Arlas 2022 global results are described as solid in a volatile year

Arla has released its 2022 financials which as expected are solid but effectively come with a wealth warning.

 

During 2022 Arla succeeded in delivering a leading but necessary European member milk price which increased by 40.5%.  In addition, an extra 2.2 euro cents (2ppl) in total to be paid out to Arla members.

During 2022 branded sales declined in volume terms by 3.2%, particularly in Europe, as consumers reacted negatively to rocketing dairy prices and the global cost of living crisis.  Arla forecast this trend to continue in 2023 as branded growth slows but returning to growth in 2024.  Note Arla commented was that Kantar research confirms 75% of households have reduced their food spend. 

Arlas Lurpak volume was down 7.6% compared to 2021. 

The annual financials confirm significant increases in revenue but these are almost exclusively attributed to price increases and not sales volume increases.

 

In its global press conference Arla made it clear that 2023 will be a difficult year for dairy however they are predicting total Arla revenue to be more or less identical to 2022 revenue at circa 13.8 billion euros.

In addition, Arlas focus is clearly on sustainability and as well as declaring it will continue to pay a competitive European member milk price, they have reconfirmed an impressive £500 million Euros (£443m) each year to be redistributed to members as part of Arlas new sustainability incentive model to be launched this summer. That’s equivalent to around 3.3ppl on every litre Arla processes (circa 13.5 billion).  It’s an impressive amount Arla will have to recover from the market place.  Arla recognise farmers must receive financial support in order to achieve reductions in co2 emissions.

 

Arla accept that today global dairy supply is out of balance with demand down and supply up.  Annual global demand increase of 2% is “normally” absorbed only in early 2022 it was married with a 1% drop in supply and now the two have effectively reversed positions with supply outpacing demand.

However, Arla expect balance to be restored during 2023 and rather surprisingly (for Ian) anticipate members producing the same 13.5 billion kgs of milk.  Ian’s personal prediction is the imminent further farmgate milk price reductions will immediately translate in a global drop in milk output and fingers crossed that happens in Europe, in which case Arlas plan to process the same amount of milk in 2023 as it did in 2022 could be optimistic.

 

Mention was also made of the excess organic milk in Scandinavian countries with several Arla members in Denmark and Sweden now converting back to conventional in a bid to rebalance supply and demand.  Arla claims it is the world’s largest organic milk processor.