ARLA FOODS:: annual report 2000 : 2001

Arla Foods ambaSkanderborgvej 277DK-8260 Viby J.Denmark

Tel. +45 89 38 10 00Fax +45 86 28 16 91e-mail arla@arlafoods.comwww.arlafoods.com

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: A S N IG H T D U T Y O F F I C E R , H A N S J Ø R G E N J E N S E N MO N I TO R S T H E E L E C T R IC I T Y S U P P LY F O R 1 M I L L IO NP E O P L E I N A N A R E A N O R T H O F C O P E N H A G E N . T H E P O W E R S TAT IO N , W H IC H C E L E B R AT E S I T S C E N T E N A R YI N 2 0 0 2 , WA S O R IG I N A L LY B U I LT TO E X P L O I T T H E T U B O R G B R E W E R Y ' S S U R P L US P R O D U C T IO N O F S T E A MF O R G E N E R AT I N G E L E C T R IC I T Y. H A N S J Ø R G E N J E N S E N W O R KS T H E N IG H T S H I F T U N T I L 8 A M W H E N H EG O E S HO M E W H I L E T H E R E S T O F T H E C I T Y G E TS O N T H E MO V E .

20524_Arla_UKomslag 28/01/02 11:58 Side 1

0 :0 2K e y f i g u r e s

0 :0 4T h e C h a i r m a n ’ s R e p o r tA better than expected result

0 :0 6R e p o r tThe first full year after the merger

0 :1 2M a n a g e m e n t o f A r l a F o o d s ’f i n a n c i a l r i s k s

0 :1 4T h e d i v i s i o n sRound the world, round the clock.Sweden Division, Denmark Divi-sion, UK Division, Europe Divisionwith a market review, OverseasDivision with a market review, ArlaFoods Ingredients with a marketreview, Production Division,Members’ Division.

0 :2 8T h e s u b s i d i a r i e sGrowth and advancement:Danapak, De danske MejeriersFællesindkøb, Rynkeby Foods,Medipharm, Semper, JO Bolaget,Frödinge, other companies.

0 :3 6E n v i r o n m e n t r e p o r tArla Foods’ Environment, Healthand Safety Policy

0 :4 1A c c o u n t s02.10.2000 – 30.09.2001Management reportAuditors’ report

0 :4 2A c c o u n t i n g p o l i c i e sGeneralProfit & loss accountBalance sheetCash-flow statement

0 :4 5P r o f i t & l o s s a c c o u n t

0 :4 6B a l a n c e s h e e t

0 :4 8E q u i t y m o v e m e n t s

0 :4 9C a s h - f l o w s t a t e m e n t

0 :5 0N o t e s

0 :5 6G r o u p c o m p a n i e s

0 :5 8A r l a F o o d s ’ S u p e r v i s o r yB o a r d

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: F R O N T C O V E RF O R J E N N I E M E Y E R , 2 2 , T H E MO R N I N GIS H E R FAV O U R I T E T I M E O F DAY,E S P E C I A L LY AT W E E K E N D S W H E N T H E R E I S T I M E TO E N J OY B R E A K FA S T ,R E A D I N G T H E PA P E R S A N D R E F L E C T I N GO N L I F E . B R E A K FA S T C O N S IS TS O FY O G H U R T, M U E S L I , T E A , M I L K A N D” J U L I A” C A K E , A S O F T, F L AT B R E A D . I NH E R DA I LY L I F E , J E N N I E S T U D I E SM E D I A & C O M M U N IC AT IO N S C I E N C E ATT H E U N I V E R S I T Y O F T R O L L H Ä T TA N /U D D E VA L L A I N S W E D E N .

: A R L A F O O D S ’ N E W S T R AT E G Y I SA I M E D AT E X T E N D I N G T H E US E O FDA I R Y P R O D U C TS TO OT H E R C O N S U M E RG R O U P S , TO OT H E R T I M E S O F T H E DAYA N D TO N E W P L AC E S . P H O T O G R A P H E RR A S M US BA A N E R H A S C A P T U R E D S O M EE X A M P L E S .

CONTENTS:: Arla Foods

Annual Report 2000/01

20524_Arla_UKberetning 25/01/02 13:49 Side 3

course, apply to the furtherharmonisation of the milk pricesystems etc. We will also examinewhether new and more beneficialsystems can be introduced which,for shorter or longer periods, cantie co-operative owner capital tothe company. This could, forinstance, apply to the unexploitedpotential for co-operative capital inpersonal accounts. Moreover, theissue of how the company’s milksuppliers in the UK can, in oneway or another, be linked to thecompany as co-owners will be con-sidered.

Lars Lamberg

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The aim was to establishuniform conditions for co-opera-tive owners in the two countrieswithin a three year period. A pos-sible barrier to this would be if thetwo countries did not, as hoped,have a common currency withinthis period. In a referendum,Denmark decided not to join theEuro from the outset, yet in termsof foreign exchange, Denmark istied to the Euro. So far, Sweden hasremained outside the Euro. Oneconsequence is that the fallingSwedish krona has resulted inincreased costs for Swedish dairyfarmers and dairies compared tothe situation before the merger.

Another important barrier is thatno political steps towards theharmonisation of the two countries’legislations within the co-operativearea have been taken. Harmoni-sation on a European level is high-ly desirable.

Even if the first year’s efforts toco-ordinate conditions for co-oper-ative owners in the two countrieshave not lived up to expectationsin all areas, the Supervisory Boardhas seen a very high level of deter-mination among the elected co-operative owners to achieve resultsacross the cultural divides. Thisalso applies to the backing given tothe Group’s ambitious strategies.

Moreover, it is also our impres-sion that the majority of co-opera-tive owners are confident that theGroup is dedicated, in the longer-term, to paying the highest possiblemilk price – a milk price at the highend of what is paid by other largeEuropean co-operative dairies.

Therefore, there is no doubteither that the owners are deter-mined to support the strategiespresented by the Supervisory andManagement Boards.

This is especially the case withregard to the support for includingthe farms themselves in the valuechain which extends from the soilto the table – a concept which aco-operative group has particularcapacity for exploiting.

The coming year will be domi-nated by endeavours to enhancethe value chain. The same will, of

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It gives me great pleasure to statethat the result for the year is notonly satisfactory, but also betterthan expected.

The first full financial year of theco-operative group, Arla Foods,was, of course, dominated byefforts directed at harmonising andstreamlining the new Group’smany activities. This was particu-larly the case with regard to theGroup’s owners, the majority of themilk-producing farmers of Swedenand Denmark.

The wide-ranging democracy,which operates across the twocountries’ legislations and tradi-tions, has indeed felt the impact ofthe challenges of the past year.

This especially applies to theefforts devoted to harmonising thesystems on which the milk pricepaid to farmers is calculated – andwhich in many respects has dif-fered in the two countries.

It also applies to such importantfactors as financing the company’sequity capital, which is compli-cated by differences in co-opera-tive legislations and tax regula-tions.

The provision of equity capitalhas been further accentuatedbecause of the extensive strategyplans approved by the co-operativeowners. In the coming years, thesewill require significant investmentand will, therefore, place highdemands on the size of the equitycapital.

Owners have shown greatunderstanding of the importance ofthis.

This is equally the case with theharmonisation of the structural anddemocratic rules of play whichgovern the decision-making pro-cesses in a trans-national co-opera-tive company. These fundamentalissues have even had to beconsidered by the relevant bodieswhere, alongside language dif-ferences, there were differentarticles of association and decision-making processes, even differentmeeting traditions.

At the time of the merger, theGroup gave itself a period of threeyears to harmonise all this.

At the t ime of the merger, the aim was to estab-

l ish uniform condit ions for the co-operat ive

owners in the two countr ies within a three year

per iod. A possible barr ier to this would be i f the

two countr ies did not , as hoped, have a common

currency within this per iod. In a referendum,

Denmark decided not to join the Euro f rom the

out se t , ye t i n t e rms of fo re i gn exchange,

Denmark is t ied to the Euro. So far, Sweden has

remained outside the Euro. One consequence is

that the fa l l ing Swedish krona has made l i fe more

diff icult for Swedish milk producers than before

the merger.

THE CHAIRMAN:: a better than

expected result

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: C H A I R M A N L A R S L A M B E R G

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Ad j u s t m e n t o f t h e o p e n i n gb a l a n c e s h e e t a s a t 1 7 A p r i l ,2 0 0 0

In connection with the merger on17 April, 2000, unifications of theapplied accounting policies as wellas certain value adjustments wereimplemented.

Partly because of the strategicplanning, the opening balancesheet as at 17 April, 2000 has beenrestated. The restatement resultedin participating interests in sub-sidiaries not regarded as core busi-nesses being adjusted by DKK 300million at a conservatively calculat-ed market value. A re-evaluation ofprovisions for restructurings etc. re-sulted in further provisions of DKK300 million as at 17 April, 2000.

The equity in the opening bal-ance sheet (17 April, 2000) was,therefore, not affected by theadjustments.

T h e S w e d i s h a n d D a n i s h m a r k e t s

The two domestic markets, Swedenand Denmark, were, of course, giventop priority as far as raw materialsupplies are concerned. Prices here,however, did not match internation-al price developments. In thedomestic markets, focus is on long-term, stable prices. Neverthelesscompetitive pressure from importedproducts is increasing.

Current trends in the Danish andSwedish retail trade, includingstrong consolidation and, in partic-ular, trans-national mergers andpartnerships have posed significantchallenges to the group. Meetingthese demands would have beenparticularly difficult without themerger of Scandinavia’s two largestdairy groups, MD Foods and Arla.Consequently, the new Arla Foodsorganisation is well prepared tomeet the future requirements of theretail sector.

The expansion of the market fordairy products has begun with anumber of successful productlaunches aimed at consumers onthe move. New products withincategories designed to meet con-

R e p o r t

The result of DKK 1,157 million,which substantially exceeds expec-tations as well as the budget, canbe described as particularly satis-factory.

We have seen a year of excel-lent economic development andfavourable trends where foreignexchange rates have beenfavourable to exports to marketsoutside Scandinavia.

Measured in DKK, the decline ofthe Swedish krona against otherEuropean currencies has adverselyaffected Arla Foods’ turnover,balance sheet and results.

During the first full operatingyear following the merger betweenMD Foods and Arla, the companyhas benefited from the subsequentsynergies, particularly with regardto international sales.

Synergies such as cost reduc-tions will be achieved through theimplementation of the restructuringplan which was presented as aconsequence of Arla Foods’ newstrategy.

The positive trends which havecharacterised European dairymarkets during the year have, inthe main, benefited the whole ArlaFoods Group.

At the same time, a series ofprice rises was implemented, bothfor industrial and retail customers.Consequently, Arla Foods con-cluded the year with a strongerprice structure than twelve monthsearlier. These price rises, however,do not match the increased pricelevels for bulk products whichhave seen significantly upwardtrends in a market characterised byrising demand.

The stronger demand has pro-vided an opportunity to prioritiseraw material supplies in order toexploit the scarcity for deselectingproduction areas, products andmarkets where long-term pro-fitability seems less attractive.

S t r a t e g y

In the first half of the financialyear, Arla Foods’ Executive

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Management Group presented anin-depth strategy plan focusing onselected markets and segments.Besides organic growth, this ambi-tious plan targets growth throughmergers and acquisitions ofprofitable dairy activities in care-fully selected markets.

The objective is to achieve anaverage growth in turnover of 10%per year over a five-year period.This will allow Arla Foods todevelop in line with its large, inter-national retail customers. Theintention is for Arla Foods to payits owners, the Danish and Swedishmilk producers, a milk price at thehigh end of the norm for theEuropean dairy industry.

The strategy plan’s key points are:

• Market expansion for dairyproducts in Sweden andDenmark through the provi-sion of new products for newconsumers.

• Profitable growth in largeexport markets with emphasison Arla Foods’ extensiverange of speciality cheese andbutter products.

• To be a global market leaderwithin advanced milk-basedingredients and other powderproducts for the internationalfood industry.

The strategy plan also lays thefoundation for restructuring pro-duction in Denmark and Sweden.Major rationalisation measuresinclude the closure of 17 dairiesand extraordinary investments innew or improved production facili-ties of DKK 2.3 billion over the life-time of the plan.

Approximately 1,000 employeeswill be affected and approximately400 jobs are expected to be lost.Due to the added value to the com-pany’s product ranges combinedwith organic growth, overall joblevels are, however, likely toremain stable over the period.

Some of the strategic andorganisational projects were initiat-ed during the financial year andseveral others will be implementedduring the current year.

sumer requirements for taste andconvenience in daily life are alsocontributing to market expansion.

Close contact with consumersthrough in-store visibility, productsand packaging enables Arla Foodsto maintain a regular dialogue withconsumers and, therefore, to an-ticipate consumer wishes andrequirements at a very early stage.

To meet consumer demand forvariation and innovation, the exist-ing broad range of Arla Foodsproducts will also, to a certainextent, be supplemented by pro-ducts from other producers.

U K

The financial year proved to be thebest ever for Arla Foods in the UK.This applies to exports fromScandinavia as well as to the oper-ations of the UK subsidiary whichadvanced in both turnover and netearnings.

The positive results derive fromincreased exports of both brandedand own label products fromDenmark and Sweden, advances forcertain UK-produced products andstrong emphasis on cost control.

The newly approved agreementwith the New Zealand dairy com-pany, Fonterra, for joint sales ofAnchor and Lurpak butter in theUK market is important for the fur-ther development of the butter andblends market. The partnership,however, also provides consider-able potential in other respects.

Arla Foods’ substantial sales inthe UK have created an interestingplatform for the future direction ofthe partnerships with UK retailers.

Arla Foods believes that the UKmarket for liquid milk has yet tofind a lasting structure and wishesto contribute to a more permanentstructure for dairy production inthis important market. The Grouphas a firm base in the UK andregards the potential here as con-siderable.

In view of its long-standing his-tory as a leading co-operative dairygroup, Arla Foods finds it naturalto aim at establishing long-termrelations with UK milk producers.

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In the f i rst half of the f inancia l year, Ar la Foods worked out a

strategy based on selected internat ional markets and sectors.

Ar la Foods is a lso committed to an ambit ious growth strategy

aimed at organic growth as wel l as mergers and acquis i t ions of

prof i table dairy act iv i t ies in careful ly def ined markets.

The object ive is to achieve an average growth in turnover of 10%

per annum over a f ive year per iod. This wi l l a l low Ar la Foods to

develop in l ine with the growth of i ts large, internat ional retai l

customers. The intention is for Ar la Foods to pay i ts owners, the

Danish and Swedish milk producers, a mi lk pr ice at the high end

of the norm for the European dairy industry.

GROUP MANAGEMENT BOARD:

: the first full year after the merger

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: M A N A G I N G D I R E C T O R J E N S B IG U M

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Argentina in partnership withArgentina’s largest cheese maker,SanCor, and the extensive upgrad-ing of the Swedish and Danishpowder factories.

The key competitive parameterfor these products is quality andadvanced product development.

During the year under review,the US authorities finally approvedthe new milk-based sweetener,tagatose, which, due to its lowcalorie content, opens up a broadrange of opportunities within thefield of nutrition.

Following the approval, ArlaFoods is currently examining how– and under what conditions – thisnew product should go into pro-duction. The potential for sharingproduction with an internationalpartner is also under consideration.

In both respects decisions areexpected to be made within thenext few months.

The rate of the dollar will signif-icantly affect developments withinboth retail-oriented and ingredi-ents-oriented powder productionover the next few years. A consid-

erable share of this business areaalso depends on world marketprices which now appear to bedeclining. If this proves to be thecase, it could lead to a markeddecline in earnings within this seg-ment from as early as the currentfinancial year.

Pe r s o n n e l

The need for combining craftsman-ship and advanced technologyposes particular demands on theprofessional skills of today’s dairy

E u r o p e

Sales in Europe have benefitedfrom general price increases fordairy products. This has enabledArla Foods to define markets andcustomers with focus on earningsin individual markets.

In Arla Foods’ largest exportmarket, Germany, there has been aclear connection between thedeclining consumption of beef fol-lowing the BSE and Foot & Mouthcrises and the rising consumptionof cheese.

Considerable progress withregard to concepts which makedaily life easier for the consumer,e.g. sliced cheese, is one of theconsequences of the close partner-ship with certain multiples. This isin line with the group’s strategies.

Activities in specific countriesare highly differentiated. InGreece, a new joint venture withthe country’s largest dairy, Delta, isa significant move. In many othercountries, focus is on Arla Foods’products with a strong internation-al profile – products for which ArlaFoods has special production skills.

M a r k e t s f u r t h e r a f i e l d

Despite declining export subsidies,markets outside the EU showedsatisfactory development.

Sales in the Middle East wereaffected by intense media attentionon the BSE and Foot and Mouthcrises in Europe. Convincing thesemarkets of the safety of Arla Foods’products and thus maintainingmarket share has been somewhatdifficult. However, sales appear tohave recovered and Arla Foods hasregained its position from beforethe BSE outbreak in 2000.

The relatively rapid recovery ofmarket positions highlights theGroup’s strong brand position andefficient distribution system,particularly in Saudi Arabia.

On the basis of the positiveexperiences in Saudi Arabia, theintention is to expand Arla Foods’activities in the region. Initially,this will take the form of a jointventure with the dairy company,

National Food Product Company inthe United Arab Emirates. Ex-pectations are that a strong marketposition similar to that in SaudiArabia can be achieved here. Otheroptions for strengthening ArlaFoods’ position in the Middle Eastwill be examined during the cur-rent year.

In North America, the combina-tion of imported products fromScandinavia and local licensedproduction contributed to a goodresult. Developments in SouthAmerica, however, were disap-pointing.

South East Asia, with Japan asthe largest market, lived up toexpectations. The region hasshown stable growth, especiallywithin luxury segments such aswestern supermarkets and hotelchains.

Japan, which occupies a specialposition in the region, continues tosee strong cheese sales with acorresponding satisfactory result.

Rapidly increasing competitionfrom other international suppliersand local producers and, not least,declining subsidies and world mar-ket prices for cheese are giving riseto some uncertainty concerningsatisfactory earnings levels.

I n g r e d i e n t s

The market for milk powder andmilk-based ingredients has beenunusually positive. This applies notleast to the bulk segment whichhas seen strong price rises forwhole milk and skimmed milkpowder. Added-value powder pro-duction also achieved satisfactorysales even though price increaseshere do not normally directlymatch the movements of bulkproducts.

The strong trends for whey andmilk-based ingredients in recentyears have provided a base forincreased sales of such addedvalue powder products beyond theexisting production capacity andraw material availability.

Accordingly, this business areain which Arla Foods intends toestablish itself as a global market

leader has been given a substantialrole in the new strategy plan.

Arla Foods is already a supplierto some of the world’s largest andmost successful food producersand the Group attaches greatimportance to servicing these com-panies and meeting their demandsfor both quality and quantity.

