Arla proposes to pay out entire 2018 net profit to farmers
Dairy co-operative Arla has made a proposal to pay its farmers the entire 2018 net profit after many have experienced a "tough financial situation" due to adverse weather.
The proposal to pay out Arla Group's 2018 net profit has been prepared by the Board of Directors due to the positive development of Arla Foods’ balance sheet.
The Board said it recognises that many farmers are facing a "tough financial situation" due to this summer’s drought in Europe.
The co-operative added that it is in its "best interest" for this year’s net profit to be paid out to farmers.
It is expected the payment will be in the range of 285 – 310m euros, or equivalent to 2.3 – 2.5 euro cent per kg of milk.
Chairman of Arla Foods, Jan Toft Nørgaard said: "As a farmer-owned dairy company, we care deeply about the livelihood of our farmers and we recognise that this summer’s drought in Europe has been extraordinary."
"We are proposing that extraordinary measures be taken in this situation, and the Board is satisfied with the positive development of the company's balance sheet, which makes this proposal possible."
Potential pay-out in March 2019
The proposal will be discussed at the next Board of Directors meeting in October. Based on this discussion, the Board expects to bring the proposal forward for a final decision at the meeting in February 2019 when the annual results are approved.
The amount of this payout remains subject to there being no material changes to the profit level or financial outlook at the end of the year.
If approved, the payment will follow the regular timing of the supplementary payment in Arla, with money being paid out in March 2019.
Also included in the Board of Directors's proposal is the pre-requisite of a commitment to return to the company's existing retainment policy for the remainder of the current strategic period, affecting the financial years of 2019 and 2020.
'Improved significantly'
CEO of Arla Foods, Peder Tuborgh said the co-operative's balance sheet has "improved significantly" over the last few years.
"The strength of our balance sheet makes room for this extraordinary initiative while still maintaining our investment plans for the continued future growth of the company," he said.
"If the Board's proposal is approved, our financial ratios are expected to remain within the target range, provided there is a firm commitment by the BoR to return to the agreed retainment policy after 2018."
For 2018, Arla expects net profit to be within the target range of 2.8 - 3.2 per cent of Group revenue. For more information on profit appropriation, see below.
Arla Foods is a cooperative owned by dairy farmers in the UK, Denmark, Sweden, Germany, Belgium, Luxembourg and the Netherlands. All these countries were affected by this summer's drought in Europe.
