Arla Foods Annual Report 2020

Management Review Our Strategy Our Brands and Commercial Segments Our Responsibility Our Governance Our Performance Review Our Consolidated Financial Statements Our Consolidated Environmental, Social and Governance Data A BUSY AND CHALLENGING YEAR A busy and challenging year 2020 will be remembered as one of the most challenging years in recent times, and Covid-19 continues to affect our lives and livelihoods. Maintaining the food supply has been a critical requirement of all governments, and as farmer owners of a global company we have much to be proud of in the way we have risen to the challenges presented by this devastating pandemic. Thanks to the efforts of everyone in Arla, farmer owners, employees and management, we have kept focus on our core purpose of producing and delivering healthy and nutritious dairy products to our customers and consumers, which is an extraordinary achievement. In addition, as farmers we have continued our collective commitment to sustainability with the landmark introduction of Climate Checks on all Arla farms and the rollout of our updated ArlagårdenⓇ programme. Strong business results We entered 2020 with positive sales momentum underpinned by a strong financial position. Even though Arla has been affected by the harsh impact of Covid-19 on the foodservice sector and global commodity markets, our retail business and strong brand portfolio, together with our transformation and efficiency programme Calcium, delivered a financial performance above our expectations. In a cooperative, strong results should reflect directly on its owners. Thus the Board of Directors has proposed to the Board of Representatives a EUR-cent 1.75 supplementary payment per kilo milk, thereby exceeding the retainment policy by 0.75 EUR-cent/kg as an extraordinary addition. 66 OUR STRONG COOPERATIVE SPIRIT HAS BEEN CHALLENGED IN THIS UNUSUAL YEAR. 99 Competitive milk price The Arla pre-paid milk price was kept at a competitive and relatively stable level throughout 2020. We ended the year with a performance price of EUR-cent 36.9 per kilo, indicating our progress towards a more competitive milk price. That said, as a Board of Directors we fully recognise that farmers are facing increasing production costs and additional requirements. This is a challenge across the European dairy industry that needs to be met by actions across the industry and its wider stakeholder group. Sustainability As farmer owners we have made great efforts to meet important milestones in our transition towards even more sustainable dairy production, and as a cooperative we have created strong results. We have updated and implemented our two major programmes: ArlagårdenⓇ and Global Climate Checks. This enables us to collect one of the world's largest sets of externally verified climate data from dairy farming, creating a solid foundation for benchmarking, knowledge sharing and research across the dairy industry. This effort will enable Arla to lead the way towards a sustainable future for dairy farming. New ways of working in our democracy As farmer owners we have always valued meeting face-to-face, debating and challenging each other and our business management. Covid-19 restrictions challenged this democratic set-up, as most of our regular meetings had to be hosted on digital platforms. This was new to many of us, but in the spirit of our cooperative mindset, we have managed to overcome this challenge, until we can meet under more normal circumstances again. Looking ahead In the coming year, the Board of Directors will dive deeply into forming our new business strategy and define a future-oriented cooperative that meets the changing demands of our customers and consumers. We must constantly adapt to the future demands and changes, while maintaining the strong core that the cooperative concept gives us as farmer owners. The Free Trade Agreement between the UK and EU was a great relief, and we look positively on the future of our UK business. Jan Toft Nørgaard Chairman of the Board of Directors Performance price 36.9 (EUR-cent/kg) 2020 36.9 2019 36.6 2018 36.4 5 ARLA FOODS ANNUAL REPORT 2020

View entire presentation