The entire upgrading pro-gramme for Arla Foods’ productionapparatus should be seen withinthis context. This is particularly thecase regarding the construction ofa new whey protein factory in

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: E R N S T H A N S E N I S T H E S I X T H G E N E R AT IO N AT AV E R N A KG Å R D FA R M , S O U T H O F O D E N S E O N F U N E N , D E N M A R K . BAC K I N 1 7 9 5 ,H IS T W O A N C E S TO R S , B R OT H E R S H A N S A N D R A S M US H A N S E N , SA I L E D F R O M T H E S M A L L I S L A N D O F AV E R N A K Ø A N D WA L K E D T H E 1 5 M I L E S TO B E L L I N G E W H E R E T H E Y B O U G H T L A N D B E L O N G I N G TO A L O C A L M A NO R , DA N E S B O. E AC H B R OT H E R B U I LT AFA R M HO US E O N T H E L A N D W H IC H H A S B E E N I N T H E P O S S E S S IO N O F T H E FA M I LY E V E R S I N C E . E R N S T H A N S E N H A S R U N T H EFA R M S I N C E 1 9 6 4 W H E N H E TO O K O V E R F R O M H IS FAT H E R . E AC H MO R N I N G AT 1 0 A M – W H E N M I L K I N G I S O V E R – H E E N J OY S A C U P O F C O F F E E , A C H E E S E S A N D W I C H A N D A G L A S S O F M I L K .

20524_Arla_UKberetning 25/01/02 13:49 Side 8

personnel. The substantial require-ments on personnel in respect of,e.g. hygiene in modern food pro-duction mean that staff must con-tinually upgrade their skills.

The new inter-Scandinavian part-nership in respect of professionaldairy qualifications at Dalum inDenmark is, therefore, to be greatlywelcomed.

Arla Foods’ own extensive train-ing programme will also contributetowards raising staff skills. In thecurrent year we shall also work ona management concept for optimis-ing the Group’s training pro-grammes.

With the exception of somelarger Swedish towns, the person-nel situation is generally charac-terised by considerable stability.Likewise, the recruitment of per-sonnel with a variety of quali-fications is relatively easy.

I n n o v a t i o n

The tough competition for provid-ing the maximum share of con-sumer needs in the form of dairyproducts and trends in Arla Foods’key markets towards experiencesand well-being rather than merelyfulfilling a basic need for food,makes product innovation moreimportant than ever.

Arla Foods believes that onlycompanies that continue to providethe best possible product rangeswill gain crucial supermarket shelfspace. Arla Foods’ developmentstaff, in partnership with theappropriate sales and productiondepartments are, therefore, com-mitted to applying the most up-to-date results from the world ofresearch to the development ofnew and attractive products.

By launching approximately 150new products each year, Arla Foodsranks among the busiest innovatorsin the international market.

With the establishment of inno-vation centres in Denmark (cheese,butter and powder) and Sweden(liquid milk and special nutritionalproducts) Arla Foods has investedsubstantially in creativity and addedvalue through new products.

In the field of research ArlaFoods has, through the DanishDairy Industry’s Research Founda-tion and Svensk Mjolk FoU,established excellent ties withleading technical universities andother institutions of higher edu-cation in Denmark and Sweden. Anextensive European network hasalso contributed to new and rele-vant knowledge. A new researchstrategy for the next seven yearshas recently been approved.

The year saw the signing of apartnership agreement with NASAFood Technology Commercial SpaceCenter for the development of dairyproducts for use in space shuttlesand in the space station, ISS, over afive year period. Arla Foods’ compe-tencies within quality, safety, nutri-tion and tasty products was a strongfactor behind NASA’s decision.

I n v e s t m e n t s

The current year is characterisedby a very large investment budget.This is primarily due to significantinvestments in structural projectsover and above the normal invest-ment budget.

The structural projects are alldistinguished by satisfactory profi-tability. However, they will, to acertain extent, affect the operatingresult in the coming years becauseof larger depreciations.

Besides the budgeted invest-ments, the year is expected to seesome acquisitions. These willrequire further investment capital.

F i n a n c i n g

Arla Foods places considerableimportance on allocating appropri-ate funds as a buffer against futurefluctuations in the operating resultand thus providing the Group withthe means to undertake majorinvestments or acquisitions.

These financial contingencyplans are substantial and sufficientto meet expected requirements.

The extensive investments underthe strategy plan necessitate aclearly politically anchored equitycapital generation.

The debate on the provision ofthis capital generation is currentlyunder way among the co-operativeowners. It is hoped that theprocess will be completed duringthe year.

To ensure long-term financialfreedom, a solvency ratio of at least30% is desirable.

T h e f u t u r e

All indications are that thefavourable international pricelevels for dairy products, whichhave characterised the marketduring the past financial year, arebeing superceded by a trendtowards falling prices in mostmarkets. Although expectations arefor fairly moderate price falls, evenminor fluctuations may impact onsales in individual markets.

In the longer term it is antici-pated that further liberalisation ofglobal trade in dairy products willtake place within the framework ofWTO. This will lead to lower sup-port levels for exports from the EUof which Arla Foods accounts for asignificant share.

EU markets will not only becharacterised by largescale sup-plies of European dairy products,but also increasingly by productsfrom large, professional suppliersfrom outside Europe.

Besides increased liberalisation– and thus more intense competi-tion – the dairy industry and itspeople can expect that the EU’sexpansion towards the East andAgenda 2000 will lead to a fall inEU guideline prices and correspon-ding support. In the slightly longer-term, we must be prepared forlower EU milk prices and decliningprices for dairy products in Europe.

Despite the somewhat lessfavourable conditions in the cur-rent operating year, Arla Foodsexpects to maintain current earninglevels provided no dramatic shiftoccurs in world markets.

Even so, a result in line with lastyear’s will require a significanteffort from everyone across theGroup.

Jens Bigum

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: H IG H A B O V E AT H E N S ’ T R A F F I C , V I V I M A R GA R I T I A N D H E R PA R T N E R , S T E FA NO S K A R A M A NO L A K ISE N J OY T H E I R B R E A K FA S T I N T H E S U N . V I V I I S A B R A N D M A N AG E R , A N D S T E FA NO S H A S J US T O P E N E D AD IG I TA L P R I N T S HO P I N T H E G R E E K C A P I TA L . A B R E A K FA S T O F C H E E S E , C A K E A N D J U I C E I S S O M E -T H I N G O F A L U X U R Y W H IC H I S NO R M A L LY R E S E R V E D F O R T H E HO L I DAY S . O N NO R M A L W E E K DAY S , T H E YP R E F E R TO S L E E P H A L F A N HO U R L O N G E R R AT H E R T H A N G E T U P F O R A P R O P E R B R E A K FA S T.

20524_Arla_UKberetning 25/01/02 13:49 Side 10

M a n a g e m e n t o f A r l a F o o d s ’f i n a n c i a l r i s k s

Arla Foods’ international activitiesmean that the Group’s results andbalance sheet are subject to a num-ber of financial risks. Of these themost important ones relate toliquidity, interest rate and foreignexchange. Only to a lesser extent isthe Group affected by risks deriv-ing from bonds and stock.

Arla Foods’ Supervisory Boardhas determined the Group’s finan-cial policies which govern thegeneral framework, the use offinancial instruments and theappropriate partners.

Decisions regarding the hedgingof foreign exchange risks are madeby the relevant divisions on thebasis of market assessments. Ex-ternal hedging is decided by theGroup’s financial department.

Financial instruments are usedto hedge commercial risks.

Liquidity risksCash-flows are settled over intra-group accounts and the financialdepartment manages cash-flowcentrally. Cash-flows in Swedenand the UK is managed locally.

The Group’s long-term financingis the responsibility of the financedepartment while operatingfinance is handled locally in con-sultation with the finance depart-ment and the Group’s approvedpartners.

The Group’s cash reservesconsist of bank deposits and bor-rowing facilities.

The Group’s net interest bearingdebt totalled DKK 7,103 millionagainst DKK 7,147 million the pre-vious year. The average repaymentperiod for long-term debt isapproximately 5 years.

During the year, Arla Foodsamba and Arla Foods AB issued acommercial paper programme inSweden of up to SEK 2,500 millionto be used for the financing ofoperations.

As at 30 September, 2001 thecash reserves totalled DKK 4.3 bil-lion.

Interest rate riskThe interest rate risk derives fromthe Group’s interest-bearing debt.The Group has no significant inter-est rate risk from interest bearingassets.

The interest rate risk is offset bymatching current assets with short-term debt, while long-term debtfinances fixed assets. Long-termdebt is undertaken when deemedattractive for the company. Theinterest rate risk is managedthrough financial instruments.

As at 30 September, 2001 theduration of the long-term debt was2.6 years. Financing is primarily inDanish and Swedish kroner andmatches the corresponding assets.

As at 30 September, 2001 theapportionment of debt was: 64% inDKK, 23% in SEK, 7% in GBP and6% in other currencies.

Foreign exchange risksCurrency risks primarily arise fromthe Group’s export activities. Themost important currencies areEuro, Sterling and Dollars. Sales inforeign currencies account forapprox. DKK 10 billion, of whichGBP accounts for DKK 1,800 mil-lion and USD for approximately3,000 million. Accounting for DKK3,800 million, the Euro is theGroup’s largest currency.

The Group’s exposure to cur-rency fluctuations is considerable.

It is the Group’s policy forhedging to take place up to 15months of the budgeted salesbecause future sales can be deter-mined with considerable accuracy.

Gains and losses are entered asthe hedged transactions arerealised.

Credit policyCredit risks on bank deposits andin connection with the applicationof financial instruments arereduced by exclusively using finan-cial counterparts with high creditratings.

Credit risks on receivables arecontinually monitored by the busi-ness units and are not regarded asunusual.

0 :1 2 0 :1 3

: T H E V E N D I N G M AC H I N E C O N TA I N S ” M E L L A N M J Ö L K ” . AT M E A LT I M E S , C H I L D R E N F R O M N O R S K O L A N I N T Ä B Y, S W E D E N , D R I N K I C E - C O L D M I L K F R O M T H E I L L U M I N AT E D C O W. A B O, 6 , GA I N S A M I L K YMO US TAC H E A N D R O SY C H E E KS F R O M H IS DA I LY G L A S S O F M I L K .

20524_Arla_UKberetning 25/01/02 13:49 Side 12

As already mentioned, the mostsignificant growth was in productswith flavour additives. Sales of yel-low fats fell as increasing numbersof Swedish consumers cut down onthe amount of fat used on bread. Itwas, therefore, decided to launchLätt&Lagom with a fat content of30%. Competition in the spreadssegment is also increasing.Traditional butter is performingbest because it is used in cooking.Bregott is also making strong head-way.

It was a good year for fruitdrinks, with the strongest increasein chilled, ready-to-drink products.Sales of long-life products, i.e.products which do not requirechilling, and concentrates areshowing somewhat weaker growth.

Sales of cheese went well duringthe year under review, with ArlaFoods’ market share in Swedennow at 51%. The Swedish classics,Grevé, Herrgård, Präst and Svecia,which are sold under the Arla cowtrademark, experienced somethingof a renaissance. Sales of specialitycheese were also good.

DistributionThe majority of the division’s prod-ucts are distributed directly tostores and to customers in therestaurant, catering and food ser-vice sector with only a small pro-portion distributed via wholesalers.Last year, the division had somedifficulties in recruiting drivers andstaff for the cold stores. As staffturnover is large and absence dueto sickness considerable, workingenvironment issues are highly pri-oritised and will remain so in thecoming year.

The new warehouse for cheeseand yellow fats at Götene cameinto service during the year. Thecapacity is sufficient to store all thecheese produced at the remotestdairies in Sweden. The new facility,which is used for slicing, shred-ding, packing and price-marking,has led to significant improvementsin terms of supply reliability andmeets consumer and customerrequirements for various types ofcheese products.

ProductionRecent years’ product developmenthas not only provided the basis forlaunching several new products,but has also generated changes tothe production structure, as seen atÖstgöta dairy. The intention is toestablish a highly efficient facilitysuitable for all yoghurt and cook-ing products. The building is allbut complete and production of theinitial products began in theautumn of 2001. Up to the summerof 2002, over 100 products will besuccessively transferred to Östgötadairy. The dairy at Alingsås is beingextended to accommodate in-creased juice production. This pro-ject is almost complete. Thechanges mean that the dairy inNorrköping will be shut down atthe end of June 2002.

It has also been decided totransfer production at the dairy inHalmstad to the dairy inGothenburg during the autumn of2003 at the latest. Customers in theHalmstad region will, therefore, besupplied from a new distributionterminal in Halmstad. The coldstore in Jönköping will also beextended in order to distribute alarger range of dairy products andto centralise order picking andimprove the working environment,i.e. through a higher level ofautomisation. Furthermore, it hasbeen decided to expand the pro-duction of fresh cheese in Skövdeby transferring production fromDenmark. It is also planned toexpand the cold store in Stockholmand to extend the facilities inGothenburg in order to rationalisedistribution.

The dramatic fall in the Swedishkrona adversely affected thedairies’ costs. Price rises for certaindairy products in Sweden may beunavoidable in order to keep pacewith inflation.

D e n m a r k D i v i s i o n

2000/01 was a good year for theDenmark Division. Sales showedstable growth as Danes are drink-ing more milk, eating more

S w e d e n D i v i s i o n

Most of the Sweden Division’sproduct groups experienced agood year.

Another postive factor was thefact that the decline in liquid milksales was halted. This is partlyexplained by the fact that manychildren born in the late 1980shave now become teenagers whodrink more milk and partly by thefact that more consumers aretaking milk with their coffee.

The greatest challenge in thecoming financial year will be tomake milk available outside thetraditional chilled cabinets. Duringthe first quarter of 2002, therefore,milk in individual packs will belaunched, targeted at the food ser-vice sector to meet the con-venience trend. In view of thegood summer, sales of fermentedproducts could be expected tohave increased. Products withflavour additives continue to showthe strongest growth. Competitionfrom the fruit yoghurt sector has,however, affected the rise in sales.The market for fruit yoghurtscontinues to be characterised bystrong competition between thekey players. The product portfoliois large and the market as a wholeis seeing considerable growth.

Volumes increased in theSweden Division while the marketshare reduced. Yoggi is the leadingbrand and the launch of the drink-ing yoghurt, Yoggi Yalla, in indi-vidual bottles was particularly wellreceived.

Cream products have beengrowing for the past 15 years.Product development comprisedthe launch of products with vary-ing fat content and products spe-cially adapted for cooking. Ready-made sauces and creme-fraîcheproducts with flavour additivestherefore saw strong growth. Keldawas the most successful brand. Interms of volume, sales of cream asa whole rose by 1.5%. The freshcheese portfolio, which comprisesthe Keso and Kesella brands, had aparticularly good year with a 6%increase in sales.

0 :1 5

fermented products and usingmore cheese products in cooking.At the same time, Danish con-sumers have reduced their fatintake. In addition, the foodservice sector is expanding. Danesare eating out more and snackingmore on their way to work, schooland leisure activities.

This development is expected tocontinue to make a positiveimpact.

During the year, the divisionworked on the basis of three strate-gic parameters: development andinnovation, customer service andoperational rationalisation.

The division’s product develop-ment is centred upon two strategi-cally important areas: continueddevelopment of the current cate-gories of dairy products andextending the use of dairy productsto other times of the day and toother occasions than the traditionalones. Activities within these areasmeant that the number of productlaunches in Denmark exceeded 30.

Developments within the exist-ing categories led to the launch ofseveral fat-reduced products. Theseinclude fat-reduced versions ofKærgården and Karoline’s creamproducts as well as new fat-reducedBuko products, Karoline’s fromageblanc & frais and especially a newCheasy firm cheese with only 6%fat. These are all signs of the divi-sion’s attempt to meet consumerdemand for low-fat products.

2000/01 was, however, largelycentred on milk. The launch of theliquid milk product organic mini-milk 0.5% resulted in 37,000 moreDanes drinking milk. Con-sequently, organic minimilk is notonly the dairy product with thegreatest impact on overall organicdevelopment, but is well on its wayto changing the milk habits ofDenmark which continues to havethe world’s largest sales of organicmilk. Denmark is also one of fewcountries which is experiencinggrowth in milk consumption.

In relation to the strategy aimedat consumption development, thedivision is focusing on conven-ience and food service. This is seen

THE DIVISIONS:: round the world,

round the clock

: r e s u m é :

0 :1 4

Sweden Divi s ion: I t was a good year for the major i ty of the

Sweden Divis ion ’s products. The decl ine in sa les of l iquid milk

has halted and yoghurt consumption increased. The yoghurt

market continued to be character ised by st rong competit ion and

although Ar la Foods ’ sa les increased, the market share fe l l . The

divis ion embarked on changes to the product ion structure so that

product ion is now centred on fewer, but larger plants. At the

same t ime, the new cheese and fats warehouse faci l i ty in Götene

was commissioned.

Denmark Divi s ion: Danes are dr inking more milk, eat ing more

fermented products and using more cheese products in cooking.

As more Danes are eat ing out , the food service sector is exper i -

encing s ignif icant growth. More than 30 new products were

launched dur ing the year. Some aim at extending the use of dai ry

products to other t imes of the day and to other occasions than

tradit ional ones. Others target the development of exist ing cate-

gor ies. The greatest change is the marketing of the l iquid milk

product minimilk containing 0.5% fat , which was f i rst launched

in an organic vers ion and subsequently in a conventional vers ion.

20524_Arla_UKberetning 25/01/02 13:50 Side 14

and Ishøj and a logistics unit inVejle. The production structure hasbeen further consolidated throughthe implementation of the UHTstructural plan in which Esbjergdairy has acquired UHT productionfrom Kimstad Dairy in Sweden.Distribution was subject to a seriesof changes resulting in both gainand loss of customers.

Production and distribution sawan improvement in the operatingresult and a general improvementin efficiency throughout the divi-sion’s supply systems. The comingyear will continue to focus onprocess optimisation and increasedefficiency. A number of new logis-tics systems and new productionlines will also be introduced. Thesewill further strengthen the divi-sion’s competitiveness.

U K D i v i s i o n

The UK Division achieved itslargest earnings ever during thefinancial year. Despite difficultmarket conditions, sales of bothArla Foods’ branded products andthe multiples’ own label productsrose.

In the liquid milk area, thedynamics of the market declinedmarkedly and the multiples contin-ue to cut down on the number ofsuppliers. This cost Arla Foodssome customers, but new onesarrived. Overall, sales of liquidmilk exceeded 900 million litres.However, competition for supply-ing the retail trade continued to betough and earnings from liquidmilk remain under pressure.

The importance of doorstepsales as a sales channel for liquidmilk continues to decline. ArlaFoods has, therefore, decided torestructure this business area sothat the more remote smallerroutes are discontinued as part ofan increased effort to control costs.Rising consumption of milk anddairy products outside the homehas led to the establishment of anArla Foods’ food service centrewhich will gather the company’sbusiness within this area.

Cravendale milk, which has anextended lifetime due to thepatented PurFiltre filtering techno-logy, continued its growth. Totalsales now exceed 50 million litresper year and the product is nowready for nationwide launch.

