NETHERLANDS – Dutch dairy giant, FrieslandCampina, has reported a revenue increase of 19.4% totaling US$6.7 billion in the first half of 2022 due to an increase in prices of dairy commodities and the recovery of European out-of-home markets.

However, the company said margins in the retail channel were under pressure from the significant rise in the cost of raw materials that necessitated price increases.

FrieslandCampina’s operating profit in the first half of 2022 grew substantially to €328 million (US$336M) compared to the first half of 2021 which was at €130 million (US$133M).

Meanwhile, net profit prominently rose to €139 million in comparison to the first half of 2021 which totaled €62 million (US$63 million) owing to higher commodity dairy prices and the recovery in infant nutrition activities.

The company posted €89 million (US$91M) as the operating cash flow which is at a lower level as a result of higher working capital, partly compensated by higher results.

In addition, the revenue of the Food & Beverage business unit in the first half of 2022 increased by 19.7% to €4.5 billion (US$4.59B) while in the first half of 2021 it totaled €3.8 billion (US$3.9B).

Before currency translation effects, the revenue of this group grew by 17.6%, the company noted.

In the Specialized Nutrition business group, revenue increased by 18.6% to €612 million (US$626M) compared to the same period of the previous year which had €516 million (US$528M).

Although infant nutrition brand Friso’s market share remained stable, revenue and profit in China rose significantly, in part because of the strong growth of Friso Prestige.

Also, the revenue of the Ingredients business group increased by 31.8% to €775 million (US$793 million) from €588 million (US$601M) in 2021, primarily due to price increases, particularly in infant nutrition, and elderly nutrition.

CEO Hein Schumacher said: “Our businesses benefited from high fat, protein, and commodity dairy prices. Profit margins, particularly in the retail channel, were under pressure because it was not possible to fully pass on cost increases.”

“The historically high milk price in the first half of the year of course is favorable for our member dairy farmers since they too are confronted with significantly increased costs in their farming operations.”

The dairy reported its milk supply in the first half of 2022 decreased by 4.6% to 4.8 billion kg in comparison to the first half of 2021 (5 billion kg) due to a decline in the number of members, lower quality of grass silage, and higher feed costs.

Schumacher pointed out that the company is still faced with inflation-related challenges and the associated price increases, and mounting raw material shortages.

The challenges also include the declining consumer confidence and the corona pandemic, which has yet to completely pass.

The Dutch dairy giant is also confronted with major uncertainty concerning the impact of the Dutch Cabinet’s announced nitrogen proposals on its members and the company.

 For this reason, Schumacher revealed that they are exercising extra caution in terms of our outlook for the rest of the year.

He added that the company has decided to forego the interim pro forma supplementary cash payment to its member dairy farmer.

Because of the many uncertainties, FrieslandCampina said it is not issuing an outlook for the expected profit for 2022 and also not making any forecasts concerning the future development of the milk prices.

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