FrieslandCampina reports overall strong performance despite infant nutrition headwinds

22 Feb 2022 --- FrieslandCampina reports strong revenues and operating profits according to its latest annual report for the year ended 2021. Specifically, the dairy giant’s F&B business group performed well over the whole year with revenues up by 4.3% to €7.9 billion (US$8.9 billion). 

The F&B business group increased its Lattiz market share in key markets; the Netherlands, Belgium, France and Denmark entered new markets with the smart milk solution for coffee professionals in Cyprus, Poland and the Czech Republic. Multiple new product innovations were also delivered in 2021. 

The group’s performance was driven by price increases and the growth of out-of-home activities, primarily in Europe. Before currency translation effects, growth was estimated at 5.8%. 

Overall group revenue increased by 3.2% to €11.5 billion (US$13 billion) primarily due to price increases, higher commodity dairy prices and the recovery of out-of-home markets in Europe. Operating profit increased by 32.5% to €355 million (US$402 million). 

Profits increased by 117.7% to €172 million (US$195 million) due to lower restructuring costs and improved results of both the professional business and the trading business group.

Profitable F&B product lines
Plant-based product line Valess performed well over 2021 with a more than 30% increase in revenue, a significantly improved profit margin. This resulted from innovations such as Valess Nuggets, Beef Style Burger and Family Packs and significant growth in the distribution in the Netherlands and Germany.

FrieslandCampina Ingredients moved into the plant-based protein arena last year with two new powder solutions developed with AGT Foods, a supplier of value-added pulses, staple foods and ingredients.The F&B group’s performance was driven by price increases and the growth of out-of-home activities.

FrieslandCampina Ingredients introduced new products with a focus on vitality and mobility. This includes launching plant-based protein-rich sports products under the brand name Plantaris and a climate-neutral powder base for infant nutrition. 

Revenue from consumer business through the e-commerce channel grew by 56% worldwide. For FrieslandCampina as a whole, e-commerce revenue rose by 18%.

Debic Cream Plus Mascarpone was launched in September in the Netherlands, Belgium, France, Italy, and Poland for the hospitality and baking sector. 

Operating cash flow remained at a satisfactory level of €594 million (US$673 million) down from 2020 mainly due to a one-off €88 million (US$100 million) defined payment to a pension plan dating back to 2005.

Challenges for infant nutrition
Within infant nutrition, Frisgo, an app that connects Mom & Baby shops, local service suppliers and infant formula Friso, progressed to reach smaller Chinese cities with its “route-to-market” model. In 2021, Friso Prestige Bio managed to multiply its market share five-fold in the organic segment in China and Hongkong compared to 2020. 

However, FrieslandCampina notes that infant nutrition activities were under “severe pressure,” which impacted the results of its Ingredients and Specialized Nutrition business. 

A declining market due to a strong decrease in the birth rate and strong local competition were the key reasons for a weak start to the year. This was contrasted by sharp growth in revenue and an improved result for FrieslandCampina Professional, particularly in the second half of 2021. 

For 2022, inflation and price increases are the key challenges in terms of keeping the result up to par, notes Hein Schumacher, CEO of FrieslandCampina. 

“We are cautiously optimistic about the recovery of the Professional market, as well as continued high commodity dairy prices. Combined with a slightly improved market for infant nutrition, we expect an increase in revenue of 2-4% with constant margins in comparison to 2021 for the year as a whole,” he continues.

State of milk supplyThe plant-based category performed well. 
The member milk supply decreased by 3.2% to 9.745 billion kg, primarily due to the relatively cold weather in the first months of 2021 and the impact of high feed costs.

The improved business result enables a subsequent cash payment of €0.14 per 100 kg of milk to member dairy farmers. In addition to the FrieslandCampina guaranteed price, a total of €14 million (US$16 million) will be paid to member dairy farmers in 2022.

The total compensation paid to member dairy farmers for their supplied milk increased by 6.2% to €3.8 million (US$4 million in 2021. This increase is mainly due to the higher milk price.

In general, FrieslandCampina’s acceleration of the transformation implemented in November 2020 is on track. The focus is on growth, structurally lower costs and optimization of the organization structure. 

By Inga de Jong