Arla Foods Annual Report 2020
Management Review Our Strategy
Revenue and cost
1.2 OPERATIONAL COSTS
Our Brands and Commercial Segments Our Responsibility Our Governance Our Performance Review Our Consolidated Financial Statements Our Consolidated Environmental, Social and Governance Data
Development in operational costs
(EURM)
יון
Calcium contributes to lower cost
Operational costs were EUR 10,223 million which is an
increase of 0.9 per cent compared with last year.
Production costs decreased 0.3 per cent to EUR 8,301
million from EUR 8,325 million last year. Excluding costs
relating to raw milk, production costs decreased to EUR
3,459 million compared to EUR 3,499 million last year.
Increased costs related to higher sales of branded
products and full year effect of M&A activities from
2019 were offset by savings from Calcium initiatives.
The Calcium savings were EUR 130 million in 2020.
The net cost effect compared to last year amounted
to EUR 84 million and includes re-investments and
non-recurring in-year items. Refer to pages 16-17 for
more on Calcium initiatives.
Sales and distribution costs increased 4.7 per cent to
EUR 1,483 million compared to EUR 1,416 million last
year, mainly due to higher sales and salary costs in the
MENA region. Research and development costs
amounted to EUR 72 million, compared to EUR 66
million last year. In addition EUR 13 million related to
capitalised development activities.
Administration costs increased 12.9 per cent to EUR
439 million compared to EUR 389 million last year due
to increased staff costs, operational costs within IT,
depreciations and costs related full year effect of M&A's
from 2019.
Cost of raw milk
The cost of raw milk increased to EUR 4,842 million
compared to EUR 4,826 million. The increase was a
result of higher weighed-in milk volumes from owners
partly offset by lower volumes on other purchased milk.
Owner milk
Costs related to owner milk increased by EUR 46 million
due to higher volumes. Average pre-paid milk price was
on the same level as last year.
Other milk
Costs of Other milk decreased by EUR 30 million due to
lower volumes. Other milk consists of speciality milk
and other contract milk acquired to meet local market
demands.
Staff costs and FTE
Staff costs increased 5.4 per cent to EUR 1,345 million
compared to EUR 1,276 million last year. Staff costs
increased due to additional FTE's from the insourcing
activities primarily in IT and transportation and due to
inflation.
The total number of FTE's increased to 20.020
compared to 19,174 last year.
Marketing spend
Marketing spend was consistent with last year and
amounted to EUR 248 million. Continued focus on
efficiency improvements enabled by the Calcium
transformation and efficiency programme including
insourcing and upscaling of "The Barn" our in-house
content studio, allowed us to increase our marketing
activities while keeping costs consistent with last year.
Depreciation, amortisation and impairment
Depreciation, amortisation and impairment increased
4.9 per cent to EUR 451 million compared to EUR 431
million last year. The increase was primarily due to
higher levels of CAPEX investments.
10,400
10,350
10,300
76 ARLA FOODS ANNUAL REPORT 2020
10,250
10,200
16
10,150
10,130
10,100
10,050
10,000
2019
Milk cost
in operational costs
Volume/mix and other changes
184
-84
49
44
Calcium net of re-investments
M&A
Currency
-72
2020
10,223View entire presentation