In the butter/margarine cate-gory, Lurpak maintained its posi-tion as the UK’s second largestbrand. The blended product,Lurpak Spreadable, was a majorfactor in the rising sales as was thedecision to strengthen marketingactivities in the southern part of theUK where the north is Lurpak’s tra-ditional key market. With the most

0 :1 6

in the enhanced competencies andincreased marketing within theseareas as well as in the number ofproduct launches which providenew use for dairy products. Thelaunch of Matilde Café in glass bot-tles and drinking yoghurts in newplastic bottles as well as soups andtapenades are significant examples.This work will intensify in the com-ing year and will increasingly becarried out in co-operation withthe Swedish domestic market.

Enhanced customer service The division aims at establishingitself as the foremost Danish sup-plier of consumer goods as mea-sured in customer and logisticsservice as well as the creation ofadded value for customers. Theability to develop efficient CRM/eBusiness systems will, therefore,become a significant competitiveparameter. The first phase of thisdevelopment is marked by thecommissioning of a new centralcustomer service centre in Vejlewhich will provide customers withprofessional, fast and uniform cus-tomer services.

Competition in Denmark intensi-fied during the year and in severalareas, the multiples have importedcompeting dairy products fromneighbouring countries. In addition,the multiples are increasingly focus-ing on own label products. ArlaFoods participates in this competi-tion in order to maintain a sensiblebalance between own label suppliesand the Group’s own brands.

It is expected that competitionwithin this field will be intensifiedin the coming year, particularly inthe light of increasing internatio-nalisation of the multiples. Thedivision sees this development as apotential platform for further busi-ness development.

Increased operationalrationalisationThe Denmark Division is respon-sible for the production of liquidmilk and other fresh dairy prod-ucts. The division operates sites atHobro, Århus/Enigheden, Bra-brand, Tyrstrup, Esbjerg, Slagelse

: THE K I TCHEN IN THE ” E L Q U I M D E L A B O Q U E R I A” TAPAS BAR ONLY TOTALS 8 SQ .M . O F THE 13 , 631 SQ .M .L A R G E M A R K E T, L A B O Q U E R I A , I N B A R C E L O N A . H E R E , C H E F Q U I M M Á R Q U E L A N D H IS W I F E , M E R C E D E SR U I Z , S E R V E A W I D E R A N G E O F C ATA L A N S P E C I A L I T I E S TO L O C A L S A N D TO U R IS TS . S E Ñ O R SA LVA D O R P O N S V I DA L L O O KS I N T W IC E A W E E K TO E N J OY TA PA S B E F O R E R E T U R N I N G HO M E W I T H T H E DAY ’ S F R E S HP R O D U C TS .

UK Divis ion: Despite diff icult market condit ions, sa les increased dur ing the year – both for

Ar la Foods ’ own brands and pr ivate labels. The UK Divis ion achieved i ts best ever earnings.

Total sa les of l iquid milk exceeded 900 mil l ion l i t res, of which 50 mil l ion l i t res were

Cravendale milk which, owing to a patented f i l t rat ion technology, has a longer l i fe. Lurpak a lso

maintained i ts leading posit ion, not least due to Lurpak Spreadable. With i ts most recent

product , Lurpak Lighter Spreadable, Ar la Foods has added a product specia l ly targeted at

consumers wanting reduced-fat a l ternat ives.

: r e s u m é :

20524_Arla_UKberetning 25/01/02 13:50 Side 16

terised by increased focus on con-cept products with satisfactorymargins. Despite the positivetrends, price levels and earnings inthe German retail sector continuedto be among the lowest in Europe.This means that the multiples’demands on suppliers are continu-ally rising, with wholesalers andimporters being hit particularlyhard. Arla Foods services all majormultiples directly.

The goal is to establish ArlaFoods as the leading supplier ofspeciality cheese over a period ofseveral years.

HollandThe Dutch retail sector is charac-terised by continued consolidationand new initiatives. Sales weresatisfactory and the Group has builton its position as the largest for-eign supplier of speciality cheese.

BelgiumOverall sales declined due to theplanned discontinuation of non-profitable bulk sales. Arla Foodsnow focuses on supplying to theretail trade. Here, the past yearshowed satisfactory development.

The Faroe Islands,Greenland and IcelandArla Foods has a considerableexport of UHT products, yoghurtand fats as well as a broad range ofcheese products to the NorthAtlantic markets. Sales developedpositively in the past year.

PolandPoland’s economic climate hasbeen somewhat turbulent. Severalyears of economic progress havebeen reversed, leading to unem-ployment, rising inflation andreduced purchasing power. Lack ofstate intervention purchases ofpowder meant a serious over-production of firm cheese resultingin lower prices. As exports fromDenmark did not develop asexpected, the overall result inPoland was unsatisfactory. Con-sequently, a large cost and organi-sational restructuring was imple-mented. The coming year will be

characterised by a strategic adjust-ment of Arla Foods’ activities inPoland.

Other Eastern European marketsEastern Europe’s new economiesare now more stable, but are stillsubject to some economic uncer-tainty. Arla Foods uses well estab-lished distributors that primarilyservice the western European retailchains. Once again, the yearshowed a positive development insales of speciality cheese and fats.Purchasing power, however,remained limited.

FinlandFollowing the Arla and MD Foodsmerger, the Finnish organisationwas restructured in accordancewith the new business base. Thecompany showed satisfactory salesand earnings. Arla Foods is thelargest importer by far of cheese inFinland. A number of new initia-tives will be taken in the comingyear, including launches of pro-fitable speciality cheese and aresumption of the full marketingeffort.

NorwayNorway had an excellent year withsatisfactory sales growth. Largervolumes were imported outside thequota.

During the year, Kraft cancelledthe agreement for production ofcream cheese for the Norwegianmarket at Disenå Dairy. Despiteextensive efforts, alternative pro-duction at the plant proved not tobe economically viable. Thisremoved the basis for continuingproduction in Norway.

The Baltic AreaPurchasing power in the regionremains limited and there are cur-rently no signs of improvementwithin the foreesable future. ArlaFoods even suffered a fall in sales.Consequently, the sales subsidiaryin Estonia was closed in the springof 2001.

ItalySales showed satisfactory progress

as did earnings in a market whichhas benefited from rising prices ofbulk cheese. Sales of specialitycheese also progressed during theyear.

The local company adjusted itsbusiness strategy and organisationin order to enhance profitability inthe Italian market.

Spain Cheese sales continued to grow,with mozzarella accounting for themost positive developments. It isparticularly encouraging that directsales to the retail sector are rising.The Spanish retail sector is under-going particularly rapid develop-ment and almost all European mul-tiples are currently establishingthemselves in the market. This willplace new demands on Arla Foods’activities in the Spanish market.

FranceDuring the year a decision wasmade to close down the morebulk-oriented sales to industrialcustomers in France. The businessis now focusing on the largeFrench retail chains which domi-nate most of southern Europe.Sales to these multiples showedsatisfactory progress during theyear.

GreeceThe year was characterised by theformation of a joint venture withGreece’s leading dairy company,Delta. Besides selling and market-ing Arla Foods’ products, the com-pany produces and markets Greeksheep/goats’ milk feta and otherlocal specialities. The new company will secure Arla Foods’ lead-ing position within cheese andbutter in Greece. Although theactivities and new launches did notentirely meet original expectations,sales and the economic result forthe year as a whole almost reachedbudgeted levels.

O v e r s e a s D i v i s i o n

The Overseas Division achievedgood sales and an excellent result.

more cheese rather than chilledmeats. All producers – not least themore bulk-oriented producers offirm cheese – have benefited fromthis.

Focus on more profitable prod-ucts and market positions con-tributed to the result. This is set tocontinue in the coming years as theconsolidation and internationalisa-tion of the European retail sectorcontinues. At the same time, thereis a clear tendency towards con-centration and consolidation withinthe European dairy industry, too.Several of the largest competitorshave also significantly increasedinvestments in the marketing oftheir products. This means thatearnings in the sector continue tobe under pressure despite lastyear’s favourable trends.

The launch of the Euro in mostEuropean countries – Europe’slargest ever money conversion –has forced multiples in mostEuropean countries to introduce avoluntary price stop until the earlysummer of 2002 to ensure asmooth conversion process. Inconsequence, the coming year willbe characterised by some uncer-tainties concerning consumer pricelevels for the division’s products.

In the Europe Division,largescale strategy planning wasimplemented in response to themain trends within the Europeanmarket. The aim is to build upstrong market positions in selectedgeographical markets with corre-sponding increased investments inmarketing and product develop-ment. Overall, the goal is to main-tain long-term, stable and prof-itable growth in Europe.

GermanyFor the first time in many years,prices of dairy products rose inGermany in response to an extra-ordinary demand for cheese. Pricesof more bulk-oriented consumerproducts also rose by double digitpercentages.

Overall, Arla Foods enjoyed anexcellent year with satisfactoryadvances in both volumes andearnings. The year was charac-

0 :1 9

recent product, Lurpak LighterSpreadable, Arla Foods now has aproduct specially targeted at con-sumers wanting a reduced-fat alter-native. During the year, the rangewas supplemented by BrandedYorkshire Butter from the dairy inSettle and a blended product fromSweden sold as own label througha major multiple.

After the close of the financialyear, Arla Foods joined NewZealand’s Fonterra in a joint ven-ture which will be responsible forthe two companies’ future sales ofyellow fats in the UK. The jointventure is in the form of a Danishcompany in which Arla Foodsowns 75% and Fonterra 25%. Thecompany will also engage in prod-uct development within the yellowfats segment.

Sales of yoghurt and dessertsalso advanced. Fromage frais prod-ucts such as the Bob the Builderrange, which is a further develop-ment of the Thomas the TankEngine range, have seen particulargrowth. New licence agreementsrelating to other popular children’scharacters are in the pipeline.There are also plans for the launchof a variety of new ranges in col-laboration with the multiples.

In the cheese area, growth wasmainly within the new Discoverrange of speciality cheese.

In contrast to the suppliers inDenmark and Sweden, British sup-pliers are not co-operative ownersof the value chain. Arla Foods has,therefore, launched ”Project Equity”which aims at bringing UK suppli-ers closer to the company in someform of co-ownership, perhapseventually as co-operative owners.

E u r o p e D i v i s i o n

The financial year was particularlysatisfactory for the Europe Divi-sion. The Division saw satisfactoryadvances in tonnage, turnover andearnings.

One reason is that the BSE andFoot & Mouth crises have causedmany consumers in Germany, thedivision’s largest market, to eat

Europe Divis ion: The f inancial

year saw satisfactory advances

in tonnage and turnover and,

in part icular, earnings. One

reason is that the BSE and

Foot & Mouth cr ises caused

consumers i n Ge rmany, the

divis ion ’s largest market , to

op t fo r cheese i n s tead of

chi l led meats. The increased

focus on higher margin prod-

uc t s and s t ronge r ma rke t

posit ions contr ibuted to the

result . The work wi l l continue

in the coming years.

: r e s u m é :

0 :1 8

20524_Arla_UKberetning 25/01/02 13:50 Side 18

Favourable, stable foreignexchange markets contributed to aparticularly good result which com-pensated for declining EU exportsubsidies during the year.

Continued emphasis on sales ofadded value products rather thanbulk-oriented products also had apositive impact – not least becauseof the ongoing endeavours tostrengthen and enhance the com-pany’s brand positions.

Added value and brand build-upproved to be key elements in thedivision’s improved competitive-ness, with postive developments inmarket shares and earnings.

There were no direct problemsin the form of import embargos orsimilar trade barriers following theoutbreak of BSE and Foot & Mouth.In certain markets, however, theso-called “European food prob-lems” had an adverse impact onconsumption.

Other negative factors include thefact that some of the division’s over-seas markets suffered an economicdownturn during the year. This wasthe case in the US and Japan and,not least, in South America wherethe substantial devaluation in Brazilcreated very difficult conditions forimported products.

In contrast, markets in theMiddle East were stable. TheRussian market, too, benefitedfrom noticeable improvements – strengthened by synergies fromthe Arla and MD Foods merger.

Events in recent months mayextend and even accelerate thedownturn, especially in the US.This, however, is not expected toaffect sales potential to any signifi-cant extent.

With the current establishing ofa market position in the UnitedArab Emirates, and significantpurchases of import quotas inCanada, the move towardsincreased internationalisationcontinued over the past year. Theseactivities will remain highly prio-ritised in the coming years.

T H E M I D D L E E A S T

Saudi ArabiaSales to Saudi Arabia were affectedby the outbreak of Foot & Mouth inEurope.

The BSE and Foot & Mouthcrises both affected the Saudi con-sumers’ perception of, and attitudeto, food safety in Europe and inDenmark.

During the year, Arla Foodsmade significant resources avail-able to regain and extend the mar-ket positions for branded products.The chosen strategy with focus onselected product areas provedsound and helped to lessen theimpact of the imports embargoafter the outbreak of BSE in thespring of 2000.

Major investments in productionin Saudi Arabia continued. Bottling

capacity, especially for cheese inglass containers, has, for instance,been significantly expanded.Coupled with the populationgrowth, stable oil prices are creat-ing positive expectations for thecountry’s economic development.

Seen on the backdrop of theBSE and Foot & Mouth outbreaksin Europe, earnings for the yearwere satisfactory. The strategy forgrowth is expected to be main-tained.

The Gulf States and LebanonFocus and consolidation wereagain key concepts for other coun-tries in the Middle East. Throughclose partnership with selectedcustomers, the company experi-enced reasonable growth – notleast in the Emirates. During theyear, the company’s brands gainedmarket shares. The positive devel-opment is expected to continueover the coming years.

The Caspian areaSales to the Caspian Sea regionwere satisfactory, albeit charac-terised by the economic slowdown.Expectations are closely linked tothe exploitation of the large oil andgas finds and economic develop-ments in Russia.

North Africa and EgyptSales of Lurpak to Egypt saw asharp increase. The other NorthAfrican countries also showed

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: P U B R E G U L A R P E T E R JA M I E S O N E N J OY S A P I N T O F B I T T E R A N D A P L O U G H M A N ’ S L U N C H AT T H E B U N C H O F G R A P E S P U B I N T H EH E A R T O F L O N D O N . A LT HO U G H T H E P U B ’ S I N T E R IO R H A S R E C E N T LY U N D E R G O N E R E F U R B IS H M E N T, T H E AT MO S P H E R E C O N T I N U E S TOE V O K E I M AG E S O F BY G O N E DAY S . A ” B U N C H O F G R A P E S ” I S A N A N C I E N T SY M B O L O F A N I N N A N D DAT E S BAC K TO R O M A N L O N D O N .

: r e s u m é :

Overseas Divi s ion: The year was character ised by st rong sales. Favourable, stable foreign exchange

markets contr ibuted to a part icular ly good result which compensated for fa l l ing EU export subsidies

during the year. The economic downturn in the US, Japan and South America , however, had an adverse

impact on sales. By contrast , economic stabi l i ty benefited the markets in the Middle East where Ar la

Foods has further st rengthened i ts posit ion through a new subsidiary in the United Arab Emirates.

20524_Arla_UKberetning 25/01/02 13:50 Side 20

significant activity. Expectations forthe future are positive.

A M E R IC A

USIn the US, Arla Foods had a satis-factory financial year where thecontinued focus on added valueproducts strengthened the posi-tions of Arla Foods’ brands, espe-cially within blue mould cheese.Not all sales potential was fullyexploited due to the strongdemand for dairy products inEurope. This, however, contributedto maintaining US prices at a highand stable level.

Despite fluctuations in the USmilk price, local production of fetaand havarti in partnership withWhite Clover Dairy also developedpositively.

In spite of the downturn in theUS, an excellent result is expectedfor the coming year with regard toboth imported and locally pro-duced products.

CanadaIn Canada, Arla Foods also achieveda good result. Local production inpartnership with AmalgamatedDairies Ltd. increased both in vol-ume and value and this is expectedto continue. The same applies tosales of imported products whereArla Foods acquired a significantimport quota during the year.

BrazilBrazil’s economic crisis and thesubsequent devaluation of theBrazilian real has had an adverseimpact on the competitiveness ofimported dairy products. The diffi-cult situation is expected to con-tinue and will reduce certainactivities in the market.

DanVigor, the joint venturebetween Arla Foods and a localdairy company, also felt thedecline in private consumption.However, a significant effort waschannelled into product develop-ment and updating the ranges. Theresults are expected to be evidentwithin the coming year.

ArgentinaIn Argentina Arla Foods achievedsignificant economic growthdespite the continuing economiccrisis. The government’s tighteningof import restrictions reduced thecompetitiveness of imported dairyproducts.

The year saw the beginning of apromising partnership with twolocal producers of specialitycheese. This is expected to developfurther. Moreover, a new partner-ship with a producer of strongbrands concerning distribution forthe food service sector has begun.

E U R O P E

RussiaThe stabilised Russian economycontributed to a highly satisfactorydevelopment in exports to Russia.

Close collaboration with selectedpartners and importers enhanceddistribution and provided a con-tinuity which has strengthened ArlaFoods’ reputation as a supplier ofquality cheese and butter.

The synergy effects from themerger of the Swedish and Danishorganisations and their ranges arenow materialising. Arla Foods isregarded as an attractive supplierof a broad range of cheeses for thespecialised trade and delicatessensand retail packed cheese and but-ter for self-service supermarkets.

This development is expected tocontinue in the coming year, pro-vided the Russian economy re-mains stable.

A S I A

JapanJapan continues to be in recessionand domestic demand and retailturnover are declining as deflationhas set in. This is impacting on theretail sector’s demand for cheese.Part of the slowdown can beascribed to the prolonged effect oflast year’s food scandal which hitJapan’s largest dairy company.

The recession appears to havehad less impact on the major part

of cheese consumption, i.e. cheeseas an ingredient in cooking, forpizzas, burgers, snacks, etc. Totalcheese imports, however, showeda declining trend for the first timein a decade.

Imports of fresh cheese, includ-ing cream cheese, showed a signi-ficant fall.

Despite the development in con-sumption, Arla Foods’ exports toJapan showed satisfactory trendsduring the year. Part of the lostmarket shares were regained andimports of cheese from Denmarkare increasing, particularly rindlesscheese for further processing. Salesof rindless cheese such as samsø,maribo and nippon, from TaulovDairy rose. Arla Foods’ position asthe third largest supplier of cheeseto the Japanese market afterAustralia and New Zealand wasconsolidated further.

Providing there are no substan-tial changes in the form of stronglyfalling world market prices forcheese or dramatic falls in exportsubsidies, expectations are that thisposition can be maintained and thatsales for the coming financial yearwill be in line with the current yeardespite stagnating consumption.

South East AsiaThe region is characterised by eco-nomic stagnation. The slowdownin the American economy had animmediate and direct impact on theSouth East Asian countries.

Within this context, the pastyear should be regarded as satis-factory with unchanged sales ofLurpak butter, a modest increase insales of retail packed cheese and asignificant rise in the sale of long-life consumer products.

Efforts in the Chinese marketwere intensified, especially focus-ing on international hotels andrestaurants and western orientedsupermarket chains.

Unless the region’s economydeterioriates and world marketprices for dairy products comeunder significant pressure or exportsubsidies fall, sales are expected tobe maintained in the coming year,possibly even rising slightly.

