Arla ready to pay out up to £280m of profits to struggling farmers

Around 100 dairy farmers in Scotland will benefit from the Arla payout.
Around 100 dairy farmers in Scotland will benefit from the Arla payout.

The board of dairy firm Arla Foods has proposed paying out its entire 2018 profit to farmers, many of whom are struggling following this summer’s drought across Europe.

Arla said that, in light of its “strong balance sheet” and the fact that farmers are facing a “tough financial situation”, it is in the firm’s best interest for this year’s net profit to be paid out to them.

The co-op is owned by 11,200 dairy farmers across the UK, Denmark,
Sweden, Germany, Belgium, Luxembourg and the Netherlands, including around 100 in Scotland. The firm’s brands include Cravendale.

Arla’s annual profit is expected to come in between 285million euros (£257.6million) and 310million euros (£280.2million) and chairman Jan Toft Norgaard 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.”

The move was welcomed as “hugely significant and very welcome” by Arla supplier and NFU Scotland vice-president Gary Mitchell who added that it underlined the difference that being part of a farmer-owned business can make.

He said: “Scottish dairy farmers have toiled for 12 months with extreme weather that, last autumn and winter, included some of the coldest, wettest weather for a century to this summer, which was the driest for 40 years.

“Producers across Europe have also toiled this summer in the heat, seeing grass growth halt and many having to feed precious winter fodder months ahead of schedule.”

The proposal will be discussed at the next board meeting in October and, if approved, the money will be paid out in March 2019.

Arla Foods chief executive Peder Tuborgh said: “Our balance sheet has improved significantly over the last few years and 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.

“The annual bonus – or 13th payment – from Arla has averaged around one Euro cent per litre in the past but this move could, if approved, see 13th payments of between 2.3 to 2.5 cents per litre, giving a huge financial boost to members’ bank accounts at a time when they have faced significant hikes in key costs such as feed, fertiliser and fuel.”