Anchor butter and Cravendale owner grows earnings despite difficult market conditions

Oliver Gill
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British Dairy Farmers March In Protest At Milk Price Plummet
Britain's dairy farmers were out in force in London earlier this year to complain about low milk prices that threaten their livelihoods (Source: Getty)

One of the dairy companies at the centre of Britain's milk crisis reported profit growth and reasserted its desire to increase the milk price paid to farmers.

Danish-headquartered Arla announced revenues of €4.9bn (£4.0bn) for the first half of 2016.

Although this was down from €5.1bn in 2015, gross margins were sustained at €1.2bn and earnings were slightly up at €363m from €341m– a result that may frustrate some of the UK's agitated farmers.

“In Europe...our branded business has continued to grow despite tough market conditions," said finance chief Natalie Knight.

The dairy sector has been hampered by a European over-supply of milk in the last two and a half years that has driven prices down.

Read more: Falling milk prices piles pressure on Arla farmers

Some of the Arla's difficulties in Britain were exacerbated by losing the contract - to rival Muller- to supply supermarket Tesco in February this year.

“The challenging market situation affected our ability to safeguard the milk price for our farmer-owners, who have suffered the consequences of the oversupply of milk in Europe," said Knight.

Despite such problems, Arla has committed to raising the minimum milk price paid to British dairy farmers to 20.05p per litre. While the move was welcomed by farmers, the price was still branded "unsustainable" by the National Farmers Union yesterday.

"[We want] improve the milk price to our hard-pressed farmers,” said chief executive Peder Tuborgh.

"In a difficult market, we have paid a milk price above our peers,” said chairman Ake Hantoft.

Arla's profits were further boosted by a gain of €120m on the sale of juice company Rynkeby Foods and generated €333m of free cash flow in 2016, compared to €100m in the year before.