0 :2 2 0 :2 3

: C HO R I AT I K I I S T H E L O C A L N A M E F O R G R E E K S A L A D I N G R E E C E . N E K TA R IO S SA R A K I NO S I N R E S TA U R A N TA L G E V E V R A US E S 1 KG F E TA E AC H DAY F O R T H E R E S TAU R A N T ’ S V E R S IO N O F T H E C L A S S IC G R E E K D IS H O FTO M ATO, C U C U M B E R , GA R L IC , G R E E N P E P P E R , G R E E N O L I V E S , L E MO N - M A R I N AT E D Z U C C I N I A N D M US H R O O MS ,O R E GA NO, O L I V E O I L A N D F R E S H LY P R E S S E D L E MO N J U IC E .

20524_Arla_UKberetning 25/01/02 13:50 Side 22

of the anticipated rise in the supplyof commodity products in thesemarkets.

P r o d u c t i o n D i v i s i o n

The Production Division is respon-sible for the production of cheese,butter and blended products inSweden and Denmark. The divi-sion operates 36 plants, 12 inSweden and 24 in Denmark.

The division is organised intotwo large production groups - onehandles production of firm cheese,hard cheese and mozzarella as wellas operating the packaging plants.The other production group handlesproduction of speciality cheese,butter and blended products.

In addition, the division is activewithin the fields of category man-agement, finance/IT, quality, engi-neering and supply chain. Sales toexporters also come under theProduction Division.

The division produces approx.475,000 tons of which 330,000 ischeese and approx. 145,000 tons isbutter and blended products. Ofthe total of 475,000 tons, approx.127,000 tons is produced at theSwedish dairies with 348,000 tonsin Denmark. The production is pri-marily sold through Arla Foods’other divisions. The divisionemploys 4,600 people.

Highlights of the division’s workduring the financial year include:

• Structuring the division followingthe merger

• Implementation of approvedstructural projects

• Development and approval of anew overall organisational struc-ture.

With approx. 27,500 tons per year,the new large dairy at Taulov inFredericia is now in full produc-tion. This has meant that RibeDairy was shut down in the springof 2001. Snejbjerg cheese packag-ing plant is also under closure andits operations will be transferred to

Vejle cheese packaging plant andTaulov. At Taulov, a new largewarehouse for the storage of firmcheese has been commissioned,allowing several small warehousesin Denmark to be closed.

In the speciality cheese area,Troldhede Dairy has been ex-panded, allowing the transfer ofproduction from Høng. Høng Dairysuffered considerable fire damagein December 1999 and is nowclosed.

Moreover, production of fetawill be transferred from GrøndalDairy to Bislev from the beginningof 2002. As part of the mergeragreements with the Danish com-petition authorities, Grøndal Dairywas sold.

Finally, production capacity atHolstebro Cream Cheese will besignificantly expanded in the nearfuture.

In Sweden, the largest structuralproject was the commissioning onJuly 1 of the new large cheesewarehouse and packaging plant inGötene. Subsequently, the cheesepackaging plants in Kalmar andStenstorp and the cheese ware-houses at Nyköping, Sävsjö,Lidköping and Jönköping wereclosed. Although this large andcomplex project has not been with-out some initial teething problems,all indications are that productionis well under control.

During 2000/01, the ProductionDivision developed an overallstructural plan for the Swedish andDanish dairies. The plan means areduction from the current 36plants to around 21 over a five-yearperiod. The division’s proposalswere approved in principle by ArlaFoods’ Supervisory Board in June2001 and the first stages of the planhave been initiated, including adecision to expand FalkenbergDairy. This means that StångaDairy at Gotland can be shut downin 2003. Milk from Gotland will beused for new powder production atVisby Dairy.

A decision to close BorgholmDairy on Øland was also taken.Consequently, production of large,round cheeses will be centred on

PakistanThe division had a good year, withadvances exceeding 30% for bothcheese and Lurpak butter.

IndiaIndia officially opened its bordersto imported dairy products on April1. Protectionist and complex cus-toms procedures have, however,acted as a barrier to imports.Despite the problems, Arla Foodshas made headway.

KoreaThe year has been a difficult one.Economic conditions remain tightand consumers are reluctant tospend after the lengthy economiccrisis. The result is a modest down-turn in exports. Regrettably thereare no immediate signs of improve-ment.

A r l a F o o d s I n g r e d i e n t s

The division confirmed its positionas the leading and preferred sup-plier of added value milk-basedingredients and powder productsto selected customers. The resultwas satisfactory and positivelyaffected by rising prices and strongdemand. Dramatic reductions inthe EU’s export subsidies have,however, had an adverse impact.

A total of 1.7 billion kg milk aswell as all whey from the Group’scheese dairies in Denmark, a sig-nificant part of the whey from thecheese dairies in Sweden and wheyfrom Germany were processed into288,000 tons ingredients and pow-der products.

Arla Foods’ production capacityin Denmark and Sweden was fullyutilised. Consequently, the struc-tural plan includes a new plantstructure for Arla Foods Ingre-dients. A milk powder plant will bebuilt in Sweden while two milkpowder factories will be closeddown. Milk powder production atthe cheese dairies will be discon-tinued. It has also been decided toclose down one factory andupgrade and expand two milkpowder factories in Denmark.

The new production structurewill enable increased production ofadded value ingredients for globalindustrial customers and retailpacked milk powder products. Thispartly replaces bulk products soldat world market prices.

IndustryExpectations remain positive forthe development of the Industrybusiness area which comprisesproduction and sales of addedvalue ingredients for global indus-trial customers. In particular, thereis significant potential withinadded value whey proteins, anarea in which Arla Foods ranksamong the global market leaders.

Scarcity of raw materials andinsufficient production capacitycurrently represent the biggestbarrier to increased turnover. Con-sequently, whey from the Swedishcheese dairies will be sent toDenmark in concentrated form forfurther processing. This whey waspreviously used for animal fodder.

In Argentina, the construction ofSouth America’s first major WPCfactory is on schedule. The factory,a joint venture between Arla Foodsand Argentina’s largest dairy com-pany, SanCor, is expected to becompleted in the summer of 2002.The factory’s raw material, whey,will originate from SanCor’s cheesedairies and sales will primarily beto large South American customers.The sales and service functions inthe region will be strengthenedthrough the construction of a pilotplant for fermented products andcheese.

Development work continues tofocus on the various milk proteinproducts’ functional and nutritionalproperties and their application. Sofar, this has resulted in a newgeneration of milk proteins withsubstantially increased functionalproperties. One example isAlphalactalbumin, a whey proteinwhich has been developed espe-cially for infant formula. Sales of infant formula were also encour-aging.

The milk-based low-caloriesweetener, Tagatose, obtained the

American GRAS approval in thespring. After the close of the finan-cial year, the product also receivedthe approval of the American Food& Drug Administration. Focus isnow on setting up productioncapacity – within or outside ArlaFoods – and establishing saleschannels, primarily for the US mar-ket. Once the necessary approvalshave been obtained, it is intendedto launch the product in Europeand Japan too.

RetailThe market position for consumer-packed milk powder productsimproved during the year, not leastowing to intensive product devel-opment activities. A new productaimed at the 1-5 year age group isshowing promising sales in LatinAmerican markets.

Results for the DominicanRepublic, one of Arla Foods’ largestmarkets for retail packed milkpowder products, met expectationsdespite problems in gaining freeaccess to the market caused by thequota system.

Sales in another large retail mar-ket, Bangladesh, are on the riseagain and the potential is regardedas substantial. Sales to Yemen werealso satisfactory, particularly due tothe expansion of the local distribu-tion system.

Licensed productionSome food suppliers that use ingre-dients from Arla Foods Ingredientshave chosen to outsource theirproduction to Arla FoodsIngredients. These include some ofthe world’s largest suppliers ofbaby food. The financial year sawsignificant advances in the numberof products as well as in tonnage.

Ingredients salesSales of bulk products in worldmarkets exceeded expectations.Throughout the financial year,world market prices of bothskimmed and whole milk powderremained high. In the longer term,developments in South Americaand Asia, in particular, givegrounds for some concern because

0 :2 4

Arla Foods Ingr edients : On a

backdrop of r is ing pr ices and

strong demand, the div is ion ’s

re su l t i s s a t i s fa c to r y. The

cons t ru c t i on of Sou th

Amer i ca ’ s f i r s t l a rge whey

protein concentrate factory in

Argentina in a joint venture

with the largest Argentinian

dairy group commenced dur-

ing the year. The milk-based

low ca lo r i e swee tene r,

Taga tose, ob ta ined the

American GRAS approval .

The Pr oduct ion Divi s ion: The

divis ion ’s work was dominated

by structur ing of the div is ion,

implementat ion of approved

s t ruc tu ra l p ro je c t s and the

development and approval of

a new ove ra l l o rgan i sa t i on

s t ruc tu re. The res t ruc tu r ing

means tha t the number of

plants in Sweden and Denmark

wil l be reduced f rom 36 to

around 21 over f ive years. The

fi rst stages of the plan have

already been init iated.

: r e s u m e :

0 :2 5

20524_Arla_UKberetning 25/01/02 13:50 Side 24

Kalmar Dairy from the end of 2003.The plan’s other components willbe considered by the Board on anongoing basis.

In view of Arla Foods’ objectiveof producing the world’s mostsought after cheese and butterrange, work in the current financialyear will focus on the following:

• Structural projects and structural plan

• Cost and efficiency measures

• Category management

• Quality – including a new quality management system

• Services to sales divisions

• New IT and administrative systems

• Organisation and staff development

M e m b e r s ’ D i v i s i o n

The Members’ Division is responsi-ble for supplying Arla Foods’dairies with raw milk from the14,900 milk producers in Denmarkand Sweden.

The structural development forArla Foods’ Danish and Swedishmilk producers continues. Duringthe year, the number of co-opera-tive owners in Sweden declined by7% to 7,000 and in Denmark by 9%to 7,900. Production of organicmilk continues to rise and nowaccounts for 7.5% of the total,which is unchanged from last year.

Despite significant increases inthe price of diesel fuel and wages,transport costs relating to milk col-lection from farms were maintainedat last year’s level. Improvedpumping capacity of the tankers,fewer and larger farms and moreefficient use of the tanker fleethave all contributed to this. Theoutbreak of Foot and Mouth dis-ease in Europe had a significanteffect on operations at the farms aswell as on transport.

A substantial part of the divi-sion’s work was dedicated to har-monising the two companies’ regu-lations and activities, a task whichwill be completed by October 2003.One important area is the harmoni-sation of the milk price. Proposalsfor a new milk pricing model,reflecting the company’s qualitypolicies and future consolidationneeds, will be discussed in depthwith the co-operative owners.

Another challenge for the divi-sion is to enhance the value chain”from soil to table”, which is one ofthe resources of an agricultural co-operative. Further steps towardsincreased harmonisation will be yetanother important part of the divi-sion’s work.

0 :2 6 0 :2 7

: AT R E S TA U R A N T V I L L A K Ä L L H A G E N , 1 0 M I N U T E S F R O M S T O C K H O L M ’ S C I T Y C E N T R E , C H E F F R E D E R I K E R I KS S O N W O R KS W O N D E R SW I T H C H E E S E . H E R E H E ’ S C R E AT I N G A M I NO R M A S T E R P I E C E F O R T H E C H E E S E B O A R D : A N O P E N SA N D W IC H W I T H K V I B I L L E Ä D E LC H E E S E A N D HO M E M A D E M A LT C R IS P B R E A D , A S M A L L G L A S S O F S H R E D D E D P R Ä S T C H E E S E A N D C U M I N , A C E N T R E P I E C E C O N TA I N I N GK V I B I L L E C H E D D A R A N D A ” B R E A D BA S K E T ” O F G R E V É A N D C E L E R Y. F R E D E R I K E R I KS S O N WA S V OT E D ” C H E F O F T H E Y E A R ” I N S W E D E NI N 1 9 8 7 .

20524_Arla_UKberetning 25/01/02 13:50 Side 26

Danish cartons company, Wester-gaard & Philipson (WP). Thepurpose of the alliance is to poolthe two companies’ respectivestrengths in the cartons area. Thealliance secures Danapak and WP’sleading position in the Danish car-tons market and marks the begin-ning of a restructuring of theDanish cartons industry. WP is aleading niche supplier andbetween them, Danapak and WPoffer a full packaging range for themajority of the cartons marketthrough a particularly competitiveproduction apparatus.

InnovationDuring the year, Danapak focusedfurther on innovation resources. InOctober 2000, the company wasawarded the Nordic packagingaward, ScanStar and in April 2001,it also won the WorldStar for thepackaging design for an exclusivegift series. In November 2000, theFrench packaging institute, IFEC,awarded a French ”Oscar” to a but-ter foil with built-in tear strengthdeveloped by Danapak for one ofEurope’s largest dairy companies.

Investments in new technologyAs part of a three-year investmentprogramme, Danapak investedapprox. DKK 48 million during theyear, mainly in new and more effi-cient technology for increasedquality and profitability. Significantamounts were also channelled intoenvironmental investments ofwhich the largest were at the car-tons factory in Korsør and at theflexibles factory in Slagelse.

The sale of Danapak PlastOn August 10, 2001, Danapak soldoff its smallest business area,Danapak Plast, which producedplastic tubs and lids, to Rexam Ltd,London, at a price of DKK 192 mil-lion. The sale comprised the fac-tory in Stilling, in Denmark andmachinery, fixtures and fittings atthe factory in Nummela in Finland.The Finnish factory is under clo-sure and the buildings are up forsale. The disposal was a naturalprogression in the consolidation of

the industry for plastic tubs andlids.

The futureDanapak will continue to pursue astrategy of growth. Within the car-tons business, Danapak will main-tain and enhance its position asmarket leader in Denmark on thebasis of an international productionplatform. At the same time,Danapak will participate in theindustry’s consolidation. Withinflexible packaging, focus will be oncompetitiveness. The current activi-ties aimed at enhancing efficiencywill be maintained and developedand there will be increased focuson core technologies and segments.Endeavours to build alliances withEuropean partners, e.g. with regardto international tenders, will befurther strengthened.

Danapak expects significantimprovements in the result for thecoming year.

D e d a n s k e M e j e r i e r s F æ l l e s i n d k ø b

De danske Mejeriers Fællesindkøbachieved a consolidated turnoverof DKK 599 million in 2000/01against DKK 553 million in1999/00. The 8% rise primarilyderives from Fællesindkøbet’sTrading Department’s increasedcollaboration with Arla Foods onGlobal Purchasing. Sales to otherfood industry customers alsoshowed satisfactory progress as didthe production activities of CrispyFood and Dairy Fruit.

Member turnover accounted for71% of the turnover in 2000/01against 62% in 1999/00.

The result before tax andextraordinary items was DKK 24.7million against DKK 4.8 million theyear before. The result for the yearwas DKK 29 million against DKK34.4 million in 1999/00.

As Kongstad A/S was sold to theSwedish company, Prokurator Safe-mann AB, in May 2001, the com-pany is not included in the figures.

The Trade Department’s pur-chasing partnership with Arla

Foods was further expanded dur-ing the year. Especially withiningredients, Fællesindkøbet isresponsible for most ingredientsfor the production of cheese, butterand fermented milk products.Likewise, the Trade Department’sindustrial section, which comprisesseveral new foreign agencies, per-formed well. The bakery and cakesegment, the confectionary indus-try and the brewery sector are themost important customer areas.

The Production Division, whichproduces cheese wax and filtersand handles blending activities forboth dry and wet blends, has notmet expectations in respect of thesale of cheese wax. Fællesindkøbetcontinues to provide these prod-ucts, primarily to the Danish mar-ket, where the company is marketleader.

The Production Division’s FIblend works in tandem with theIndustrial Department in offeringtotal solutions for finished blendsto, e.g. the bakery industry. Byacquiring IFEG International ApS,the division is further focusing onsupplies to the bakery industry. A joint sales strategy is underdevelopment.

At the beginning of 2001,Fællesindkøbet’s fruit factory inOdense was established as an inde-pendent limited company underthe name, Dairy Fruit A/S. Thecompany’s turnover rose by 24%and both domestic sales andexports have advanced, particularlyto the Swedish market. Due to therelatively good summer, the fruitharvest in most supplier countrieswas good leading to stable rawmaterial prices. The market for fer-mented products and desserts ofwhich fruit is a major componentcontinues to develop positively.

With a rise in turnover of 38%,Crispy Food in Gørlev, Denmark,had a satisfactory result. In theDanish market, sales of tops forMiniMeal were stable. In conjunc-tion with Arla Foods’ DevelopmentDepartment, a range of new topsfor the UK was developed andsales are promising. Late in theyear, the company began to export

D a n a p a k

The Danapak group achieved prof-its of DKK 1.5 million for the finan-cial year 2000/01, which is animprovement of DKK 100 millionon the previous year. Of this, therevenue from the sale of the plastictub division accounted for approx.DKK 28 million.

Turnover was DKK 1,038 mil-lion, corresponding to an advanceof 6% allowing for disposals. Theoverall operating result improvedsignificantly on previous years as adirect consequence of tight costcontrol, high quality levels andconsiderable supply reliability.

Within the cartons area, devel-opments in Cartons Europe, thatoperates production facilities inGermany and UK, have been par-ticularly positive. Cartons Nordic,with production in Korsør andHerning, also advanced.

With regard to flexible pack-aging, the year was a turbulent onewith certain capacity problems, therunning-in of new machinery andstrongly rising international com-petition. The result for DanapakFlexibel is an improvement on lastyear, but these improvementsremain insufficient. However, inthe latter part of the financial year,developments were positive. Thisindicates that the foundation forfurther improvements in the com-ing year is in place.

Sales growthDespite significant changes and ris-ing international competition, allresult centres showed growth inturnover due, in part, to selectedniche products in flexible pack-aging. The stronger focus on nicheproducts has increased these prod-ucts’ share of total sales of flexiblepackaging products. The emphasison niche products has resulted infast lead times and stable, lesscomplex production procedures.

Restructuring ofthe cartons industryIn August 2001, Danapak enteredinto a strategic alliance with the

0 :2 9

Danapak: Allowing for the sel l -off of Danapak Plast , turnover

rose by 6% and the company achieved a posit ive result . In the

cartons area, Danapak has entered into a st rategic a l l iance with

Westergaard & Phi l ipson to offer a ful l range for the major i ty of

the cartons market . Within f lexible packaging, Danapak has

focused on a number of selected niche areas.

De danske Mejer iers Fæl les indkøb: Turnover rose by 8%, pr imari ly

due to the Trade Department ’s increased col laborat ion with Ar la

Foods on Global Purchasing. 71% of the company ’s turnover now

derives f rom dair ies that are members of the company against

62% the previous year. The subsidiary, Kongstad A/S, was sold

whi le the f ruit factory in Odense has been spun off as an inde-

pendent subsidiary under the name of Dairy Fruit A/S.

THE SUBSIDIARIES:: growth and advancement

0 :2 8

: r e s u m é :

20524_Arla_UKberetning 25/01/02 13:50 Side 28

muesli tops to Japan where con-sumers like to combine muesli andfermented milk products. Sales ofmuesli as own label products aredeveloping satisfactorily in theDanish market, although exportshave been disappointing.

