Challenging start due to difficult market conditions

Date: 22.06.2023Source: FrieslandCampina

At yesterday’s Members’ Council meeting, FrieslandCampina CEO Jan Derck van Karnebeek and CFO Hans Janssen confirmed the outlook for 2023 given on 21 February of this year. As anticipated in February, FrieslandCampina experiences a challenging start of the year due to difficult market conditions caused by high inflation and the resulting decrease in volumes, as well as due to the sharp drop in basic dairy prices since the end of 2022.

As indicated in the ‘Outlook 2023’ section of the statement made on 21 February 2023, the difficult market conditions and the strong decline in basic dairy prices during the final months of 2022 have continued into the first half of 2023. In the Netherlands and large parts of the world, consumer buying power was weak due to persistent high levels of inflation, which translated into lower volumes. Costs increased due to high energy and raw material prices, rising labour costs, the impact of unfavourable foreign exchange rates and rising interest rates.

The guaranteed price that FrieslandCampina pays for the 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. The results of the Food & Beverage and Trading business groups came under pressure because of this. On the other hand, the Specialised Nutrition and Ingredients business groups had a good start of the year. However, the combined factors above had a significant negative impact on FrieslandCampina’s financial results in the first half of 2023.

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. The half-year results of Royal FrieslandCampina N.V. will be published on 20 July 2023 at 8:00 a.m. CET.

At the Members’ Council meeting, a 3.25 percent interest surcharge on member certificates starting June 1, 2023 was approved, resulting in a total interest rate of 7.020 percent (six-month Euribor plus a 3.25 percent interest surcharge) as per June 1, 2023. This interest rate is therefore equal to the interest rate for member bonds per June 1, 2023.

David Cox / IDM

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