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Arla plans 2013 production capacity expansion to meet export demand

By Mark Astley , 24-Jan-2013

Arla Foods plans to invest more than DKK 2bn ($357m) over the next 12 months to increase its global dairy processing capabilities, boost efficiency, and reduce its impact on the environment.

The investment – equivalent to approximately 3% of Arla’s expected revenue for 2013 – has been allocated to finance the expansion of existing sites, rationalisation measures, environmental improvements, maintenance, and innovation.

The largest proportion of the investment fund – around 40% - has been set aside to increase the production capacity of Arla sites that manufacture products for export.

Earlier this month, Arla unveiled Strategy 2017 – its latest five year growth plan. Under the strategy, Arla intends to build on the massive export potential held by China, Russia, and the Middle East and Africa region.

Future lactose demand

The company’s single biggest investment in 2013 will be the construction of a new 85,000 tonnes lactose manufacturing plant in Denmark.

The plant, which is expected to be fully operational in 2016, will manufacture highly-process whey-based lactose products. Arla Foods Ingredients will market the products.

Approximately DKK 900m ($190m) in total will be ploughed into the project, which has been designed to meet the ever growing demand for lactose for infant formula.

“This investment sends a strong signal to the whey ingredients market that we remain committed to supplying high quality products to the global nutrition and food industry. We have had a very constructive dialogue with a number of leading customers regarding their future demands for lactose quality, and our new plant will deliver on these demands,” said Arla Foods Ingredients CEO, Henrik Anderson.

Around 40% of the total DKK 2bn investment will be devoted to financing the expansion of existing facilities.

Arla has also set aside approximately DKK 232m ($.41.4m) to expand milk powder and butter processing capabilities at Arla’s Pronsfeld plant in Germany. An additional DKK 215m ($38.4m) has been allocated to complete the construction of Arla’s yellow cheese plant in Taulov, Denmark.

Rationalisation investment

Arla’s second largest area of focus in 2013 will be “production rationalisation initiatives.”

The company intends to invest DKK 370m ($66.1m) in a number of streamlining projects over the next 12 months in an attempt to reduce production costs at its existing dairies.

The investment appears to be in line with Arla’s Strategy 2017 objective to reduce production costs by DKK 2.5bn ($446m) by the end of 2015.

Elsewhere, Arla intends to invest approximately DKK 140m ($25m) 2013 to reduce the carbon footprint of its existing sites. CO2 emissions are expected to decrease by 2% in 2013 as a result of the investment.

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