Frieslandcampina Half-Year Report 2009

Half-year report 2009 Royal FrieslandCampina N.V. Key figures Results 2009 2008 2008 Cash flows 2009 2008 2008 First Fist Full First First Full in millions of euros half half Year in millions of euros half half Year Revenue 4,104 4,818 9,454 Net cash flows from operating 269 - 94 315 Operating profit 110 119 248 activities Profit for the period 78 60 135 Investment in property, 87 105 240 plant and equipment in euros per 100 kilograms of milk and intangible assets excl. of VAT, at 4,41% fat, 3,47% protein Depreciation and amortisation 104 110 219 Guaranteed price 26.04 38.17 35.89 Pro forma performance payment 1 0.34 0.45 0.48 Pro forma milk price in euro’s 1 26.38 38.62 36.37 Balance sheet 2009 2008 2008 Other information 2009 2008 2008 First First Full in millions of euros 30 June 30 June 31 December in millions of euros half half Year Total assets 4,680 5,253 4,930 Solvency ratio (group equity 35.1 30.7 30.0 Group equity 1,642 1,615 1,480 as a % of total assets) Equity attributable to the 1,552 1,541 1,395 equity holder Volume of milk supplied by 4,439 4, 374 8,589 members (in millions of kg) Net debt 2 1,227 1,624 1,494 1 The performance payment and milk price stated are of an indicative nature and are based on profit for the first six months. The final performance payment and milk price will be determined on the basis of the profit figures for the full year. 2 Net debt represents non-current interest-bearing borrowings and current borrowings less cash and cash equivalents Cash flows from Revenue Profit for the period operating activities Gross profit margin in millions of euros in millions of euros in millions of euros in % 10,000 150 350 4 9,454 9,000 140 300 315 135 8,000 250 269 120 3 7,000 200 2.7% 100 2.6% 2.5% 5,000 150 4,818 80 2 78 4,000 4,104 100 60 3,000 60 50 40 1 2,000 0 1,000 20 -50 - 94 0 0 -100 0 2008 2009 2008 2009 2008 2009 2008 2009 first half first half first half first half first half first half first half first half full year full year full year full year 2 Half-year report 2009 First half of 2009: reasonable performance in challenging dairy market Highlights, first half of 2009 The first six months of 2009 were characterised by difficult economic conditions worldwide. Both selling • Economic crisis leading to falling demand for, and drop in selling prices of, basic dairy products prices and volumes of dairy products sold were being weighed down as a result. This led to a 15 percent • Revenue down 15 percent to 4.1 billion euros due to weaker demand for consumer products and drop in Royal FrieslandCampina’s revenue to ingredients, and lower selling prices. Currency 4.1 billion euros. Operating profit fell 8 percent, movements weighing down earnings by 19 million euros on balance landing at 110 million euros. Profit for the first half of 2009 was up 30 percent, rising to 78 million • Operating profit down 8 percent, dropping to 110 million euros due, in part, to the lower valuation euros thanks to an improved performance on finance of inventories income and costs, and share of profit of associates. • Good results posted by the Consumer Products Both branded products and industrial labels International and Consumer Products Europe performed well. Owing to disappointing selling prices business groups of basic products, such as milk powders, caseins and • Earnings achieved by the Cheese & Butter and cheese in particular, the milk price paid to member Ingredients business groups adversely affected by low selling prices of basic products such as milk dairy farmers has come under severe pressure. powders, caseins and cheese Due, in part, to this development, FrieslandCampina • Profit up 30 percent to 78 million euros thanks to paid its member dairy farmers a guaranteed price of improved performance on finance income and costs, 26.04 euros, exclusive of VAT, per 100 kilograms of and share of profit of associates milk for the first half of 2009. This represents a • Cash flows from operating activities up thanks to 32 percent drop compared with the same period last cost control and higher working capital, mainly due to lower prices and the positive effects of structured year. working capital management • Solvency ratio up from 30.0 at the end of 2008 to 35.1 percent at 30 June 2009, attributable to strengthened equity position and lower total assets • Guaranteed milk price for member dairy farmers down 32 percent to 26.04 euros per 100 kilograms of milk, exclusive of VAT • Pro forma performance payment for first half of 2009 at 0.34 euros per 100 kilograms of milk, exclusive of VAT • Merger: geographical spread and broad product portfolio bringing more balance and stability • Merger: integration well on schedule with first merger synergies achieved one year sooner than planned thanks to purchasing benefits and lower personnel expenses and overheads Royal FrieslandCampina N.V. 3 Good brand development, basic products lagging behind and basic products on the other. We market we have brought costs under control managed to achieve good results, under the and delayed investments in order to improve circumstances, from both our branded our financial position, which has also been products and our industrial specialties. boosted by the positive trend in earnings. Branded products showed a particularly As a result, despite the current tight credit positive trend in South East Asia and Africa, market, we have managed to reach and we saw volumes grow and market share agreement with banks on a new, 1 billion increase in most countries in these regions. euro credit facility that will provide us with In Europe we managed to improve our the financial headroom we need for the market position, although volumes and coming years. I am happy with the prices are under pressure. We are advancements that have been made after particularly concerned about trends in the merger. The first half-year results show prices for basic products such as milk that, as a business combination, powders, caseins and cheese. Price levels in FrieslandCampina is more stable and these product categories are based mainly balanced than its two predecessors on global supply and demand, and lagging individually, thanks to both the geographical Encouraging first half of the year demand has caused selling prices to spread of our operations and our broad Cees ’t Hart, Chief Executive Officer of Royal plummet to an exceptionally low level. The product offering. Although the market is FrieslandCampina, described the first price levels not only have a major impact on difficult, we still made good progress, half-year earnings of the newly merged our results, they also determine to a achieving synergies and cost savings sooner company as “encouraging, given the difficult significant extent the guaranteed price for than expected, and the integration project is dairy market”. However, at the same time he our member dairy farmers, which is at a going entirely to plan. The Executive Board also noted that “the guaranteed milk price worryingly low level. would like to state that it greatly for our member dairy farmers is at a appreciates the exceptional efforts that our worryingly low level’’. That said, we are pleased to report that our highly motivated staff have made in branded products made a strong contri- connection with this demanding change Says ’t Hart: “The half-year figures show a bution to our results. The challenge that we project.” clear division between branded products face is to develop more branded products and industrial specialties on the one hand, and industrial labels. In view of the difficult Market conditions Commission to broaden its support for the dairy In the first half of 2009, demand for dairy products sector. Consignments of milk powder and butter are from both consumers and industrial customers dropped being purchased using an intervention system. This further around the world due to the economic crisis, programme, which will at least continue on into 2009, although there were differences between regions and created a bottom in the market. The reintroduction in product categories. In Europe, fewer dairy products January 2009 of export refunds for such products as were consumed and used, where Asia showed growth milk powder and butter, and subsequently for cheese, stagnation. The strong euro and the weak dollar got supports sales on the world market of dairy products in the way of exports of dairy products outside the from the EU to some extent. In addition, the private European Union (EU) because prices were high relative mark-up scheme for butter kicked in earlier this year to price levels in other regions. Selling prices of milk and will remain in effect longer, as will the intervention powder, caseins and cheese were under heavy strain system. in the first half of 2009. This then had a gradual effect In the EU, with over 69 billion kilograms, production of on price developments in other product categories farm milk in the first half of 2009 was virtually at the as well. Supermarkets in Europe are again starting to same level compared with the first six months of 2008. focus on price competition, which is causing more and Over this period, production of farm milk in the more pressure on selling prices of dairy products in the Netherlands rose by 1.8 percent, with milk supplied to supermarket segment.

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