Fællesindkøbet’s expectationsfor the coming year are positive.Following the disposal of Kong-stad, the company intends tobecome the preferred supplier ofingredients to the dairy sector andother important customers withinthe food industry.

The production companies,Dairy Fruit and Crispy Food, con-tinue to look forward to a positivedevelopment in turnover, mainly inexports. Fællesindkøbet’s TradingDepartment plans to extend thecollaboration with Arla Foods onglobal purchasing. With respect toindustry, the strategy has beenupdated to focus on the core busi-nesses.

R y n k e b y F o o d s A / S

On a foundation of market growthand strong marketing effort,Rynkeby Foods’ sales to the Danishretail and catering sectors rose by4% while export sales and sales toindustrial customers fell by 12%.This was primarily a consequenceof the cessation of a series of trad-ing agreements in 1999/2000.Turnover rose from DKK 797 mil-lion to DKK 804 million. The ordi-nary result before extraordinaryitems and tax was DKK 27 millionagainst DKK –21 million. Theyear’s result after tax was DKK 27million against DKK 8 million theprevious year.

The positive development in theordinary result compared to theprevious year is primarily due to arise in gross profit. The mainexplanation is that raw materialprices have been at a somewhatlower level than the year before.This trend has, however, partlybeen counterbalanced by the highrate of the US dollar.

A second positive element wasthe targeted effort to improve

profitability. This has resulted in asatisfactory rise in productivitycompared to the previous year.

Rynkeby Foods A/S’ mostimportant business areas are thedevelopment, production and saleof fruit-based drinks, primarily tothe Danish market. The majority ofthese products are produced at thefactories in Ringe and Rynkeby.

More than 80% of the Danishturnover falls within the juice andfruit juice market. As in previousyears, juice saw a satisfactorygrowth of 10%. The market for fruitjuice was a couple of percentabove last year’s.

Rynkeby Foods’ position as mar-ket leader within these two marketsegments was further underlinedduring the year, although competi-tion increased significantly. This isespecially the case with own labelproducts. In consequence, the mar-ket has seen a rising level of cam-paign activities and price pressure.

A third important product area isspring water where RynkebyFoods’ Harilds Kilde has a satisfac-tory share of the Danish market.The market for spring water hasseen continued growth. Manyactive suppliers of branded prod-ucts have, however, intensifiedcompetitive pressures.

To maintain and develop itsposition as market leader, RynkebyFoods launched a range of newand modern packaging and newflavours during the year.

A new Rynkeby logo and a rela-tively strong marketing effort con-tributed to increased visibility inthe market.

Other mattersIn June Rynkeby Foods won itscase in the Danish High Courtagainst the Ministry of Foods,Agriculture and Fisheries concern-ing “Rigtig Juice” (=“real juice”).The Court upheld Rynkeby Foods’claim that the term “Rigtig Juice”should be regarded as a brandname and, therefore, does not con-stitute a misleading statementunder consumer regulations.

Rynkeby Foods’ internal logis-tics has, in recent years, been ham-

0 :3 0 0 :3 1

R ynkeby Foods A/S : Sales to

the Danish retai l and cater ing

sec to rs ro se by 4% wh i l e

exports and sales to industr i -

a l cu s tomers f e l l by 12%,

primari ly as a consequence of

the termination of a number

of contracts. Overal l , however,

turnover and earnings rose.

During the year, a ser ies of

new, modern packag ing and

new f lavours were launched. A

new logo and re lat ively st rong

marketing effort contr ibuted

to the company ’s inc reased

prof i le in the market .

: r e s u m é :: I N L O N D O N ’ S L U X U R I O U S L A N D M A R K H O T E L , T H E TA B L E S A R E S E T F O R T E A I N T H E E IG H T H S TO R E Y AT R I U M . T H E L A R G E S E L E C -

T IO N O F S C O N E S , S A N D W I C H E S A N D C A K E S S E R V E D O N C A K E S TA N D S A R E M A D E AT T H E HOT E L’ S O W N BA K E R Y. T H E F R E N E T ICPAC E O F L O N D O N L I F E I S , F O R A S HO R T T I M E , R E P L AC E D BY T H E S O U N D O F A F L U T E A N D H A R P I N T H E AT R I U M . O R IG I N A L LY, T H EHOT E L , O P E N E D D U R I N G T H E R E IG N O F Q U E E N V I C T O R I A I N 1 8 9 9 , WA S K NO W N A S T H E G R E AT C E N T R A L HOT E L . T H E L A N D M A R K HOT E L WA S AWA R D E D T H E T I T L E O F HOT E L O F Y E A R 2 0 0 1 BY T H E L O N D O N TO U R IS T B OA R D .

20524_Arla_UKberetning 25/01/02 13:51 Side 30

: r e s u m é :

pered by insufficient storagecapacity for finished goods.Consequently, a major part of thefinished goods was transferred toexternal storage resulting inincreased costs and complex ware-house management. To alleviatethe situation, a new fully automa-tised warehouse was planned forthe storage and dispatch of all fin-ished goods from the factory inRinge. The project has been sub-mitted to Ringe local council,which has prepared a local zoningproposal for the purpose of reach-ing a final decision early in 2002.

The futureExpectations for the 2001/02 finan-cial year are for a moderateincrease in turnover and a con-tinued positive result. Rising rawmaterial prices, which have alreadyimpacted on the start of the finan-cial year, will be countered byincreased sales prices and internalefficiency measures.

M e d i p h a r m A B

Medipharm AB, which producesbacteria cultures for agricultureand the food industry, markets itsproducts in, as well as outside,Sweden. In the last financial year(15 months) the company achieveda turnover of SEK 74 million whichrepresents a significant rise. Theresult rose from SEK 5.4 million toSEK 10.7 million.

Despite the Foot & Mouth epi-demic, Medipharm’s sales of micro-biological ensiling agents in the UKincreased markedly.

The Czech Republic, Germany,Poland and the UK achieved thegreatest growth. The Czech sub-sidiary, in particular, managed toimprove on its already very strongdomestic position.

Sales of Enzobact for the pro-duction of reduced-fat cheeseincreased once again following amodest decline. Interest in theproduct is considerable and vol-ume sales have increased byapprox. 40%.

Due to approval by the EU

authorities and the rising interest inantibiotic-free production, thedownward curve for the productarea, probiotics for feed, has nowbeen reversed. This has consoli-dated Medipharm’s position further.

The sales and marketing organi-sation in Kågeröd in Sweden hasbeen further strengthened. Thesame is the case with the Czechorganisation which can now workmore efficiently with probiotics forfeed in the European market. Thisrepresents the first step towardsthe co-ordination of the Europeancompanies’ activities which will benecessary once the CentralEuropean countries join the EU.

In general, the debate concern-ing animal welfare amongEuropean consumers will strength-en the natural alternatives’ marketposition. Demand for Enzobact forproduction of reduced-fat cheese isalso expected to have a positiveimpact on the company’s future.

S e m p e r A B

Semper, the Swedish market leaderin baby food, gained further marketshares during the year. Under theFriggs brand, the company alsosupplies a broad range of healthfood. Within the field of specialdietary products, the companydevelops and markets products forconsumers with special food andnutritional requirements. Semperalso offers a broad range of prod-ucts for the food service sector.

2000/01 exceeded expectationsfor both sales and result which, atSEK 32.0 million, was a substantialimprovement on last year. Salesrose by 10% to SEK 1,064 million.Exports rose by 33% and nowaccount for 19% of turnover.

Retail productsWith regard to baby food, Semperrenewed its range during the year.Although Sweden’s birth rate onlyrose by 2%, turnover in Swedenincreased by 7%.

Exports of baby food increasedby 18%. During the year, Semperhas, in the main, directed its efforts

towards two markets – Finland andRussia. In Finland, Semper is nowthe second largest supplier and inRussia, sales have been substan-tially above last year. This develop-ment is expected to continue in thecoming year.

Friggs health food benefitedfrom the continued growth in theretail sector. At the same time, thecompany’s range has been stream-lined. Friggs is now the marketleader in respect of vitamins, anti-

0 :3 2

Mediphar m AB: Sales of microbiological ensi l ing agents increased s ignif icant ly, pr imari ly in countr ies

such as the Czech Republ ic, Germany, Poland and the UK. The decl ine in sa les of probiot ics for feed

was a lso reversed, not least due to increased interest in antibiot ic-f ree product ion. Interest in the

product , Enzobact , which is used in the product ion of reduced-fat cheese, is on the r ise, with sa les

increasing by 40%.

Semper AB: Semper ’s tota l sa les rose by 10%. Exports increased by 33% and now account for 19% of

the turnover. F inland and Russia are major export markets within baby food whi le Norway, UK and

Germany are the most important export markets for specia l nutr i t ional products. Semper has taken over

responsibi l i ty for sa les in Norway, which increased by 50% during the year.

: B JA R N E BAC H M A N N A N D O L E B Ø C K M A N A R E M A K I N G A D E S S E R T A S S IS T E D BY O L E ’ S W I F E H A N N E . T H E S C E N E I S M A L L I N G S C H O O L , S O U T H O FÅ R H U S I N D E N M A R K , W H E R E T H E T W O E X P E R I E N C E D A M AT E U R C H E F S A R E TAC K L I N G T H E TA S K O F T H E E V E N I N G : F I L O - BA K E D A P P L E S W I T H L E MO NC US TA R D . I N H IS W O R K I N G L I F E , O L E B Ø C K M A N I S A BA I L I F F I N Å R H US W H I L E B JA R N E BAC H M A N N I S A T E AC H E R . TO G E T H E R W I T H A G R O U P O FF R I E N D S , O L E A N D B JA R N E H AV E B E E N PA R T IC I PAT I N G I N T H E C O O K E R Y C L A S S E S F O R T W E N T Y Y E A R S .

20524_Arla_UKberetning 25/01/02 13:51 Side 32

layer cake. Exports increased overthe past year, while sales in thedomestic market fell. Turnovertotalled SEK 302 million, anincrease of 10%. The operatingresult was SEK 22 million.

Sales volumes saw a marginalincrease during the year. Sales fellin the domestic market, whileexports increased and now accountfor 40%. The weak Swedish kronahad a positive impact on the exportresult.

Sales to the UK continued toshow a positive trend and Frödingeis now one of the largest suppliersof deep-frozen layer cake. As cus-tomer requirements are high,Frödinge has, besides the currentISO accreditations, been third partyaccredited in accordance withBritish standards.

Sales in Germany increased mar-ginally. Competition in the marketintensified significantly when thelargest supplier merged with one ofits competitors.

Sales to Finland developed par-ticularly well, and Frödinge is wellestablished in the market. Five dif-ferent products are currently mar-keted under Frödinge’s own brand.

In the spring of 2001, a newproduction line for layer cake wascommissioned, resulting in a 50%increase in capacity. The invest-ment, which also includesimproved warehouse and rawmaterial handling facilities,amounts to SEK 60 million. Theproject has succeeded in improvingproduct flow, improving qualityand safety and enhancing theworking environment for staff.

The company will see furtherefficiency measures over the com-ing year in order to address theincreased demand for deep-frozenlayer cake in export markets.

A r l a F o o d s H o l d i n g A / S

Wholly-owned by Arla Foods, ArlaFoods Holding A/S is the holdingcompany for a number of ArlaFoods’ shareholdings, includingMedani A/S and Rynkeby FoodsA/S.

Overall, Arla Foods Holding’sresult showed a profit of DKK 3million against DKK 4 million in1999/00. The result was positivelyinfluenced by stronger earnings inRynkeby Foods A/S, while theresult for Medani A/S failed to meetbudgeted levels.

M e d a n i A / S

The company owns Arla Foods’head office, Ravnsbjerg Erhvervs-center. The company was previous-ly responsible for a number offinancing and investment activitiesas well as the Group’s internal leas-ing business, but these activitieshave been severely curtailed inrecent years and are now beingdisposed of.

To a certain extent, Medani wasadversely affected by the turbu-lence in financial markets inSeptember 2001, which has result-ed in a small loss for 2000/01.

A r l a I n s u r a n c e C o m p a n y L t d .

Arla Insurance Company Ltd. onthe Cayman Islands also acted as areinsurance company for the ArlaFoods group in 2000/01. Theclaims situation was substantiallymore favourable than the previousyear and the net result of DKK 12million is above budget.

To reduce administrative costs, itwas decided to liquidate the com-pany on the Cayman Islands witheffect from the 2000/01 financialyear. A new reinsurance company,Arla Insurance Co. (Guernsey) Ltd.has been registered in Guernsey.With effect from 2001/02, the com-pany will be responsible for theGroup’s reinsurance business.

A n d e l s s m ø r A . m . b . a .

Arla Foods holds a stake of approx.92% in the company, which handlesthe majority of Danish butterexports. The company operates asan integral part of Arla Foods. Theresult for the year is satisfactory.

A M F o o d s

In 1996, MD Foods (67%) and Arla(33%) established a joint companyfor the production and sale ofcapuccino and chocolate instantproducts for the food service sectorand retail segments.

The company has now entered aperiod of consolidation and isshowing remarkably positiveresults. The 2000/01 financial yearis satisfactory.

cold remedies, Omega 3 fish oil,and rice cakes. Friggs is continuingits strong development within theproduct areas of tea, natural medi-cines and minerals.

S e m p e r N u t r i t i o n

Within the field of special dietaryproducts, Semper develops andsells products for clinical nutrition,primarily in Nordic markets. Thisgrowth market saw sales increaseby 17% during the year. Oneimportant strategic move was thedecision to assume responsibilityfor sales in Norway in late 2000.This has meant a rise in sales of noless than 50%. During the year,production of special dietary prod-ucts was transferred from Kimstadin Sweden to Esbjerg in Denmark.

Part of the special dietary prod-uct range is gluten-free productswhich are primarily marketed inthe Nordic countries. Sales in thisrapidly rising segment rose by 22%.The range has been expanded by,for instance, pasta and bread prod-ucts. In the UK, where the prod-ucts are marketed under the Juvelbrand, sales rose by 39%. Duringthe year, gluten-free products werealso launched in Germany.

Food serviceWithin food service, total sales inSweden rose by 2% while Semper’sturnover in the area of cateringincreased by 8%. Deep-frozenproducts such as pancakes andcrêpes saw the largest increase.Total exports of pancakes rose by8%.

Sales of the chocolate milkdrink, Pucko, rose by 22%. WhenArla Foods launched the chocolatemilk, Matilde Café, in Denmark,production at the plant in Laholmdoubled. Together with theincreased production of the pan-cake and crêpes ranges, this hasled to a high level of capacity uti-lization, major changes andincreased staff levels.

The futureDespite weaker trends and a con-

tinuing low Swedish birth rate, theoutlook is for continued growthwithin all product areas. Newproducts are in the pipeline andthe company’s marketing will bestrengthened.

J O B o l a g e t

JO Bolaget, which is 50/50 ownedby Arla Foods and Skånemejerier,operates within the field of fruitjuice, fruit drinks, fruit soup andstewed fruit.

In 2000/01, total sales increasedto 123.6 million litres, a rise of 4.3 million litres while turnoverrose by 7% to SEK 879 million. Thehot summer of 2001 contributedsignificantly to this. A series ofproduct launches and campaignsalso contributed positively.

The price of apple concentrate,the company’s largest raw materialafter oranges, remained unchangedduring the year whereas the priceof orange concentrate was at anunusually low level. Despite thehigh dollar rate, this meant thatoverall raw material costs declined.

JO Bolaget is the Swedish marketleader within concentrated juice,ready-to-drink unchilled juice andchilled ready-to-drink juice. Juiceaccounts for 90% of the turnoverand sales of chilled, ready-to-drinkjuice products have shown thelargest increase. Sales of the chilledjuice, God Morgon, rose by morethan 20%, partly due to a new, mod-ernised design, the introduction ofscrew tops and the launch of twonew products, God Morgon Floridaand God Morgon+ Järn.

The outlook for 2001/02 is posi-tive. Sales continue to develop pos-itively and a series of excitingproduct launches are on the way.Recently, however, the price oforange concentrate has risenmarkedly.

F r ö d i n g e M e j e r i A B

Frödinge Mejeri, which in Swedenis best known for cheese cake, alsoproduces deep-frozen tarts and

0 :3 5

JO Bolaget : Overal l sa les of

ju i ce, f ru i t d r inks , f ru i t

soups and stewed fruit rose

by 7%. One important reason

for this is the hot summer,

a l though a ser ies of product

launches and campaigns have

al l had a posit ive effect . In

spite of the high dol lar rate,

the pr ice of orange concen-

trate was low during the year.

Recent ly, however, pr ice lev-

els have r isen markedly.

Fröd inge Da i ry AB : Whi le

sales in the domestic Swedish

marke t dec l i ned , expo r t s ,

supported by a weak Swedish

k rona , i n c reased . Vo lumes

only rose marginal ly whereas

turnover increased by 10%. In

the ear ly summer, a new prod-

uct l ine for layer cake was

commiss ioned. The l ine has

increased capacity by 50%.

: r e s u m é :

0 :3 4

20524_Arla_UKberetning 25/01/02 13:51 Side 34

while striving to minimise theimpact of our activities on the sur-rounding environment.

In concrete terms, this meansArla Foods will:

• continually improve the Environ-ment, Health and Safety (EH&S)performance of products andactivities

• conserve energy and raw materi-al, reduce waste, and exploreopportunities for reuse and re-cycling

• minimise potential EH&S impactwhen developing new products

and business and when planningcapital projects

• actively co-operate with authori-ties and other relevant stake-holders

• encourage our suppliers todevelop and supply EH&S supe-rior products and servicesthrough cooperation and in linewith our requirements

• ensure that our employees areaware of Arla Foods’ EH&Spolicy and motivated to apply it,are aware of their own responsi-bilities and are given the support

and training necessary to fulfilthem

• plan, prepare and regularlyreview company objectives, tar-gets and action plans for EH&Sissues

• monitor and communicate ourEH&S activities and performanceagainst our plans both internallyand externally

A r l a F o o d s ’ E n v i r o n m e n t ,H e a l t h a n d S a f e t y Po l i c y

An overall Environment, Health andSafety (EH&S) policy has now beenadopted for the Arla Foods group.The basis of the EH&S policy is ArlaFoods’ commitment to meeting theneeds of society, customers andconsumers in an environmentallysound, safe and sustainable man-ner. To achieve this the groupemploys a range of active EH&Smeasures across the entire foodchain – from the farm to consumer.

Arla Foods’ policy is to produceand supply products in a healthyand safe working environment

Arla Foods ’ pol icy is to produce and supply prod-

ucts in a healthy and safe working environment

whi le st r iv ing to minimise the impact of our

act iv i t ies on the surrounding environment. The

Group’s overal l environment, health and safety

po l i cy i s re f l e c ted in a se r i e s of spec i f i c

object ives.

ENVIRONMENT:: Arla Foods Environment,

Health and Safety

0 :3 6

: D I N N E R T I M E , “ L A C E N A” , I N A S PA N IS H HO US E HO L D . AT GAV À - M A R , O NT H E C OA S T S O U T H O F B A R C E L O N A , D US K H A S S E T I N . T H E FAT H E R , O R IO LVA L L É S , T H E MOT H E R , PAT R IC I A D E V I L L A MO R E A N D T H E I R C H I L D R E N , I A N ,6 , A N D PAU L A , 4 , A R E GAT H E R E D A R O U N D T H E TA B L E F O R PA S TA A N D SA L A D .A S I N MO S T OT H E R S PA N IS H HO M E S , T H E T V F L I C K E R S I N T H E BAC KG R O U N D .I T ’ S 1 0 P M , A L MO S T T I M E F O R T H E C H I L D R E N T O G O T O B E D .

