FrieslandCampina has said it experienced a challenging start to the year due to 'difficult market conditions,' caused by high inflation and a resulting decrease in volumes, as well as a sharp drop in basic dairy prices since the end of 2022.
At its Members’ Council meeting this week, CEO Jan Derck van Karnebeek and CFO Hans Janssen confirmed the group's outlook for 2023, which was issued on 21 February of this year.
The outlook noted the difficult market conditions and the strong decline in basic dairy prices during the final months of 2022, which have continued into the first half of 2023.
The Dutch dairy cooperative said in the Netherlands and large parts of the world, consumer buying power was weak due to persistent high levels of inflation, which has translated into lower volumes.
FrieslandCampina also warned of costs increased due to high energy and raw material prices, rising labour costs, the impact of unfavourable foreign exchange rates and rising interest rates.
Lower Market Price
The cooperative said the guaranteed price that FrieslandCampina pays for delivered members’ milk decreased slower in the first half of 2023 than the basic dairy prices did.
As a result, products in stock that were produced at a higher cost price had to be sold at a lower market price.
FrieslandCampina said the performance of its Food & Beverage and Trading business groups came 'under pressure' because of this.
Elsewhere, its Specialised Nutrition and Ingredients business groups had a good start of the year, it said.
In a statement, FrieslandCampina said, 'It is expected that the gap between the guaranteed price and the basic dairy prices will decrease. As a result, no additional, adverse impact is expected in the second half of the year due to the devaluation of stocks.
'However, due to inflation and a continuing decrease in consumer buying power in all markets, volumes are expected to remain under pressure. Interest rate developments and currency risks remain uncertain factors in the second half of 2023 as well.'