Strong start for Friesland­Campina in 2024

• Significant increase in operating profit from 47 million to 301 million euros due to improvements in volume mix, less expensive inventories, smaller differences between commodity dairy prices and the guaranteed price, and cost savings.
• Cost savings of 152 million euros in first half of 2024 as a result of successful implementation of Expedition 2030 strategy.
• Net result increased to 183 million euros compared to 8 million euros in first half 2023.
• Solid performance of value-added products. However, revenue decreased by 6.7 percent to 6.4 billion euros, mainly due to the lower milk price and currency translation effects. Before currency translation effects, the decline was 2.9 percent.
• Healthy operating cash flow of 397 million euros compared to 90 million in first half 2023.
• Pro forma milk price decreased by 3.1 percent compared to the first half of 2023 due to lower guaranteed price, partly offset by higher premiums for sustainability performances.
• Good foundation laid for 2024 supplementary cash payment; no interim payment to member dairy farmers due to global dairy market volatility and economic uncertainties.

We are seeing that the changes that we have implemented since the end of 2023 have led to a strong start in 2024. In the first half of the year, our operating profit significantly increased due to improvements in the volume mix, positive developments of our consumer brands in Southeast Asia and of our Friso infant nutrition brand in China, as well as the elimination of the impact of expensive inventories, and lower costs. This is good news for our member dairy farmers and employees. Additionally, large new production facilities were opened in Malaysia and Indonesia to meet future market demand in the region.

Due to uncertainty about the future milk supply in the Netherlands, as well as beyond, it is very important for us to maintain scale in our milk volume. This is why the cooperative, in close collaboration with the company, initiated an integrated programme to make the cooperative even more attractive to current and new members.

FrieslandCampina produces dairy products in balance with people and planet. Moreover, this is also what our customers and society expect from us. With a view to this, we fully integrated our sustainability strategy into the strategies of our seven business groups, support functions and the cooperative in the first half of 2024. This strengthens our focus on sustainability and ensures that all business groups and our members contribute to our collective sustainability objectives.

I would like to conclude by thanking our employees for all their hard work over the past months. In addition, I would also like to thank the members of our cooperative and the Cooperative Board for their confidence in the collective strategy, focused on paying our members a leading milk price.”

Revenue decreased, profit and margin improved

Despite a solid performance of value-added products, revenue decreased by 6.7 percent to 6.4 billion euros. This decrease in revenue was primarily due to the lower milk price and currency translation effects. Before currency translation effects, the decline was 2.9 percent. 

Thanks to improvements in the volume mix, the elimination of the impact of expensive inventories and a considerably smaller difference between commodity dairy prices and the guaranteed price, as well as cost savings in the context of Expedition 2030, profit and margin improved in the first half of 2024.

The operating profit improved to 301 million euros compared to 47 million euros in the first half of 2023. The increased investments in advertising and promotion were partly offset by cost savings. Higher costs resulting from Collective Labour Agreements were offset by lower staff numbers. Over the course of the first half of the year, the number of jobs (FTEs) decreased by 1,146.

In the first half of 2024, net result increased to 183 million euros compared to 8 million euros in the first half of 2023.

Operating cash flow

The cash flow from operating activities in the first half of 2024 was 397 million euros, compared to 90 million euros in the same period last year. Working capital increased due to changes in volume mix and the low level at year-end 2023.

Milk supply decreased

In the first half of 2024, FrieslandCampina processed approximately 4.7 billion kilogrammes of member milk, a decrease of 3.2 percent in comparison to the same period last year. The decline in milk supply can largely be attributed to member dairy farmers who have opted for the Exit Scheme, which was a condition set by the European Commission for approving the merger between Friesland Foods and Campina and which ended on 9 November 2023.

Lower milk price partly offset by higher sustainability premiums

^{(Amounts stated are exclusive of VAT)}
In the first half of 2024, the guaranteed price showed a slightly upward trend compared to year-end 2023, ending at 46.53 euros per 100 kilogrammes of raw milk; 6.9 percent lower than in the same period last year. This decrease was partly offset by higher sustainability premiums. Including an adjustment of 0.21 euros per 100 kilogrammes of milk for 2023, the Foqus planet bonus for Sustainable Development increased to 1.63 euros per 100 kilogrammes of milk, compared to 1.13 euros per 100 kilogrammes of milk in the same period last year. All in all, the average milk price in the first half of 2024 decreased by 3.1 percent to 50.09 euros per 100 kilogrammes of milk, compared to 51.70 euros per 100 kilogrammes of milk in the first half of 2023.

Interim payment of pro forma supplementary cash payment

Pursuant to the reservation policy, an interim payment can be proposed on the basis of the results for the first half-year of FrieslandCampina and the quantity of milk supplied. The interim payment consists of 75 percent of the pro forma supplementary cash payment on the value of the quantity of milk supplied in the first half-year. In the first half of 2024, a good foundation has been laid for a full-year supplementary cash payment. Based on the results for the first half-year, an amount of 61 million euros has been accrued for pro forma supplementary cash payment relating to 2024. However, due to volatility in the global dairy market and potential economic impacts on results, it has been decided out of caution not to make an interim payment to the member dairy farmers.

Company

In the first half of 2024, FrieslandCampina made significant progress in optimising the organisation as part of Expedition 2030. The number of FTEs was reduced by 1,146 in comparison to 2023. Together with other cost savings, such as more efficient production processes, improved procurement of raw materials and packaging materials and less waste within the chain, this has resulted in cost savings of 152 million euros, which partly offsets inflation.

Sustainability

The company works closely with the cooperative to achieve its sustainability goals, whereby the organisation also focuses on creating market value through progress on sustainability. This is in line with FrieslandCampina’s sustainability strategy which focuses on excellent nutrition produced in balance with people and planet.

FrieslandCampina aims to operate net climate-neutral by no later than 2050, with a net positive impact on nature. This goal is part of the company’s broader sustainability strategy. Through premiums for special milk flows and the ‘Foqus planet Sustainable development’ programme, FrieslandCampina rewards member dairy farmers for achievements in the area of animal health and welfare, climate, biodiversity, and pasture grazing. A new reward methodology was introduced last year, and in June, the first premiums over 2023 were paid out according to this system. As a result, members received a total of 245 million euros in bonuses for their sustainability performance in 2023.

Reducing greenhouse gas emissions on member dairy farms is part of FrieslandCampina’s Climate Plan. The objective is to reduce the greenhouse gas emissions associated with the production of milk on member dairy farms (Scope 3 member milk) in 2030 by 33 percent in comparison to 2015. The 2023 ‘KringloopWijzer’ data were analysed in the first half of 2024 and showed that in 2023, the greenhouse gas emissions of member dairy farms decreased by 28 percent compared to 2015. For additional information about the progress of the Climate Plan in 2023, see the fact sheet that was published recently.

Outlook

FrieslandCampina expects to face continued economic uncertainties in the second half of 2024, similar to those experienced in the first half of the year. Prices for commodity dairy products remain volatile and inflation is expected to rise. FrieslandCampina will increase its marketing efforts in the second half of 2024 to strengthen market positions. Optimisation of production processes and milk processing capacity will continue under the Expedition 2030 strategy. Given the current uncertainties and market conditions, FrieslandCampina is not issuing a results forecast for the second half of the year.