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Arla proposes paying out entire 2018 profit to farmer owners

It comes as Arla UK announced a 2.3 per cent uplift in revenue for the first half of 2018.


Alex   Black

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"It is unprecendented' - Arla proposes paying out entire 2018 profit to farmer owners

Arla’s board of directors has proposed to pay out the entire 2018 net profit of Arla group to farmer owners ‘due to the positive development’ of its balance sheet.

 

The cooperative also recognised the ‘tough financial situation’ facing farmers due to the summer drought.

 

The pay-out would come in March 2019 after being discussed at the Board of Representatives meeting in October with a final decision made in February 2019, following the regular timing of the supplementary payment.

 

Payment

 

Arla chief executive Peder Tuborgh said it was ‘unprecendented’.

 

“It is clear this is a one time possibility,” he said.


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“We would not have been able as a company to do this four or five years ago.”

 

He attributed the ability to pay this to the ‘strong balance sheet’.

 

Chairman of Arla Foods, Jan Toft Nørgaard said: “As a farmer-owned dairy company, we care deeply about the livelihood of our farmers and we recognize that this summer’s drought in Europe has been extraordinary.

 

“We are proposing that extraordinary measures be taken in this situation, and the Board is satisfied with the positive development of the company’s balance sheet, which makes this proposal possible.”

 

Commitment

 

The proposal also includes a commitment to return to the company’s existing retainment policy for the financial years of 2019 and 2020.

 

As a cooperative, Arla targets a net profit within the target range of 2.8 - 3.2 per cent of Group revenue, and the company pays out any additional profit throughout the year via the milk price to its farmers.

 

It came as Arla UK announced net revenue was up 2.3 per cent year on year.

 

A 6.7 per cent growth in Arla Foods UK sales volume was supported by a 9.3 per cent growth in the core Arla brand, an 8.8 per cent growth for Castello and 2.2 per cent growth in Lurpak, increasing revenue to £961m (€1.093bn).

 

The Arla, Lurpak and Castello brands also performed well on a global level.

 

Arla Foods UK Managing Director, Ash Amirahmadi said: “Year on year, Arla’s portfolio continues to lead the way in driving growth across the UK dairy sector.

 

“Our decision to invest to build capability in the growing channels of foodservice, online and convenience is paying off and will continue to do so as we further develop the UK business.”

 

The proposal states all earnings in 2018 to be paid as supplementary payment, expected to be in the range of €285 – 310m or equivalent to 2.3 – 2.5 cents per kg milk.

 

As the year end consolidations were converted from euros to sterling using the average currency mechanism rates across the year, Arla said it was difficult to determine what the sterling figure might be.

 

However, based on current figures available a reasonable estimation would be approximately 1.8-1.94ppl, although this was an estimation and subject to change.

Cooperative

 

NFU dairy board chairman and Arla member Michael Oakes said it was one of the best examples he had seen of a cooperative ‘working at its best’.

 

“I think on this occasion Arla has actually listened to its members. Fortunately they are in a strong enough position to do this,” he said.

 

Mr Oakes added the payment looked like it would be equivalent to receiving an extra 13th payment for some farmers.

 

He said he had already spent extra money on securing forage for the winter and the extra payment would help his farm cope with what would still be a tough winter.

 

“It has put a smile on my face as an Arla member.”

NFU Scotland Vice President Gary Mitchell, an Arla supplier, said it underlined the difference being part of a farmer-owned business could make.

 

“Scottish dairy farmers have toiled for 12 months with extreme weather that, last autumn and winter, included some of the coldest, wettest weather for a century to this summer, which was the driest for 40 years.

 

“Producers across Europe have also toiled this summer in the heat, seeing grass growth halt and many having to feed precious winter fodder months ahead of schedule.

 

“The annual bonus – or 13th payment – from Arla has averaged around one Euro cent per litre in the past but this move could, if approved, see 13th payments of between 2.3 to 2.5 Euro cents per litre, giving a significant financial boost to member’s bank accounts at a time when they have faced huge hikes in key costs such as feed, fertiliser and fuel.”

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