Dairy co-op Arla will give entire 2018 profit to farmers hit by drought

‘We care deeply about the livelihood of our farmers and we recognise that this summer’s drought in Europe has been extraordinary’

Arla Foods, one of the world’s biggest dairy firms, is to pay out its entire 2018 net profit of up to €310m (£278.48m) to its members after one of the hottest and driest summers on record.

The proposal from the agri co-op’s board follows the positive development of Arla Foods’ balance sheet, which has improved significantly over recent years.

The firm, owned by 11,200 farmers in Denmark, Sweden, Germany, Britain, Luxembourg, the Netherlands and Belgium, traditionally pays only a part of its profit to owners, but said it would make an exception this year.

Company chair Jan Toft Nørgaard said: “The board recognises that many Arla farmers are facing a tough financial situation due to this summer’s drought in Europe, and that it is in Arla’s best interest for this year’s net profit to be paid out to the farmers.

“Arla’s board of directors has discussed and agreed on a proposal for the company’s supreme governing body, the board of representatives, to pay out the entire net profit from 2018 when the annual results are approved early next year, thus making a one-year only deviation from the company’s usual profit appropriation policy.”

He added: “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 comes as farmers across Europe try to recoup losses after the heatwave hit cereal harvests and dried out pastures, leaving some on the edge of bankruptcy and shutting the EU out of lucrative export markets.

“It is obvious farmers have had a tough time acquiring fodder, and it’s been more expensive. This puts the farmers’ economy under pressure,” Arla chief executive Peder Tuborgh told Reuters press agency.

The proposal will be discussed at the next board of representatives meeting in October, and brought forward for a final decision at the meeting in February 2019 when the annual results are approved.

A statement from Arla added that 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 extraordinary payment will follow the regular timing of the supplementary payment in Arla, with money being paid out in March 2019.

The company says it will return to its existing retainment policy for the remainder of the current strategic period, affecting the financial years of 2019 and 2020.

“Our balance sheet has improved significantly over the last few years,” said Mr Tuborgh, “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.”