“We’ll strive to achieve our target, but we can’t promise that we’ll succeed,” Group Managing Director Jens Bigum told Arla Foods’ Board of Representatives on Tuesday (June 24) in Århus.
Eight months into the financial year, Jens Bigum reported that there is little prospect of any improvement compared to the interim report.
Stressing that the dairy industry is finding itself in a more difficult situation than one year ago, Jens Bigum said:
"We see this as a sign of things to come in the coming years – developments which will be driven by changes in the EU’s dairy policy and by the WTO.”
Hit by exchange rate falls
Arla Foods has been particularly affected by the fall in a number of the company’s main currencies with the lower dollar having a strong impact on Arla Foods’ exports of milk powder. The situation is compounded by the fact that the EU is cutting export subsidies for full-cream milk powder which, in conjunction with the lower dollar, is having a doubly negative effect on exports.
Cheese prices in Europe also continue to fall. Although demand is rising moderately, the market is characterised by an extraordinary large supply of cheese. In Germany and Holland, for instance, cheese production was 8-9% up in the first four months of 2003 compared to last year as a result of the worsening sales conditions for European milk powder which are forcing dairies to reallocate their milk to cheese production.
One positive aspect of the adverse trading conditions is that Arla Foods is benefiting from the general fall in interest rates for the financing of the new dairies at Stourton and Vimmerby.
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