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
PERFORMANCE REVIEW (CONTINUED)
THIRD YEAR OF STRONG
CALCIUM DELIVERY
Our transformation and efficiency programme,
Calcium, was initiated as part of the strategy to
increase efficiencies and operational execution
across the business and strengthen Arla for the
future. 2020 was the third year of the Calcium
programme, and again the programme delivered
strong results with savings of EUR 130 million,
significantly ahead of our target range of EUR
75-100 million for the year. The accumulated
Calcium savings achieved since the programme
start in 2018 increased to EUR 354 million,
approaching our 2021 target of EUR 400 million.
Savings were primarily achieved through further
supply chain efficiencies as well as decreased
marketing spend and SG&A optimisation, supported
by reduced expenses due to employees working
from home and less business travel during Covid-19.
Read more about our Calcium programme
on page 16-17.
LEVERAGE BETTER
THAN TARGET RANGE
Arla's leverage is calculated as the ratio of net
interest-bearing debt, including pension liabilities,
to operating profit, i.e. EBITDA. This measures Arla's
ability to generate profit compared to our net-interest
bearing debt. Leverage is our most important
indicator of our financial position and our long-term
target range is 2.8-3.4. In 2020, leverage decreased
to 2.7 compared to 2.8 in 2019 despite a high level
of investment. This was the result of strong cash
generation from operations as well as firm cash
management throughout the year.
Net interest-bearing debt including pensions
increased to EUR 2,427 million compared to EUR
2,362 million in 2019. The increase was primarily
due to a high investment level. EBITDA increased
by EUR 72 million to EUR 909 million compared to
EUR 837 million last year.
Arla's overall financial position is strong and
provides us with flexibility to fund our strategy and
pursue our vision to create the future of dairy. Arla
does not hold a public rating; however, based on
the market pricing of our bond issues and feedback
from several external financial relations, Arla is
considered a solid investment grade company and
is committed to maintaining this status going
forward.
STRONG CASH FLOW FROM
OPERATING ACTIVITIES
Arla's cash flow from operating activities decreased
to EUR 731 million compared to EUR 773 million
last year. The higher EBITDA was more than offset
by increased positions of other working capital
items, such as import VAT, duties and HR-related
liabilities.
NET WORKING CAPITAL
The net working capital position decreased to EUR
679 million compared to EUR 823 million last year.
This was primarily driven by a decline in the value
of trade receivables and increased trade payables.
Increased working capital requirements, primarily
related to stronger sales, were offset by the effect
of the utilisation of receivables finance programmes
and improved internal processes. Turnover days
improved by 1.6 days from 2019 to 2020.
alcium
130
(EURM)
Financial leverage development
2.4
44
2.6
2.4
2.8
2.7
27
2020
130
2019
110
2018
114
2016
2017
2018
2019
2020
59 ARLA FOODS ANNUAL REPORT 2020View entire presentation