20524_Arla_UKberetning 25/01/02 13:51 Side 36

A n a l y s e s r e s u l t i n f e w e rw o r k - r e l a t e d a c c i d e n t s

For several years, Arla Foods hasfocused on reducing the number ofwork-related accidents at itsDanish plants. Part of this work iscentred upon analyses of the causeof such accidents, where the num-ber of “incidents with a potentialrisk of personal injury” has beenregistered and a series of preven-tive measures carried out, not leastin connection with the introductionof new staff. These initiatives haveresulted in an 11% fall in work-related accidents at Danish plantsover the past three years.

To maintain this positive trend,Arla Foods has entered into a part-nership with MejeriindustriensBedriftssundhedstjeneste (MB)(The Dairy Industry’s OccupationalHealth Service) on a joint actionplan. The initial aim is to reducethe number of work-related acci-dents in the Denmark Divisionwhich accounts for approximately40% of all work-related accidents atArla Foods’ Danish plants. Theaction plan consists of three ele-ments, i.e. an analysis of work-related accidents during 2000/01,the preparation of a so-called“safety-culture analysis” and theuse of specific preventive tools.

The analysis and the culture-analysis is well under way. Theculture-analysis is intended toexamine the safety-culture – i.e.the values, habits and perceptionsaffecting management’s and staff’sattitude to prevention, risk andaccidents. MB is responsible forthis stage, including interviews andobservations at the specific plants.

On the basis of the culture-analysis, concrete initiatives forimproving accident prevention willbe decided.

Experiences from the DenmarkDivision will later be applied to therest of the group.

F e w e r w o r k - r e l a t e d i n j u r i e s

A link exists between work-relatedinjuries and heavy lifting and

Repetitive Strain Injury (RSI). Inconsequence, all production andwork stations in Denmark havebeen surveyed with regard toheavy lifting and RSI in order topave the way for a targeted effortto reduce the number of workfunctions carrying a risk of injury.

This effort is now beginning toshow an effect on the number ofwork-related injuries reported tothe Danish National LabourInspection. As is shown in the tablebelow, the number of RSI/heavylifting work functions between1997/98 and 1999/00 fell fromindex 100 to index 69. Over thesame period the number of re-ported work-related injuries fellfrom index 100 to index 61.

Work-

related

(Index fig.) RSI/Heavy lift. injuries

1997/98 100 1001998/99 85 761999/00 69 61

R e d u c t i o n i n u s e o f c h e m i c a l sAlthough chemicals have an impor-tant role in ensuring higher hygi-enic standards, their use must bereduced as far as possible.Consequently, the consumption ofcleaning agents is closely moni-tored at plant level in order to opti-mise their use. In addition, staff aregiven detailed instructions in thecorrect use of the agents in relationto the working environment andthe external environment.

At Akafa, the milk powder fac-tory, the used lye is nanofilteredfor recycling, which has resulted inannual savings of approx. 300 tonslye. Moreover, consumption of acidin the purification plant and energyconsumption for the heating ofcleaning agents has also beenreduced.

N e w d r i v i n g t e c h n i q u e sr e d u c e f u e l c o n s u m p t i o n

To reduce energy consumption inconnection with milk transport,

units in Sweden have introducedthe Heavy Eco Driving programmewhich has been developed inFinland, but adapted to Swedishconditions. The programme, whichis aimed at drivers of heavyvehicles, comprises a series ofmeasurements using special trafficcomputers which teach drivers newtechniques. Experienced HGVdrivers are often surprised to seehow fuel consumption can bereduced without losing time.Savings of 5-10% are not unusual – with a corresponding reductionin gas emissions.

A l l p l a n t s t o b e I S O 1 4 0 0 1a c c r e d i t e d

Since the dairy in Skövde wasaccredited in accordance with ISO14001 in 1998 – the first plant to beso – accreditation has proceededfast in Sweden. Currently, approx.66% of Arla Foods’ Swedish plantshave been ISO 14001 accredited.

In Denmark, too, accreditationis proceeding rapidly. So far, Akafaand Kjersing (in 2001) have beenaccredited. The aim is that all ArlaFoods’ plants in Denmark andSweden will be accredited accord-ing to the ISO 14001 environmentalstandards.

Accreditation is a natural conse-quence of several years’ systematicenvironmental work, with specifiedprocedures and clearly definedareas of responsibility. One impor-tant reason for accreditation is thatit ensures the optimum use of bothenergy and raw materials.

C o r p o r a t e o b j e c t i v e s

Environment, Healthand Safety ManagementArla Foods uses a proprietary envi-ronment, health and safety man-agement system developed inaccordance with the ISO 14001 andOHSAS 18001 standards for alldairy activities.

The aim is:

• for all operating plants and divi-sions in Denmark and Sweden tobe accredited according to ISO14001 by 2005/2006.

Water and energyArla Foods wishes to minimise theimpact on the surrounding envi-ronment by efficient use of waterand energy resources for produc-tion and transport.

The aims are:

• to reduce water consumption by7.5% over a five year period – relative reduction of water con-sumption compared to the baseyear 2000/01.

• to reduce energy consumptionby 5% over a five year period – relative reduction of energyconsumption compared to thebase year 2000/01.

Health and Safety at WorkArla Foods wishes to work activelyto ensure a good working environ-ment and to avoid the occurrenceof accidents. The aims are:

• to gather data as a basis for set-ting out concrete targets no laterthan the end of the budget year2001/2002.

Where such data already exists(DK), the aims are

• to reduce the work-related acci-dent frequency by 25% over afive year period from the end ofthe budget year 2000/01 to theend of 2005/06.

• to reduce the number of work-related injuries by 25% over a

five year period from the end ofthe budget year 2000/01 to theend of 2005/06.

Emissions to airArla Foods is intent on contributingtowards a reduction in globalwarming and acidification of waterand air by reducing gaseousemissions from production andtransport.

The aims are:

• to reduce the emission of CO2by 5% over a five year period – relative reduction compared tothe base year 2000/01.

• to reduce NOx emission by 10%over a five year period – relativereduction compared to the baseyear 2000/01.

ChemicalsArla Foods will pay strong atten-tion to the use of chemicals carry-ing a risk to health or having anegative impact on the environ-ment.

The aims are that:

• a risk assessment of all chemicalsused at each production plant iscarried out no later than the endof the budget year 2005/06.

• once a year, the group monitorsthe use of chemicals withparticularly undesirable effectson health and the environmentand draws up aims and actionplans with a view to substitutionor phasing out.

Based on the Environment, Health& Safety Management policy andthe group objectives, focus will beon strategies and action plansdesigned to ensure that the estab-lished aims are achieved within theagreed time frame. An importantelement in this respect will be thecollation of comparative cross-border data as a basis for theongoing work. In addition, thisdata will serve to highlight devel-opments in this area from year toyear.

0 :3 8 0 :3 9

20524_Arla_UKberetning 25/01/02 13:51 Side 38

A u d i t o r s ’ R e p o r t

We have audited the consolidatedaccounts and the annual accountsof Arla Foods amba for the2000/2001 financial year presentedby the Supervisory Board andManagement.

Basis of opinionWe planned and performed ouraudit in accordance with generallyaccepted international auditingstandards and Danish auditing prin-ciples with a view to ascertainingthat the accounts are free frommaterial errors or defects. In thecourse of our examinations wehave, on the basis of the criteria ofmateriality and risk, checked thebasis of and documentation for theaccount figures and other account-ing data. In doing so, we evaluatedthe accounting policies applied andthe estimates made. In our opinion,the information contained in theaccounts as a whole is satisfactory.Our audit did not result in anyqualifications.

O p i n i o n

In our opinion, the consolidatedaccounts and the annual accountshave been prepared in accordancewith the stipulations contained inDanish legislation governing thepresentation of accounts. Theaccounts give a true and fair viewof the assets and liabilities, finan-cial position and results for thefinancial year of the group and theparent company.

Århus, 28 November 2001

K P M G C . J e s p e r s e n

E. Black Pedersen

S TAT E AU T HO R IS E D P U B L IC AC C O U N TA N T

J. Bräuner Knudsen

S TAT E AU T HO R IS E D P U B L IC AC C O U N TA N T

P r i c e w a t e r h o u s e C o o p e r s

Göran Tidström

AU T HO R IS E D AC C O U N TA N T

Jesper Lund

S TAT E AU T HO R IS E D P U B L IC AC C O U N TA N T

ACCOUNTS:: 02.10.2000 - 30.09.2001

0 :4 1

M a n a g e m e n t R e p o r tÅ R H US , 2 8 NO V E M B E R 2 0 0 1

G r o u p M a n a g e m e n t B o a r d o f A r l a F o o d s a m b a

Jens Bigum Åke Modig /Jørn Wendel AndersenM A N AG I N G D I R E C TO R D E P. M A N AG I N G D I R E C TO R F I N A N C E D I R E C TO R

S u p e r v i s o r y B o a r d f o r A r l a F o o d s a m b a

Lars Lamberg Knud Erik JensenC H A I R M A N D E P U T Y C H A I R M A N

Bertil Andersson Leif Backstad

Niels Bøgedal Kaj W. Christensen

Christer Eliasson Anders Ericsson

Leif Eriksson Elisabeth Gauffin

Åke Hantoft Tommy Jacobsson

Sören Kihlberg Kr. Ole Kristensen

Ove Møberg Hans Peter Nielsen

Per Norstedt Jan Nørgaard

Kaj Ole Pedersen Søren Rasmussen

Peter Stoffersen Bent Juul Sørensen

: W H E N F R I E N D S T U R N U P U N E X P E C T E D LY, A Q U IC K , P I P I N G HOT P I Z Z AD E L I V E R E D S T R A IG H T TO YO U R D O O R C A N SAV E T H E DAY ! K J E L LS KO G B E R G F R O M P I Z Z A E X P R E S S I N S T O C K H O L M K NO W S T H E C I T Y L I K ET H E BAC K O F H IS H A N D . K J E L L D E L I V E R S M A L I N A R N E S S O N , 2 5 , A N DA N D R E A S B J Ö W I , 2 4 , O N E O F T H E C H A I N ’ S S P E C I A L I T I E S C O N TA I N I N GM O Z Z A R E L L A C H E E S E .

0 :4 0

20524_Arla_UKberetning 25/01/02 13:51 Side 40

G e n e r a l

The accounts of the parent com-pany Arla Foods amba and the con-solidated accounts of the ArlaFoods Group as a whole have beenpresented in accordance with theDanish Company Accounts Act(Årsregnskabsloven) with suchdeviations as follow from thespecial circumstances of the parentcompany and the Group. Thesedeviations relate, in particular, tothe presentation of the results ofthe non-dairy subsidiaries andassociated companies in the Profitand Loss Account for the parentcompany, cf. below.

As mentioned on page 7 of theAnnual Report, the openingbalance sheet was revised as at 17 April 2000. The revision hasresulted in goodwill as of this dateof DKK 300 million, which isamortised over a period of 20 years.

Furthermore, a reassessment hasbeen made in respect of provisionsfor structural rationalisation, whichhas resulted in additional provi-sions as at 17 April 2000 of DKK300 million.

The comparative figures haveconsequently been revised.

The comparative figures in theProfit and Loss Account pertain tothe company’s first financial year,covering the period 17 April – 1 October 2000, and do thereforenot allow direct comparison.

The accounting policies remainunchanged in comparison with lastyear.

ConsolidationThe consolidated accounts com-prise Arla Foods amba (the parentcompany) and those subsidiaries,(subsidiaries, cf. the list of Groupcompanies on pages 56-57), inwhich the parent company has adirect or indirect share of more than50 per cent of the voting rights or inwhich the parent company in otherways has a controlling interest.

The accounts used for theconsolidation have, in all materia-lity, been prepared in accordancewith the accounting policies of theparent company.

The consolidation of theaccounts has been achievedthrough a consolidation of theidentical items from the annualaccounts of the parent companyand those of the individualsubsidiaries. Intra-group incomeand expenses have been elimi-nated as have shareholdings,balances, dividends and non-nettedprofits and losses.

The Profit and Loss Accounts offoreign subsidiaries have beentranslated into Danish kroner usingthe average foreign exchange rates,while their Balance Sheets havebeen translated using the foreignexchange rates in effect on theBalance Sheet date.

The foreign exchange rateadjustment of the equity of foreignsubsidiaries at the beginning of thefinancial year using the exchangerates in effect on the Balance Sheetdate and the adjustments followingfrom the translation of the Profitand Loss Accounts of foreign sub-sidiaries using average exchangerates have been carried out againstequity.

As regards the acquisition andsale of subsidiaries, the operationsof such subsidiaries have beenincluded in the consolidatedaccounts for that part of the year inwhich the subsidiaries have beenowned by the Arla Foods Group. Inconnection with the acquisition ofcompanies, the added value hasbeen distributed on the individualassets and liabilities, and Groupgoodwill has been capitalised andamortised.

Foreign currencyand financial instrumentsFinancial instruments comprise, inparticular, foreign exchange for-ward contracts and options, etc.

For financial instrumentsentered into to hedge receivablesand debt in foreign currency, theforeign exchange forward contractrate is used to value the hedgeditem. The financial instruments arethus not valued as an independentitem. Foreign exchange rate adjust-ments of financial instrumentswhich are used to hedge the

income and expenditure in thecoming year are, however, post-poned until such income andexpenditure is realised.

Financial instruments not usedto hedge income and expenditureare valued at their market values asat the Balance Sheet date. Bothrealised an unrealised gains andlosses on these are included in theProfit and Loss Account.

Debtors and creditors denomi-nated in foreign currencies whichhave not been hedged are enteredat the foreign exchange rates pre-vailing on the Balance Sheet date.

SubsidiesEU subsidies and subsidies fromother public authorities for invest-ments in fixed assets are deductedfrom the purchase sum.

Subsidies granted for productdevelopment, etc. are entered asincome under the item Other oper-ating income at the time when arepayment obligation is no longercontingent.

P r o f i t a n d L o s s A c c o u n t

Net turnoverNet turnover includes the year’sinvoiced sales of finished productsless sales discounts. Any refundsand production subsidies from theEU are included in the netturnover.

The net turnover for Arla Foodsamba also includes declared sup-plementary payments from othersales companies within the ArlaFoods Group.

Variable costsThe item Variable costs includesthe consumption of goods, includ-ing purchases from Arla Foods’ co-operative owners as well as costs,including depreciation, wages andsalaries, incurred to realise theturnover for the year.

Development costsThe costs of developing new prod-ucts are entered as expenses asthey are incurred.

ACCOUNTS:: accounting policies

0 :4 2

20524_Arla_UKberetning 25/01/02 13:51 Side 42

Result in subsidiaries andassociated companiesThe Profit and Loss Account of theparent company includes the pro-portional share of the profits orlosses of the individual dairy-related subsidiaries after tax andafter the deduction of declaredsupplementary payments and non-netted internal profits.

Dairy-related subsidiaries aredefined as subsidiaries which are primarily involved in the pro-cessing/selling of the milk weighedin from Arla Foods’ co-operativeowners. These companies are listedseparately in the chart on pages 56-57.

The share of results after tax ofnon-dairy subsidiaries have notbeen included in the parent com-pany’s Profit and Loss Account, buthave been added directly to equityunder the item Revaluationreserves.

Undertakings in which theGroup holds between 20 per centand 50 per cent of the voting rightswithout having a controlling inter-est are regarded as associated.These undertakings are includedunder one item in the Profit andLoss Account and the BalanceSheet, and their turnover has thusnot been included in the consoli-dated turnover.

The difference between the wayin which shares of profits in dairy-related and non-dairy undertakingsare presented in the Profit and LossAccount of the parent companyserves to show the direct incomefrom the milk supplied by the co-operative owners of Arla Foodsamba.

Financial itemsInterest income and interest expen-diture are entered in the Profit andLoss Account with the incomeearned and expenditure paid in thecourse of the financial year.

Furthermore, financial itemscomprise both netted and non-net-ted value adjustments of securitiesand exchange rate adjustments.

Extraordinary itemsExtraordinary items comprise mate-

rial items of income and expen-diture relating to events or circum-stances which are of a non-recur-ring nature and which do notderive from the ordinary activitiesof the Group.

Corporation taxThe taxable income of the com-panies in the Group is calculated inaccordance with the national rulesin force from time to time. Forcompanies which are jointly taxed,tax on the results for the financialyear is entered at the current ratesof taxation, calculated on the basisof the pre-tax results for the year,adjusted for non-taxable incomeand expenses. Deferred tax is cal-culated as one figure for jointlytaxed companies. The deferred taxis entered at the current rate oftaxation of all periodic differencesbetween the results for accountingand tax purposes.

B a l a n c e S h e e t

Fixed assets in generalThe acquisition costs of the fixedassets correspond to the book valueof the founding companies and theirsubsidiaries as at 16 April 2000,adjusted for the value adjustmentsmade in the opening balance sheet.

Intangible fixed assetsIntangible fixed assets are valuedat acquisition cost less accumulatedamortisation and write-downs.

Intangible fixed assets comprisegoodwill from the acquisition ofundertakings, licences, trademarks,etc. as well as the equalisation sumfor former members of KløverMælk A.m.b.A.

The assets are amortised on thebasis of an estimation of theirexpected useful lives:

Goodwill 5-20 years

Licences and trademarks, etc. 10 years

Equalisation sum 3 years

Tangible fixed assetsTangible fixed assets are valued at

acquisition cost less accumulateddepreciation and write-downs.

Assets are depreciated accordingto the straight-line method as fromthe time of acquisition or commis-sioning on the basis of an estima-tion of the expected useful lives ofthe assets, as follows:

Office buildings: 50 years

Production buildings:20-30 years

Plant and machinery:5-10 years

Operating equipment, fixtures and fittings:

3-7 years

The book value of plant andmachinery, operating equipment,fixtures and fittings as at 17 April2000 is, however, depreciatedaccording to the straight-linemethod over five years from thisdate.

Plants under construction arenot depreciated.

Assets with a short useful life,minor assets and minor improve-ment expenses and computer soft-ware are expensed in the year ofacquisition.

InvestmentsParticipating interests in sub-sidiaries and associated companiesare entered at the ownership shareof the companies’ equity value atthe end of the financial year, calcu-lated in accordance with theGroup’s accounting policies.Furthermore, non-netted intra-group profits have been deducted.

For those cooperative societieswhich form part of the Group, theownership share has been calcu-lated in accordance with theArticles of Association of theindividual companies.

Other financial fixed assets(shares, mortgage deeds, bondholdings, etc.) are entered at acqui-sition value, although written downto market values, if such values areconsistently lower.

StocksRaw materials, consumables andgoods for resale are entered at the

0 :4 3

20524_Arla_UKregnskab 25/01/02 13:43 Side 43

acquisition price. The cost price ofthe milk which forms part of stockhas been entered at the price paid,including supplementary pay-ments, to Arla Foods amba’s co-operative owners.

