The operating profit for the second quarter ended at NOK603m ($66.4m), NOK197m ($21.7m) lower than the same period last year. TINE said this is due to a fall in volume in the large dairy categories and much lower ice cream sales this year compared to last year.
CEO Gunnar Hovland said the combination of strong import growth, loss of Jarlsberg exports, changes in consumption patterns and strong subsidization of competitors is serious for Norwegian milk production and TINE.
He said the company has implemented measures to improve profitability and expects this to bear fruit in 2020.
Sales revenue for TINE in the quarter was NOK7.89bn ($859m), an increase of 2.2% compared with the same quarter in 2018. The growth in sales revenues is mainly due to further acquisitions of the shares in Lotito Foods in the US, which is now a subsidiary of TINE.
TINE said there was value growth in the Norwegian dairy business, but the negative development in volume for the major categories takes away this effect. In addition to volume declines in the largest dairy categories and lower ice cream sales, operating profit in the period was negatively affected by somewhat increased costs. So far this year, operating profit was NOK931m ($102.5m), NOK337m ($37.1m) weaker than the same period last year.
“That is why we are implementing improvement measures with the aim of reducing costs by at least NOK 1bn ($110m) and reducing staff by 400 full-time equivalents. In addition, a number of measures for strengthening growth and competitiveness will be forthcoming,” Hovland said.
Sales revenues for Dairy International were NOK1.17bn ($129m) in the second quarter of 2019, an increase of 30.9% compared to the second quarter of 2018. This is due to the acquisition of the shareholding in Lotito Foods in the US, which is now a subsidiary of Norseland Inc.