Arla Foods’ 2024 outlook
Image: Arla Foods
Arla Foods managed to adapt to a tough dairy market by returning to strong branded growth in the second half of 2023, and thereby reaffirming a positive outlook for the first half of 2024, it says. A strong year ending means the expected dividend to Arla Foods’ farmer owners should be increased, in total to €270 million for the full year. Arla Foods and its farmer owners also made significant progress in reducing carbon emissions, cutting close to one million tonnes of CO2e in the last two years. This means that Arla Foods is on track towards its 2030 reductions. With the 2023 launch of the Sustainability Incentive Model, a point-based system that rewards on-farm sustainability activities, as well as a new programme to help customers with their scope 3 reductions, Arla Foods expects to further accelerate reductions in 2024, it notes.
Total Arla Group revenue ended at €13.7 billion, roughly the same level as its 2022 revenue of €13.8 billion. The revenue was impacted by negative currency effects, primarily on SEK, GBP and USD. The cost of goods and general inflation led to a performance price decrease of €0.081/kg to €0.47/kg against the all-time high performance price in 2022. Although lower than 2022, the 2023 result is 15% above the last five-year average, the company says.
“Thanks to the strong execution by our farmer owners, employees and management, Arla once again demonstrated our ability to adapt to challenging market conditions in 2023. I am incredibly proud of our solid results, both reflected in the competitive milk price and the sustainability milestones achieved. Sustainability is a challenge we cannot ignore, but we are on track towards our CO2e reduction target for 2030. We, farmer owners, show that we dare to be proactive and take on the task through innovation and action,” says Arla Foods chairman Jan Toft Nørgaard.
In 2023, Arla achieved a net profit of €380 million, or 2.8% of revenue, which is at the bottom end of its target range of 2.8-3.2%.
“The proposed supplementary payment as well as a competitive on account milk price in 2023 is a direct reflection of Arla’s financial performance and robustness. We have navigated a deflated and volatile global dairy market as well as headwind from several currencies. In light of this, I am very pleased that we during 2023 managed to pay the second-highest ever average on account milk price and still deliver a high supplementary payment to our farmer owners at year end,” says Peder Tuborgh, CEO of Arla Foods. Investments amounted to an all-time high of € 01 million compared to €521 million in 2022. The first payouts issued in summer of 2023 marked, for the first time ever, that the milk price the individual Arla farmer receives is now directly tied to their activities related to environmental actions.
In 2024, Arla expects the volatile market conditions, driven by external factors such as reduced consumer purchasing power, currency developments, and geopolitical tension and uncertainty, to continue to impact the business in 2024. Arla expects the growth momentum experienced in the last half of 2023 to continue in the first half of 2024, which results in an expected return to branded volume driven growth for 2024 as a whole of 1-3%, despite a more uncertain market and growth outlook for the second half of the year. Group revenue outlook for 2024 is expected to be €13.2-13.7 billion, the reduction is primarily driven by reduced sales prices compared to the record highs in the beginning of 2023 and adverse currency effects. Net profit share will be in the range of 2.8 to 3.2% and efficiencies in the range of €85-105 million.