Goods in process and finishedgoods are valued at the cost price,including the acquisition costs ofraw materials and ancillarymaterials with the addition of pro-cessing costs and other costsdirectly or indirectly related to theindividual goods.

Stocks are valued according tothe FIFO method. In the event ofthe acquisition or cost price exceed-ing the net realisable value, write-down is made to this lower value.

The net realisable value is deter-mined with account being taken ofthe turnover rate, marketability anddevelopment in expected salesprice of the goods.

ReceivablesReceivables are entered at nominalvalue less write-downs for baddebts carried out on the basis ofindividual assessments of debtors.

Other current assetsSecurities are entered at marketvalue as at the end of the financialyear.

EquityAs per Article 15 of the Articles ofAssociation, the company’s equityconsists of:

Capital account: The company’s capital accountconsists of the undistributedequity of the company.

Reserve A: Reserve A consists of reserves inpersonal accounts in MD Foodsamba, for which the followingterms apply:

1. The Board of Representativesmay decide to servicedeposits in the personalaccounts at a rate of interestnot exceeding the officialDanish discount rate.

2. Any decisions concerning

payments from the personalaccounts shall be made by theBoard of Representatives.

3. The plan is for the reserve tobe paid out in the course ofthe 2000/2001 - 2007/2008 fi-nancial years.

No payments shall be made to themembers of Arla Foods ambawhich reduce the total of thecompany capital account andReserve A. Upon the effecting ofsuch payments from Reserve A, acorresponding amount shall bepaid into the capital account, thereserve thereby being successivelyphased out.

In addition, DKK 280 millionshall be added to the capitalaccount through consolidation andconcurrently with payments fromReserve A.

Reserve B: Reserve B comprises the provi-sions made on the incorporationof the company.

Revaluation reserve:The account includes net revalu-ation in accordance with theequity method for subsidiariesand non-dairy associated com-panies. Furthermore, non-nettedgains on securities which arecurrent assets are included.

Subsidiary reserves:The account includes net reva-luation of dairy subsidiaries inaccordance with the equitymethod.

Subordinate loan capitalIn pursuance of the Memorandumof Association, Arla ekonomiskförening contributed SEK 330 mil-lion in the form of subordinate loancapital, which in the event of thebankruptcy of the company ranksafter other claims. The loan, onwhich interest accrues at the samerate as Reserve A, shall be repaid byone eighth annually, the first time inthe 2001/2002 financial year.

ProvisionsOther provisions comprise, in

particular, the provisions for struc-tural rationalisations allocated inthe opening balance sheet as at 17 April 2000.

Provisions for pensions inSweden are made on the basis ofactuarial valuations.

C a s h - f l o w s t a t e m e n t

The cash-flow statement is pre-pared according to the indirectmethod on the basis of the consol-idated results. The statement showsthe cash-flows of the Group, divid-ed into operating, investment andfinancing activities and how thesecash-flows have affected theGroup’s cash funds.

The cash-flow from operations iscalculated as the consolidated resultadjusted for non-cash operatingitems such as depreciation andwrite-downs and changes to theoperating capital.

The cash-flow for investmentscomprises cash-flows in connectionwith the purchase and sale ofintangible, tangible and financialfixed assets.

The cash-flow from financingcomprises the arrangement andrepayment of long-term and short-term debt to financial institutionsas well as mortgage lenders.

The cash funds are made up ofcash funds and listed bondsentered in the Balance Sheet ascurrent assets.

The cash-flow statement cannotbe deducted solely from the con-solidated accounts.

12

22/3

4

5

6

TurnoverVariable costsGross income

Sales and distribution costsAdministration and joint costsOther operating incomeOther operating expenditureResults of primary operations

Results in subsidiariesResults in associated companiesNet financial itemsResults for the year before tax

Corporation taxResults for the year

Minority interest share of results in subsidiaries

A R L A F O O D S A M B A ’ S S H A R E O F R E S U L T S F O R T H E Y E A R

Proposed allocation:Supplementary payments to Arla Foods’ co-operative ownersTransferred to Capital accountTransferred to Reserve ATransferred to subsidiary reservesTransferred to other reservesTotal

PROFIT AND LOSS:: account

DKKm

38,133-30,9197,214

-4,548-1,128

156-98

1,596

-0

-3811,215

-571,158

-1

1,157

690222

0-

2451,157

17,453-14,371 3,082

-2,028 -480

41-68

547

-12

-159400

-13387

5

392

2767224

-20

392

24,526-21,7722,754

-1,311-320

31-41

1,113

76-10

-1651,014

-26988

-

988

690222

076

- 988

11,020-9,8241,196

-608-154

17-25

426

70

-41392

-13379

-

379

27672247-

379

: g r o u p :: p a r e n t c o m p a n y :

: P R O F I T /L O S S

0 2 . 1 0 . 2 0 0 03 0 . 0 9 . 2 0 0 1

: P R O F I T /L O S S

1 7 . 0 4 . 2 0 0 00 1 . 1 0 . 2 0 0 0

: P R O F I T /L O S S

0 2 . 1 0 . 2 0 0 03 0 . 0 9 . 2 0 0 1

: P R O F I T /L O S S

1 7 . 0 4 . 2 0 0 00 1 . 1 0 . 2 0 0 0

0 :4 4 0 :4 5

NOT E

20524_Arla_UKregnskab 25/01/02 13:43 Side 44

BALANCE SHEET:: DKKm

NOT E NOT E

7

7

8

A S S E T S

Fixed assetsIntangible fixed assetsLicences, trademarks, etc.Goodwill, incl. consolidated goodwillEqualisation sumTotal

Tangible fixed assetsLand and buildingsPlant and machineryOther plant, operating equipment, fixtures and fittingsTangible fixed assets under constructionTotal

InvestmentsParticipating interests in subsidiariesParticipating interests associated companiesOther securities and participating interestsOther receivablesTotal

T O T A L F I X E D A S S E T S

Current assetsStocksRaw materials and consumablesGoods in progressFinished products and goods for salesTotal

DebtorsTrade debtorsAmounts owed by affiliated companiesAmounts owed by associated companiesLand and buildings for disposalOther debtorsPrepayments and accrued incomeTotal

Securities

Cash

T O T A L C U R R E N T A S S E T S

T O T A L A S S E T S

9

10

111213

14

15

E Q U I T Y A N D L I A B I L I T I E S

EquityCapital accountReserve AReserve BRevaluation reserveSubsidiary reservesOther reservesTotal equity

Minority interests

Subordinate loan capital

T O T A L L I A B L E C A P I T A L

ProvisionsDeferred taxPensions, SwedenOther provisions

T O T A L P R O V I S I O N S

CreditorsLong-term creditorsMortgage lendersFinancial institutions, etc.Total

Short-term creditorsShort-term portion of long-term creditorsFinancial institutionsSupplementary paymentsTrade creditorsAmounts owing to affiliated companiesAmounts owing to associated companiesCorporation taxOther debtAccrued expenses and deferred incomeTotal

T O T A L C R E D I T O R S

T O T A L E Q U I T Y A N D L I A B I L I T I E S

Contingencies, guarantees, etc.

BALANCE SHEET:: DKKm

0317276593

1,3671,516

5874

3,015

2,59633

8430

3,472

7,080

389724172

1,285

1,0874,346

017

10216

5,568

0

317

7,170

14,250

53658276987

3,5713,278

584599

8,032

-122

1,90410

2,036

11,055

7771,1781,6283,583

4,2130

1148

49055

4,817

472

1,348

10,220

21,275

0296184480

1,3801,682

60151

3,273

2,73494

8140

3,642

7,395

428766153

1,347

1,1213,477

20432

1907

5,031

0

445

6,823

14,218

94594184872

3,6593,393

521472

8,045

-273

1,3249

1,606

10,523

7451,1631,5753,483

3,9880

21062

63097

4,987

560

1,305

10,335

20,858

0 :4 6 0 :4 7

4,928649500

--

346,111

85

252

6,448

370609735

1,714

1,5742,3193,893

1713,040

6902,2921,074

760

1,43237

8,803

12,696

20,858

4,706743500

--

175,966

89

288

6,343

421671800

1,892

1,1753,2564,431

1442,572

2762,4091,808

425

1,35219

8,609

13,040

21,275

4,92864950077-43

-6,111

-

252

6,363

330

193

226

1,0201,6522,672

1121,254

690804

1,4321

3459337

4,957

7,629

14,218

4,70674350023-6-

5,966

-

288

6,254

360

259

295

1,0351,6752,710

1191,376

276759

1,9653

13480

04,991

7,701

14,250

: B A L A N C ES H E E TA S AT

3 0 . 0 9 . 2 0 0 1

: B A L A N C ES H E E TA S AT

0 1 . 1 0 . 2 0 0 0

: B A L A N C ES H E E TA S AT

3 0 . 0 9 . 2 0 0 1

: B A L A N C ES H E E TA S AT

0 1 . 1 0 . 2 0 0 0

: B A L A N C ES H E E TA S AT

3 0 . 0 9 . 2 0 0 1

: B A L A N C ES H E E TA S AT

0 1 . 1 0 . 2 0 0 0

: B A L A N C ES H E E TA S AT

3 0 . 0 9 . 2 0 0 1

: B A L A N C ES H E E TA S AT

0 1 . 1 0 . 2 0 0 0

: g r o u p :: p a r e n t c o m p a n y : : g r o u p :: p a r e n t c o m p a n y :

20524_Arla_UKregnskab 25/01/02 13:43 Side 46

EQUITY:: movements

DKKm

Capital accountBalance at 2 October 2000Revision of opening balance sheet, cf. Annual Report p. 7

Participating interestsProvisions for structural rationalisations

Corrected balance at 2 October 2000Transferred from result for the yearTotal

Reserve ABalance at 2 October 2000Paid to MD Foods ambaTotal

Reserve BBalance at 2 October 2000Total

Revaluation reserveBalance at 2 October 2000Adjustment on account of revision of opening balance sheetCorrected balance at 2 October 2000Profit in non-dairy subsidiaries

and associated companies, netOther adjustments, etc.Total

Subsidiary reservesBalance at 2 October 2000Transferred from result for the yearOther adjustments, etc.Total

Other reservesBalance at 2 October 2000Adjustment on account of revision of opening balance sheetCorrected balance at 2 October 2000Transferred from result for the yearOther adjustments, etc.Total

T O T A L E Q U I T Y

4,706

300-300

4,706222

4,928

743-94

649

500500

30-723

169-115

77

-6 76

-113-43

- -- - - -

6,111

4,706

300-300

4,706222

4,928

743-94

649

500500

---

---

- ---

24 -717

245 -228

34

6,111

0 :4 8

: C A P I TA LA S AT

3 0 . 0 9 . 2 0 0 1

: C A P I TA LA S AT

3 0 . 0 9 . 2 0 0 1

: g r o u p :: p a r e n t c o m p a n y :

Cash-flow from operationsResults for the yearDepreciation and corporation taxShare of results in associated companiesChange in provisionsChange in stocksChange in debtorsChange in trade creditors and other creditors, etc.Corporation tax paidCash-flow from operations

Cash-flow for investmentsInvestments in intangible fixed assets, netInvestments in tangible fixed assets, netInvestments in participating interests etc., netCash-flow for investments

Cash-flow from financingChange in debt to financial institutions and mortgage lendersCash-flow from financing

C H A N G E I N C A S H F U N D S A N D S E C U R I T I E S

Cash funds and securities at 1 October 2000Cash funds and securities at 30 September 2001

CASH-FLOW:: statement

DKKm

0 :4 9

1,157 1,336

0-40100-170

-1,118-21

1,244

-70-1,476

390-1,156

-43-43

45

1,8201,865

392 546-12

-188-74104-296

-2470

-28-807112

-723

-285-285

-538

2,358 1,820

: g r o u p :

: A M O U N T S0 2 . 1 0 . 2 0 0 03 0 . 0 9 . 2 0 0 1

: A M O U N T S1 7 . 0 4 . 2 0 0 00 1 . 1 0 . 2 0 0 0

20524_Arla_UKregnskab 25/01/02 13:43 Side 48

NOTES:: DKKm

1

2

T U R N O V E R

Divided into marketsSwedenDenmarkOther EU countriesRest of EuropeMiddle EastNorth AmericaCentral and South AmericaAsiaAfricaOtherTotal

Turnover in markets outside Sweden and DenmarkCorresponding to

Divided into product categoriesFresh productsCheeseButter and spreadsCondensed milk productsPackaging and additivesOther turnoverTotal

Costs

Employee costs:By functionProductionSales and distributionAdministrationTotal

By typePay and remunerationPensionsOther social security costsTotal

A V E R A G E N U M B E R O F E M P L O Y E E S

( M A N Y E A R S )

The item Pay and remuneration, including pensions forthe Group, includes the parent company’s ManagementBoard with DKK 6 million (17 April – 1 October 2000:DKK 3 million) and remuneration to the parent company’sSupervisory Board and Board of Representatives beingDKK 10 million (17 April – 1 October 2000: DKK 3 mil-lion).

2

3

4

5

6

Costs (continued)

Depreciation: By functionEqualisation sum (production)ProductionSales and distributionAdministrationNet profit/loss on sale of

intangible and tangible fixed assetsTotal

Remuneration for auditors elected by the Board of RepresentativesKPMG C. JespersenPricewaterhouseCoopersOther services: KPMG C. JespersenPricewaterhouseCoopersTotal

Results in subsidiariesProfit in subsidiaries after taxLoss in subsidiaries after taxTotal

The figures include only the results of dairy-related sub-sidiaries. The non-dairy subsidiaries and associated com-panies have achieved the following profit, which hasbeen taken directly to equity:

Net financial itemsExpenditure:Interest expenditure to affiliated companiesOther financing expenditureTotal

Income:Interest income from affiliated companiesOther financing incomeTotal

N E T F I N A N C I A L I T E M S

Corporation taxTax on taxable income for the yearAdjustment of deferred taxCorrection of tax for previous yearsTotal

Corporation tax paid in (including on-account tax) in thecourse of the year

NOTES:: DKKm

-818-74-59

-951

-898-47-6

-951

6,763

5,0604,1935,305

33088541260147717515

17,453

8,20047%

7,0614,6522,0332,574

502631

17,453

-1,844-579-222

-2,645

-2,232-107-306

-2,645

18,622

-1,840-176-191

-2,207

-2,083-110-14

-2,207

6,775

10,0629,248

12,396782

2,103928932

1,22543027

38,133

18,82349%

15,43010,6404,2895,5731,0651,136

38,133

-3,663-1,565

-534-5,762

-4,926-314-522

-5,762

18,200

0 :5 0 0 :5 1

-92-903-128-156

-12-1,291

-20-601-621

8232240

-381

-54 1-4

-57

21

--396 -71-66

6 -527

-23-223-246

08787

-159

-25 18-6

-13

2

-92-433

-30

4 -524

-4-2

-20

-8

102-2676

169

-30-331-361

11185

196

-165

-25 -10

-26

0

--177

00

2 -175

-2-2

-2-2-8

21-14

7

13

-20-114-134

672693

-41

-13 0 0

-13

0

: A M O U N T S0 2 . 1 0 . 2 0 0 03 0 . 0 9 . 2 0 0 1

: A M O U N T S1 7 . 0 4 . 2 0 0 00 1 . 1 0 . 2 0 0 0

: A M O U N T S0 2 . 1 0 . 2 0 0 03 0 . 0 9 . 2 0 0 1

: A M O U N T S1 7 . 0 4 . 2 0 0 00 1 . 1 0 . 2 0 0 0

: g r o u p :: p a r e n t c o m p a n y : : g r o u p :: p a r e n t c o m p a n y :

: A M O U N T S0 2 . 1 0 . 2 0 0 03 0 . 0 9 . 2 0 0 1

: A M O U N T S1 7 . 0 4 . 2 0 0 00 1 . 1 0 . 2 0 0 0

: A M O U N T S0 2 . 1 0 . 2 0 0 03 0 . 0 9 . 2 0 0 1

: A M O U N T S1 7 . 0 4 . 2 0 0 00 1 . 1 0 . 2 0 0 0NOT E NOT E

20524_Arla_UKregnskab 25/01/02 13:43 Side 50

NOTES:: DKKm

N o t e

7 I N T A N G I B L E A N D T A N G I B L E

F I X E D A S S E T S

Acquisition cost 02.10.2000Revision of opening balance sheetCorrected acquisition cost 02.10.2000Foreign exchange adjustmentsAdditions for the yearTransfers during the yearDisposals for the yearAcquisition sum 30.09.2001

Deprec. and write-downs 02.10.2000Depreciation of revaluationCorrected depreciation

and write-downs 02.10.2000Foreign exchange adjustmentsDeprec. and write-downs for the yearDepreciation and write-downs

of discontinued assetsDepreciation

and write-downs 30.09.2001B O O K V A L U E

3 0 . 0 9 . 2 0 0 1

I N T A N G I B L E A N D T A N G I B L E

F I X E D A S S E T S

Acquisition cost 02.10.2000Revision of opening balanceCorrected acquisition cost 02.10.2000Additions for the yearTransfers during the yearDisposals for the yearAcquisition sum 30.092001

Deprec. and write-downs 02.10.2000Depreciation of revaluationCorrected depreciation

and write-downs 02.10.2000Deprec. and write-downs for the yearDepreciation and write-downs

of discontinued assetsDepreciation and

write-downs 30.09.2001B O O K V A L U E

3 0 . 0 9 . 2 0 0 1

8 I N V E S T M E N T S

Acquisition cost 02.10.2000Foreign exchange adjustmentsAdditions for the yearDisposals for the yearAcquisition cost 30.09.2001

Adjustments 02.10.2000Result for the yearOther adjustmentsAdjustments 30.09.2001

B O O K V A L U E 3 0 . 0 9 . 2 0 0 1

Acquisition cost 02.10.2000Revision of opening balanceCorrected acquisition cost 02.10.2000Foreign exchange adjustmentsAdditions for the yearDisposals for the yearAcquisition cost 30.09.2001

Adjustments 02.10.2000Foreign exchange adjustmentsResults for the yearChange, in-group stock profitOther adjustmentsAdjustments 30.09.2001

B O O K V A L U E 3 0 . 0 9 . 2 0 0 1

N o t e

NOTES:: DKKm

5990

599 -58347-416

0 472

0 0

000

0 0

472

740

74151-74

0151

00

00

0 0

151

6670

667 -3217717-47

782

-83 0

-832

-183

3 -261

521

630

63220-7

78

-50

-5-13

0 -18

60

3,574 0

3,574-14298494

-1524,358

-296 0

-29623

-693

1-965

3,393

1,6330

1,63344344-16

2,104

-1170

-117-308

3 -422

1,682

3,6890

3,689-165296305-139

3,986

-118 0

-11814

-229

6 -327

3,659

1,4130

1,41316430-87

1,520

-460

-46-97

3 -140

1,380

276 0

276 0 0 00

276

0 0

00

-92

0-92

184

2760

2760 0 0

276

00

0-92

0 -92

184

390 300690

-5170-3

699

-25-7

-320

-73

0 -105

594

26300326

0 0 -3

323

-2 -7

-9-18

0 -27

296

57 0

57-75600

106

-40

-41-9

0 -12

940 :5 2 0 :5 3

LAND

AND

BUILDINGS

EQUALISATION

SUM

GOODWILL

INCL.

