Arla Sees Profits Falling In 2009

Arla Foods AmbA, the Danish/Swedish-owned co-op says it expects profits to fall significantly in 2009 as milk prices decline "rapidly" after four years of gains.

“2009 will definitely be a tough year,” said Arla CEO Peder Tuborgh.

Denmark-based Arla won’t reach a sales forecast of 52 billion kroner ($8.8 billion) this year because of the Danish kroner’s strength against the pound and the financial crisis, the CEO said. The U.K. is Arla Foods’ largest market.

The price of skim-milk powder, the benchmark for world trade, has dropped 49 percent this year on the Chicago Mercantile Exchange. That has affected profitability at Arla, Europe’s second-largest dairy company, and the likes of Groupe Danone SA, the world’s biggest yogurt maker, which this month said revenue will rise in 2009 at a rate below its “medium-term” prediction.

“Looking beyond 2009 is very difficult, because the dairy market has for the past 12 to 18 months, and will continue, to be extremely volatile and difficult to predict,” Tuborgh said. “On top of that, we are seeing recession.”