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Arla Cuts Sales Forecast As Consumers Opt For Cheaper Butter, Cheese

By Reuters
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Arla Cuts Sales Forecast As Consumers Opt For Cheaper Butter, Cheese

Danish dairy firm Arla lowered its full-year sales forecast, saying inflation and the rising cost of living in Europe were prompting consumers to buy fewer or cheaper dairy products to cut costs.

The group reported a rise in sales by value in the first half of 2023 due to higher prices as its cost rose. However, it said volumes of Lurpak butter, a premium brand which is sold in 95 countries around the world, fell 6.6%, while the amount of Castello cheese it sold decreased by 4.4% from a year earlier.

Arla's earnings before interest and tax for the first half fell 36% from a year earlier to €161 million ($174.19 million).

'Inflationary Pressure'

"During the first half of 2023, we continued to see inflationary pressure resulting in consumers moving towards discount channels and private-label products," Arla chief financial officer Torben Dahl Nyholm said in a statement.

The group lowered its sales outlook for 2023 to between €13.2 billion and €13.7 billion, from €13.6 billion to €14.2 billion seen in February, because of the continued uncertainty in the market.

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First-Half Highlights

Owned by some 8,400 dairy farmers in Denmark, Sweden, Germany, Britain, Luxembourg, the Netherlands and Belgium, Arla said revenue totalled €7.06 billion for January to June, up 10.7% from the same period last year.

Revenue growth of some €700 million was primarily driven by price increases, the dairy cooperative said.

The company's branded volume growth saw a 6.0% decline in the first half, with declines of 5.7% in Europe and 4% in international markets.

"As anticipated, the market conditions put our branded products under pressure. However, we managed to protect our relative market shares against our competitors, and I am pleased that we were able to secure group earnings, a competitive milk price and a half-year supplementary payment to our farmer owners of 1.0 euro-cent/kg milk based on the half-year volumes as planned," said Arla Foods CEO, Peder Tuborgh.

Article by Reuters, additional reporting by ESM

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