CONSOLIDATED

GOODWILL

LICENCES,

TRADEMARKS,

ETC.

TECHNICAL

PLANT AND

MACHINERY

PLANT

UNDER

CONSTRUCTION

PARTIC IPAT.

INTERESTS IN

SUBSIDIARIES

PARTIC IPAT.

INTERESTS IN

ASSOCIATED

COMPANIES

OTHER SECU-

RITIES AND

PARTICIPAT.

INTERESTS

OTHER

RECEIVABLES

: g r o u p : : g r o u p :

: p a r e n t c o m p a n y :

: I N TA N G I B L E F I X E D A S S E T S

: TA N G I B L E F I X E D A S S E T S

: I N V E S T M E N T S

2,869 -300

2,569-164

83-10

2,478

27-1523916-11

256

2,734

110 -19 184

0 275

12 0

-14 -2

273

31 0

31 0

680

99

20-40-3-5

94

1,893 -21271-830

1,313

11 00

11

1,324

8320

832 -19

0 -10

803

110000

11

814

10 0 3 -49

0 00 0

9

: p a r e n t c o m p a n y :

New acquisitions for the year have been reduced by EU subsidies and subsidies from other public authorities of DKK 6 mil-

lion. At the annual adjustment as per 1 January 2001, the total property valuation of Danish properties with a book value

of DKK 1,917 million amounted to DKK 1,946 million, to which should be added investments subsequent to this date.

New acquisitions for the year have been reduced by EU subsidies and subsidies from other public authorities of DKK6 million. The cash value of land and buildings in Denmark as at 1 January 2001 is valued at DKK 1,394 million, towhich should be added investments subsequent to this date.

OTHER PLANT,

OPERATING

EQUIPMENT,

FIXTURES AND

FITTINGS

20524_Arla_UKregnskab 25/01/02 13:43 Side 52

NOTES:: DKKm

9

10

11

12

13

14

Minority interestsMinority interests beginning of yearShare of results for the yearChange in ownership shareMinority interests end of year

Subordinate loan capitalSubordinate loan capital beginning of yearForeign exchange adjustmentsSubordinate loan capital end of year

Deferred taxDeferred tax beginning of yearForeign exchange adjustmentsChange in deferred tax for the yearDeferred tax end of year

Pensions, SwedenPensions beginning of yearForeign exchange adjustmentsProvisions for the yearPensions end of year

Other provisionsOther provisions beginning of yearRevision of opening balanceCorrected other provisions beginning of yearProvisions for the yearApplied during the yearOther provisions end of year

Long-term debtLong-term debt falling due after 5 years

15 Contingencies, guarantees, etc.

Surety and guarantee obligations

Leasing obligation (total)

Obligations relating to agreements concerning the supplyof fixed assetsTo cover exchange risks, the following foreign exchangeforward contracts have been entered into:

Forward exchange (buying)Forward exchange (selling)

As security for debt, the following assets have been deposited:Mortgage deed registered to the owner of property with a book value of

Securities, book value

Arla Foods amba has received guarantee certificates co-operative members. The basis for these guarantees is theindividual member’s deliveries over the past 5 financial years,calculated as DKK 20 per 1,000 kg milk or part thereof. DKK 0 has been placed as security for debt.

The Group is party to a few lawsuits. The outcome ofthese cases is not expected to significantly affect the prof-it for the year or the assessment of the Group’s financialposition.

NOTES:: DKKm

296-8

288

37-10

36

2570

2575

-69193

1,481

101-5-7

89

296-8

288

453-14-18

421

673-1715

671

498300798

8-71

735

1,622

0 :5 4 0 :5 5

1,167

310

417

1,7774,889

4441,421

0

573

1,058

134

412

1363,787

6021,681

208

580

3,100

142

219

1,5214,665

170468

0

573

2,786

94

272

03,531

170415

0

580

: A M O U N T S0 2 . 1 0 . 2 0 0 03 0 . 0 9 . 2 0 0 1

: A M O U N T S1 7 . 0 4 . 2 0 0 00 1 . 1 0 . 2 0 0 0

: A M O U N T S0 2 . 1 0 . 2 0 0 03 0 . 0 9 . 2 0 0 1

: A M O U N T S1 7 . 0 4 . 2 0 0 00 1 . 1 0 . 2 0 0 0

: F I G U R E SA S AT

0 1 . 1 0 . 2 0 0 0

: F I G U R E SA S AT

0 1 . 1 0 . 2 0 0 0

S T R U C T U R A LR AT IO N A L I -

SAT IO N S ,E TC .

S T R U C T U R A LR AT IO N A L I -

SAT IO N S ,E TC .

: g r o u p :: p a r e n t c o m p a n y : : g r o u p :: p a r e n t c o m p a n y :

: A M O U N T SA S AT

3 0 . 0 9 . 2 0 0 1

: A M O U N T SA S AT

0 1 . 1 0 . 2 0 0 0

: A M O U N T SA S AT

3 0 . 0 9 . 2 0 0 1

: A M O U N T SA S AT

0 1 . 1 0 . 2 0 0 0

288-36

252

36-41

33

2020-20

1,312

891-5

85

288-36

252

421-50-1

370

671-8725

609

2020-20

1,876

M E R G E RC O S TS

M E R G E RC O S TS

: F I G U R E SA S AT

3 0 . 0 9 . 2 0 0 1

: F I G U R E SA S AT

3 0 . 0 9 . 2 0 0 1

NOT E NOT E

20524_Arla_UKregnskab 25/01/02 13:44 Side 54

S U B S I D I A R I E S that are all included in the consolidated accounts (continued)

Arla Foods Holding A/S, DenmarkMedani A/S, Denmark (100.0%)

Kingdom Food Products ApS, Denmark (100.0%)Arla Foods Leasing A/S, Denmark (100.0%)Ejendomsanpartsselskabet St. Ravnsbjerg, Denmark (100.0%)

Rynkeby Foods A/S Denmark (50.0%. The remaining 50.0% is owned by Kinmaco ApS)Kinmaco ApS, Denmark (100.0%)

GB Finans A/S, Denmark (100.0%)Arla Insurance Co. Ltd., Cayman Islands Arla Foods Fastighetsförvaltning AB, SwedenDe Danske Mejeriers Fællesindkøb Amba, Denmark

Dairy Fruit A/S, Denmark (100.0%) A/S Crispy Food International, Denmark (100.0%)IFEG International ApS, Denmark (100.0%)Ejendomsselskabet Østre Gjesingvej 19 A/S, Denmark (100.0%)

Danapak A.m.b.a., DenmarkDanapak A/S, Denmark (100.0%)

Danapak Flexibel A/S, Denmark (100.0%)Danapak Kartonnage A/S, Denmark (100.0%)Danapak Plast A/S, Denmark (100.0%)

Tölkki OY, Finland (100.0%)Norsk Danapak A/S, Norway (100.0%)Danapak Faltschachtelsysteme GmbH, Germany (100.0%)Danapak Cartons Ltd., England (100.0%)Danapak R&D Center A/S, Denmark (100.0%)Danapak leasing ApS, Denmark (100.0%) Dana-Green 2000 A/S, Denmark (51.0%)

Associated companies

JO-Bolaget Fruktprodukter HB, Sweden (owned through Arla Foods AB)HB Grådö Produktion, Sweden (owned through Arla Foods AB)Synbiotics AB, Sweden (owned through Arla Foods AB)Arla Foods Hellas S.A., GreeceBiolac GmbH, GermanyArla Foods Ingredients S.A., Argentina (owned through Arla Foods Ingredients amba)Dan Vigor Ltd., Brazil (owned through Arla Foods International A/S) Matpartner R&S AB, Sweden (owned through Semper Holding AB)Medipharm USA, USA (owned through Medipharm Holding AB)Delimo A/S, Denmark (owned through Arla Foods Holding A/S)

Paticipating interests

Danish Dairy Board, DenmarkSvensk Mjölk ekonomisk förening, Sweden Lantbrukarnas Riksförbund, förening upa, Sweden

Pursuant to Section 43, Subsection 2 of the Danish Company Accounts Act (Årsregnskabs-loven) and Section 22, Subsection 5 of the Danish Company Accounts Order, informationabout individual subsidiaries has been omitted as it is deemed that such information maycause considerable damage to these companies.

The Group owns other companies without commercial activities.

The companies marked with •are defined as dairy-related, and their results are included in the Profit and Loss Account of the parent company. The other companies are defined as non-dairy, and their results are therefore taken directly to the equity of the parent company.

S U B S I D I A R I E S that are all included in the consolidated accounts

Arla Foods AB, SwedenASM Mjölksocker AB, Sweden (100.0%)Arla Ost och Smör Produktion AB, Sweden (100.0%)Bregott AB, Sweden (62.4%)

Arla Foods Distribution amba, DenmarkDanos A/S, Denmark (100.0%)

Gredstedbro Ost A/S, Denmark (100.0%)Mejerigrossisten Fyn ApS, Denmark Kirkeby Mejeri A/S, DenmarkArla Foods Holding AB, Sweden

Oy Arla Foods Ab, Finland (100.0%)Arla Foods AB, Norway (100.0%)

Arla Foods Inc., CanadaArla Foods GmbH, GermanyArla Foods S.r.l., ItalyArla Foods Specialost AB, SwedenArla Foods Inc., USAArla Foods S.A.R.L., FranceAndelssmør A.m.b.a., DenmarkEnigheden A/S, DenmarkArla Foods Ingredients amba, Denmark

Arla Foods Ingredients GmbH, Germany (100.0%)Arla Foods Ingredients Inc., USA (100.0%)Arla Foods Ingredients KK, Japan (100.0%)Arla Foods Ingredients AB, Sweden (100.0%)Arla Foods Ingredients Ltd., England (100.0%)Arla Foods Ingredients Korea Co. Ltd., South Korea (70.0%) AM Produktion K/B, Sweden (66.7%. The remaining 33.3% is owned by Arla Foods AB)AM Foods K/S, Denmark (66.7%. The remaining 33.3% is owned by Arla Foods amba)

Arla Foods Sp. Z o.o., Poland Arla Foods International A/S, Denmark

Danya Foods Ltd., Saudi ArabiaArla Foods Plc., EnglandArla Foods Argentina S.A., Argentina

Frödinge Holding AB, SwedenFrödinge Mejeri AB, Sweden (100.0%)

Medipharm Holding AB, SwedenMedipharm AB, Sweden (100.0%)Munka Invest AB, Sweden (100.0%)Medipharm Investments Ltd., USA (100.0%)Medipharm CZ s.r.o., the Czech Republic (100.0%)Medipharm Hungary Kft, Hungary (51.0%)

Semper Holding AB, Sweden Semper AB, Sweden (100.0%) Friggs AB, Sweden (100.0%)Eterna Näringsprodukter AB, Sweden (100.0%)

Anjo Holding AB, Sweden A/S Anjo, Denmark (100.0%)

••••••••••••••••••••••••••• •

•••

GROUP:: subsidiaries,

associated companies and paticipating interests

100.0%

100.0%

100.0%100.0%100.0%

100.0%100.0%100.0%100.0%100.0%100.0%92.4%51.0%

100.0%

100.0%100.0%

100.0%

100.0%

100.0%

100.0%

: O W N E R S H I PS H A R E

100.0%

100.0%100.0%96.1%

93.1%

50.0%50.0%49.0%60.0%50.0%50.0%50.0%50.0%50.0%48.0%

90.1%42.0%19.0%

: O W N E R S H I PS H A R E

GROUP:: subsidiaries,

associated companies and paticipating interests

0 :5 6 0 :5 7

: p a r e n t c o m p a n y : : p a r e n t c o m p a n y :

20524_Arla_UKregnskab 25/01/02 13:44 Side 56

ARLA FOODS:: Supervisory Board and

Management Board

0 :5 8

J E N S B IG U M: M A N A G I N G D I R E C T O R

Å K E MO D IG: D E P. M A N A G I N G D I R .

L A R S L A M B E R G: C H A I R M A N

K N U D E R I K J E N S E N: D E P U T Y C H A I R M A N

B E R T I L A N D E R S S O N N I E L S B Ø G E DA LL E I F BAC KS TA D K A J W. C H R IS T E N S E N

A N D E R S E R IC S S O N L E I F E R I KS S O N E L ISA B E T H GAU F F I N Å K E H A N TO F T

S Ö R E N K I H L B E R G K R . O L E K R IS T E N S E N O V E M Ø B E R G H A N S P E T E R N I E L S E N

JA N N Ø R GA A R D K A J O L E P E D E R S E N S Ø R E N R A S M US S E N P E T E R S TO F F E R S E N

C H R IS T E R E L I A S S O N

TO M M Y JAC O B S S O N

P E R NO R S T E DT

B E N T J U U L S Ø R E N S E N

20524_Arla_UKregnskab 25/01/02 13:44 Side 58

1. H J Ø R R I N G M E J E R I2. A K A FA3. B IS L E V M E J E R I4. A A R S M E J E R I5. FA R S Ø M E J E R I6. HO B R O M E J E R IC E N T E R 7. G R E N Å M E J E R I8. V E L L E V M E J E R I9. HO C O

HO L S T E B R O F L Ø D E O S THO L S T E B R O S M Ø R M E J E R I

10. R Ø D K Æ R S B R O M E J E R I11. V R I N N E R S F L Ø D E O S T12. Å R H US M E J E R IC E N T E R 13. B R A B R A N D M E J E R I

I N NO VAT IO N14. V I BY

I T- C E N T R E15. S N E J B J E R G M E J E R I

16. DA N M A R K P R OT E I NN R . V I U M M E J E R IA R I N C O

17. T R O L D H E D E M E J E R I18. K L O V B O R G M E J E R I19. T I S T R U P M E J E R I20. VA R D E S M Ø R M E J E R I21. V E J L E O S T E L AG E R O G

PA K K E R ID E N M A R K D I V I S IO N SA L E S

22. TAU L O V M E J E R I23. K J E R S I N G 24. E S B J E R G M E J E R I

E S B J E R G E KS P O R T T E R M I N A L25. G L E J B J E R G M E J E R I26. KO L D I N G E KS P O R T T E R M I N A L27. C E N T R A LV Æ R KS T E D E T 28. T Y R S T R U P M E J E R IC E N T E R29. H Ø G E L U N D M E J E R I

30. B R A N D E R U P M E J E R I31. SA M D E N32. B O V M E J E R I33. G R Ø N DA L M E J E R I34. C R E MO35. B I R K U M O S T36. S L AG E L S E M E J E R IC E N T E R 37. I S H Ø J F R I S K VA R E T E R M I N A L38. C O P E N H AG E N

67. N E W C A S T L E68. S E T T L E69. L E E D S70. BA M B E R B R I D G E71. K E T T E R I N G

I N G R E D I E N TS72. H AT F I E L D P E V E R E L73. OA K T HO R P E

74. NO R WAY75. F I N L A N D76. P O L A N D77. G E R M A N Y78. HO L L A N D79. F R A N C E80. S PA I N81. I TA LY82. G R E E C E83. C A N A DA84. USA85. B R A Z I L86. A R G E N T I N A87. SAU D I A R A B I A88. U N I T E D A R A B E M I R AT E S89. BA N G L A D E S H90. M A L AY S I A91. KO R E A92. JA PA N

A r l a F o o d s U K A r l a F o o d s g l o b a l l yA r l a F o o d s i n D e n m a r k

1

23

45

6

78910

111213

141516

17 18

1920

21

22232425 26

27 28

2930

31

32

33

34 35 36

3738

39

40

4142

43

44

4546

47

4849

50

51

52

53

54

55

56

57

58

59

60

61

62

6364

65

66

A r l a F o o d s i n S w e d e n

39. K Å G E R Ö D40. H A L MS TA D M E J E R I41. K V I B I L L E M E J E R I42. FA L K E N B E R G

M E J E R I43. Å S E DA M E J E R I44. K A R L S K R O N A

M E J E R I45. K A L M A R M E J E R I46. B O R G HO L M M E J E R I47. S T Å N GA M E J E R I48. V IS BY M E J E R I49. V Ä S T E R V I K M E J E R I50. J Ö N K Ö P I N G M E J E R I51. G Ö T E B O R G M E J E R I52. H J O U T V E C K L I N G S -

M E J E R I53. A L I N G S Å S M E J E R I54. M J Ö L BY

55. Ö S TG Ö TA M E J E R IL I N K Ö P I N G

56. K I MS TA D57. Ö S TG Ö TA M E J E R I

NO R R K Ö P I N G58. S K Ö V D E M E J E R I59. G Ö T E N E M E J E R I

G Ö T E N E O S T -D IS T R I B U N A L

60. S Ö D E R T Ä L J ET E R M I N A L

61. E N S K E D E T E R M I N A L62. S TO C K HO L M ,

TO R S GATA N63. S TO C K HO L M M E J E R I64. Ö R E B R O M E J E R I65. V Ä S T E R Å S

T E R M I N A L66. U P P SA L A T E R M I N A L

67

68

6970

71 7273

7475

7678

77

7981

8082

83

84

85

86

87 89

90

88

91 92

KEY F IGURES:: 02.10.2000 - 30.09.2001

DKK million

ProfitNet turnover

outside DK/SE

% outside DK/SE

Net profitSupplementary paymentsConsolidation

FinancingBalance sheet totalFixed assetsGross investmentsCapital base

Equity ratioIn %

Raw materials Milch recieved (the Group) million kg

DenmarkSwedenOther countries

No. of co-operative owners DenmarkSweden

EmployeesNo. of employees (man years)

T U R N O V E R

0 2 . 1 0 . 2 0 0 0 - 3 0 . 0 9 . 2 0 0 1

Divided into markets1. Sweden2. Denmark3. Other EU countries4.Rest of Europe5. Middle East6. North America7. Central and South America8. Asia9. Africa

10. OtherTotal

Divided into product categories11. Fresh products12. Cheese13. Butter and spreads14. Condensed milk products15. Packaging and additives16. Other turnoverTotal

17,453 8,200

47%

392276 116

21,27511,055

9056,343

30%

3,3441,914

993437

16,1218,6397,482

18,622

5,0604,1935,305

33088541260147717515

17,453

7,0614,6522,0332,574

502631

17,453

38,133 18,823

49%

1,157690467

20,85810,5231,8776,448

31%

7,0853,9672,167

951

14,9097,9216,988

18,200

10,0629,248

12,396782

2,103928932

1,22543027

38,133

15,43010,6404,2895,5731,0651,136

38,133

: P E R I O D0 2 . 1 0 . 2 0 0 03 0 . 0 9 . 2 0 0 1

: P E R I O D1 7 . 0 4 . 2 0 0 00 1 . 1 0 . 2 0 0 0

: g r o u p :

Divided into markets

Divided into product categories

98765

4

3

2

1

11

12

13

14

15 16

20524_Arla_UKomslag 28/01/02 11:59 Side 2