FrieslandCampina reveals revenue drop but Specialized Nutrition and Ingredients offer relief
20 Feb 2024 --- The multinational dairy cooperative FrieslandCampina, based in Amersfoort, the Netherlands, had a difficult 2023, with revenues declining to €13 billion (US$14 billion), a 7% fall from 2022. The company states this is due to unfavorable market conditions, in particular currency translation effects, sales of German consumer activities, a declining consumer market and high inflation.
“2023 was a difficult year for FrieslandCampina,” states Jan Derck van Karnebeek, CEO of Royal FrieslandCampina. “Business results, particularly with respect to our global consumer dairy and trading activities, were severely under pressure. By contrast, the specialized nutrition and ingredients business groups had a good year, although this was insufficient to compensate for the disappointing results of the other two business groups.”
“The disappointing operating profit, combined with one-off costs and higher financing charges, resulted in a negative net result for 2023. As a result, we are not providing a supplementary cash payment to our member dairy farmers. This is disappointing, all the more so given the increased costs for our members and costs for efforts to further increase sustainability at farms,” he adds.
Market conditions
The company’s €75 million (US$81 million) operating profit was negatively affected in 2023, an 84% decrease compared to 2022, when it amounted to 471 million euro (US$508 million).
This change is linked to the discrepancies between the guaranteed price of member milk and market prices for commodity dairy products. The sale of expensive stock in the current low-price market and unfavorable currency translation were also identified as factors contributing to last year’s performance.
Due to improved working capital, the operating cash flow was also higher in 2023 — totaling €831 million(US$896 million).
Milk prices for member dairy prices decreased by 16%, from 57 (US$61) to 48 euro (US$52) per 100 kg. This result is outlined as the reason for the scrap of supplementary cash payments to farmers.
“With a view to these disappointing results, we initiated a transformation, Expedition 2030, in the second half of 2023, fully focused on remaking FrieslandCampina into the leading dairy company it has always been,” asserts Van Karnebeek.
FrieslandCampina’s Friso brand improved its performance on the Chinese infant nutrition market, now ranking fourth.Company transformation
More optimistically, the company brand FrieslandCampina Professional strengthened its market position as a supplier to buyers. Its specialized nutrition business group improved performance on the Chinese infant nutrition market with its Friso brand, where it currently ranks fourth.
FrieslandCampina’s Ingredients business group conducted successful sales of adult nutrition proteins and ingredients and semi-finished products for pharmaceutical and functional nutrition DFE Pharma items.
In 2023, the company made the decision to expand its whey protein isolate and Milk Fat Globule Membrane (MFGM) production capacity at its Borculo production facility in the Netherlands.
The 2023 revenue was impacted by a one-off restructuring cost of €136 million (US$147 million) restructuring cost for the implementation of the Expedition 2030 strategy, among other one-off and higher financing charges, altogether leading to a negative net result of €149 million (US$161 million).
“The core of Expedition 2030 consists of seven powerful business groups, each with its specific markets, product categories, strategy, and the required people, competencies, and investment levels,” Van Karnebeek explains.
“FrieslandCampina’s strength lies in the diversity of our business. We have linked the new business structure to an integral cost reduction program to ensure that the business groups, our production environment, and support services, have a fitting cost structure,” he adds.
“Unfortunately, this means that over the next two years, 1,800 jobs will be eliminated worldwide. This was a difficult but necessary decision, and we will do everything in our power to effectively support the affected employees in this process.”
Sustainability agenda
The company touts its sustainability achievements in 2023, highlighting its 9% greenhouse gas emission decrease in comparison to 2022. The greenhouse emissions of member dairy farms decreased by more than 4% in the same year.
Last year, FrieslandCampina implemented its Foqus Planet sustainable development methodology through which dairy farmers receive a higher financial premium for reducing greenhouse gas emissions on their farms.
Total energy consumption was reduced throughout the past year, partially due to the sale of some German facilities. In the Netherlands, 91% of energy consumed by production facilities was generated by member dairy farmers.
These sustainable transformation efforts are facilitating partnerships with B2B customers, the company asserts.
“We will also continue to focus on making our dairy chain more sustainable. We are doing this for our owners –– our member dairy farmers – for our employees worldwide and, of course, also for our customers and consumers, and all other stakeholders in a successful and future-proof FrieslandCampina.”
By Milana Nikolova
