Arla Foods has reported strong revenue growth for the first half of 2022, however warns that global milk production is likely to further decline, leading to higher dairy prices.
With revenue up 17% at £5.48 billion compared with £4.67 billion in the first half of 2021, it reports this increase is due to significant price increases in its retail, food service and commodity trading business.
In its Q2 report, published yesterday, the company also revealed it will be providing its first half-year supplementary payment to farmer owners of 85p per kg of milk.
This looks to support added pressures affecting farmers such as production costs which are up 51% since 2021 and feed prices which have risen by 73% according to Kite Consulting, as reported by The Grocer.
“It is an extraordinary time for both our farmer owners and the company as food and farming industries experience high levels of exposure to inflationary pressure,” Arla Foods CEO, Peder Tuborgh said.
“I am pleased that we have been able to move the pre-paid milk price up for our farmer owners to help them with their increased production costs. We are now also able to deliver on our first ever half year supplementary payment to support future investments in sustainable actions on their farms.”
However, despite its growth, Arla Foods expects the second half of 2022 to produce more challenges as it warns declining milk production and sustained high dairy prices will diminish consumer confidence and consumption.
It also predicts its branded sales volume growth to further decline by 2-3%, following current data showing the Arla brand saw a 0.1% decrease in the first half of the year.
Lurpak’s volume sales dropped as much as 5.9% following its significant price rises within the last two months.
Tuborgh added: “2022 continues to be characterised by volatility and inflation, exacerbated by Russia’s invasion of Ukraine. Changes in consumer behavior continue to be multifaceted and difficult to predict and we expect our branded growth will slow down further.”
