: 0.73 euro).

At 33.87 euro the guaranteed price for 2012 was 8.3 percent lower than for 2011 (36.94 euro). The drop was the result of the lower milk prices of the reference companies primarily as a consequence of lower sales prices for butter and milk powder.

In 2012 the milk price amounted to 36.24 excl. VAT euro per 100 kilos of milk at 4.41 percent fat and 3.47 percent protein, a decrease of 6.5 percent compared with 2011 (38.77 euro).

Since 1 January 2012 member dairy farmers who put their cows out in the meadow to graze for at least six hours a day, on at least 120 days a year, are paid a meadow milk premium of 0.50 euro per 100 kilos of milk. Averaged out over all FrieslandCampina milk this amounts to a payment of 0.32 euro per 100 kilo milk. A further average of 0.12 euro per 100 kilo milk is paid out in other supplements. Including supplements in 2012 a total of 36.68 euro was paid out (2011: 38.92 euro) to the member dairy farmers per 100 kilos of milk.

In 2012 the organic milk price amounted to 45.42 euro per 100 kilos of milk at 4.41 percent fat and 3.47 percent protein. Including meadow milk premium in total the organic milk price + supplements amounts to 45.92 euro per 100 kilos of milk.















Consumer Products Europe
In 2012 the Consumer Products Europe business group recovered from the disappointing result in 2011. Operating profit before reorganisation rose by 44.4 percent to 104 million euro (2011: 72 million euro) due to far-reaching efficiency improvements, cost management and the price increases implemented at the end of 2011. The reorganisations involve an incidental expense of 29 million euro before the measures to reduce costs in the German and Hungarian organisations announced at the end of 2012. Operating profit improved by 4.1 percent to 75 million euro. Revenue from third parties fell by 2.7 percent to 2,814 million euro (2011: 2,892 million euro) due to lower volumes (-6.1 percent) as a result of reduced consumer spending.

Consumer Products International
The Consumer Products International business group performed well in 2012. A further acceleration of the volume growth was achieved in all product categories. The increasing demand for infant & toddler nutrition contributed towards the increased revenue and improved profit. Revenue from third parties rose by 29.3 percent to 3,180 million euro (2011: 2,460 million euro) due to volume growth (9.0%), price increases (5.4%), the acquisition of Alaska Milk Corporation (8.6%) and positive currency effects (4.7%). Operating profit rose by 43.2 percent to 514 million euro (2011: 359 million euro).

Cheese, Butter & Milkpowder
As far as its cheese activities are concerned the Cheese, Butter & Milkpowder business group can look back on a good 2012. Both the Cheese Specialities and Cheese operating companies achieved a positive result. Increased export, especially of Frico cheese, resulted in a positive volume development of 4.4 percent. In Europe sales of branded cheese stabilised. The price development and results of butter and milk powder were negative, which resulted in the business group’s revenue dropping to 2,370 million euro (2011: 2,474 million euro) and the operating profit dropping from 8 million euro positive to 39 million euro negative.

The Ingredients business group performed well in 2012. Revenue from third parties rose by 10.9 percent to 1,677 million euro (2011: 1,512 million euro) due to higher volumes and sales prices. The continuing high demand for dairy ingredients for infant & toddler nutrition had a positive effect on the volumes. Operating profit rose by 11.4 percent to 224 million euro (2011: 201 million euro).

The economic outlook is challenging. For 2013 a slight rise of the demand for dairy is expected due to the increasing consumption at a global level, particularly in Asia, South America, Russia and Africa. In western countries the demand for dairy products has, to a degree, stagnated due to the negative economic developments and lagging consumer spending power. The worldwide offering of milk is expected to increase slightly. In Western Europe milk production is expected to be lower in the first half of 2013 than it was in the first half of 2012 due to the mediocre quality of ‘natural’ cattle feed and the high cost of supplementary feed. Milk production is expected to increase slightly in the Netherlands. The increased cost of raw milk and other raw materials could put pressure on the Company’s margins if these cost increases cannot be passed on in the sales prices in full or in good time. The moment at which prices are fixed and the term of contracts could have major consequences for the achieved sales prices and margin development.

In 2013 the focus will be on the further achievement of the route2020 strategy. FrieslandCampina anticipates further volume growth of added-value products. The growth of infant & toddler nutrition in particular is expected to accelerate due to new production capacity becoming available in both the consumer and industrial markets in the second half of 2013. Organic growth with dairy-based beverages is also foreseen partly due to a number of innovations that will be introduced in 2013. Most of the growth of dairy-based beverages will take place outside of Europe. Within Europe a slight reduction in the volume of dairy-based beverages is expected. Europe will also remain a difficult market for branded cheeses, although volume growth is foreseen due to increased export to, for example, Russia and North Africa and the expansion of the cheese activities due to the acquisition of IDB Belgium N.V. and the intended acquisition of Zijerveld en Veldhuyzen B.V. and G. den Hollander Holding B.V., a transaction which must be approved by the European Commission..

Competition in the global dairy market will increase further. Both multinational dairy companies and local companies in specific countries strengthen their positions by expanding their distribution, a competitive price structure, product introductions and intensifying advertising & promotional activities. In Europe the market for dairy-based beverages and desserts is expected to shrink even further due to the economic crisis. Limited growth is anticipated for cheese. The up-scaling of the European dairy industry will continue through mergers and acquisitions so that cost efficiencies can continue to be effective. Despite the ending of the milk quota in 2015, in Europe as a whole no sharp increase in the total milk production is expected. Dairy farmers and dairy companies in a number of countries and regions, including the Netherlands, are, however, preparing for an increased milk production after 2015. By taking further steps in the implementation of the route2020 strategy, in 2013 FrieslandCampina will continue contributing towards improving the position of the Cooperative’s member dairy farmers.

No statement is being made regarding the expected result for 2013.


FrieslandCampina in 2012