Our report is our detailed annual
account of the company’s financial and
sustainability performance, risks, strat-
egy and governance. It includes our con-
solidated financial statements and our
externally audited ESG figures. Also, it
describes how we are working towards
reaching our science-based and other
environmental targets as well as our
health and social ambitions. From 2022,
we disclose our climate risks and oppor-
tunities according to TCFD’s recommen-
dation. This report serves as our annual
communication on our progress to-
wards the UN Social Development Goals,
and the statutory statement on CSR in
accordance with section 99a and 99b of
the Danish Financial Statements Act.
See our statutory reporting on §99a on
page 9 (business model), page 29-32
(climate-related risks), page 33-65 (poli-
cies, actions, management systems and
expectations for future), page 128-145
(ESG key figures). See our statutory re-
porting on §99b on page 137 and 140.
www.arla.com
On the frontpage
Claus Fenger
Claus Fenger, one of our 8,492 farmer
owners, is at the forefront of transform-
ing dairy production to be more sustain-
able and climate-friendly. His 500
Holstein cows are closely monitored for
all aspects of their health, well-being
and efficiency. He milks them with milk-
ing robots, follows their feeding patterns
with 3D cameras and measures their in-
dividual methane emissions with a spe-
cial hose. Together with researchers
from Aarhus University, he uses all the
data he collects to find the cows who
are the most climate-efficient and breed
them. In the future, all Arla owners will
be able to benefit from the result of this
research, as they work on becoming
more and more sustainable.
Progress overview
Sustainable dairy farming
Sustainable production
and logistics
Sustainable packaging
Responsible sourcing
Progress overview
Health and inspiration
Diversity and inclusion
Employee well-being
Human rights
International dairy development
34
36
39
42
44
46
47
51
52
53
55
Message from the Chairman
Message from our CEO
2022 performance at a glance
Five-year overview
Highlights 2022
Business model
Future 26 – our strategy
Executive summary
External market overview
Performance overview
2023 Outlook
Strategy outlook
Risk Governance
Arla’s risk position
4
5
6
7
8
9
10
12
13
15
25
26
28
29
Table of contents
Primary financial statements
Notes
Statement by Board of Directors
and Executive Board
Independent auditor’s report
Environmental data
Social data
Governance data
Five-year overview
Climate related disclosures
(TCFD)
UN Sustainable Development
Goals
UN Global Compact
Independent auditor’s
reasonable assurance report
Glossary
Corporate calendar
67
68
76
125
126
129
136
140
142
143
144
145
146
147
149
Governance framework
Board of directors
Excutive management team
Management remuneration
Transparent tax practices
Internal controls and
compliance
57
59
61
63
64
65
Arla® Skyr is a traditional Icelandic yoghurt that is
thick, creamy and high in protein. Perfect for those
looking for a healthier yoghurt option with lower
sugar and fat content
the point-based system will reward past
sustainability actions as well as encour-
age future improvements.
Arla’s Board of Directors was closely in-
volved in the development of the model,
and the proposal was later discussed
broadly in Arla’s farmer community. The
engagement and support our owners
have shown in financially incentivising
sustainability action, even at a time of
great uncertainty, is a testament to our
commitment to set the standard in our
sector.
The incentive model builds on the same
data-led and scientific approach to con-
tinuous improvements that is well
established through our Climate Check
programme. The 2022 results show
average CO2e emissions on owner milk
reduced to 1.12 per kg of milk from 1.15
the year before – displaying the effec-
tiveness of our approach and determina-
tion to continue to be a leader in value
creation and sustainability.
Thanks to strong execution by employ-
ees and management, Arla once again
proved agile in navigating these difficult
conditions. Coupled with a decline in
global milk production which drove
commodity prices upwards, this enabled
a higher return to our farmer owners.
The average prepaid milk price in 2022
was 52.0 EUR-cent/kg, 40.5 per cent
higher than the previous year. The finan-
cial performance allowed for supple-
mentary payment of EUR 269 million,
corresponding to 2.2 EUR-cent per kg
owner milk, above the level set in Arla’s
retainment policy. As EUR 61 million
was paid out in September, the remain-
ing amount of EUR 208 million will be
paid out in March.
The higher returns helped alleviate pres-
sure on farmers, who particularly in the
first half of the year faced soaring pro-
duction cost as prices on feed, fertilizer
and energy reached unprecedented
levels. It also supported them in making
investments required to continue their
transition to more sustainable dairy pro-
duction and meet our on-farm target of
reducing CO2e emissions by 30 per cent
by 2030.
As a cooperative, we took a historic step
in this transition in 2022 with the deci-
sion to introduce a sustainability incen-
tive for our farmers. Showing our ambi-
tion to be at the forefront of sustainable
dairy farming, it ties for the first time the
individual farmers’ milk price to sustain-
ability activities and performance. When
the incentive comes into effect in 2023,
Chairman of the
Board of Directors
or Arla and our 8,492 farmer
owners, 2022 was a year domi-
nated by inflation and uncer-
tainty, yet despite this challeng-
ing environment, we delivered
solid results while taking important
strides forward on sustainability.
As well as causing humanitarian tragedy,
Russia’s invasion of Ukraine exacerbated
the existing pressure on global markets
and supply chains. This created a highly
inflationary and volatile environment for
both company and farmers.
model. Up to 4 EUR-cent1 per kg milk,
corresponding to an annual EUR 500
million will be allocated to motivate and
reward our members’ individual climate
and biodiversity actions.
We are very pleased to see that Arla
farmers have resumed their reductions
after a flat development in the past four
years. With the launch of the Sustainabil-
ity Incentive in 2023, we aim to acceler-
ate our scope 3 reductions in the years
to come, and look forward to working
with our customers on offering more
sustainable dairy products.
In scope 1+2, we achieved further
reductions, bringing us to 29 per cent
on our 63 per cent reduction journey
towards 2030.
2023 will undoubtedly be another diffi-
cult year to navigate with the challeng-
ing economic environment globally and
the ongoing effects of the war in
Ukraine continuing to impact the energy
market and supply chains.
We expect the supply and demand bal-
ance to be restored on the dairy market
over the course of 2023. Commodity
prices, on the other hand, already to-
wards the end of 2022 started to sharply
decline. Our expectation for 2023 is
further decrease on the commodity
markets.
pace of our branded growth as well as
our efficiency target.
We remain committed to delivering
within our profit target range of 2.8-
3.2 per cent, and the direction in
our Future26 strategy and our
appetite for leading sustaina-
ble dairy stand strong.
CEO of Arla
The cost-of-living crisis will continue to
challenge brands across categories. We
have therefore made a slight adjust-
ment to our expectations regarding the
1 Up to 3 EUR-cent/kg of milk is earmarked for distribu-
tion across the Sustainability Incentive Model levers,
and farmers will receive 1 EUR-cent/kg of milk for sub-
mitting their Climate Check data.
ajor global disruptions with
widespread ramifications
across societies and econ-
omies characterised yet
another year. Inflation,
which was further fuelled by Russia’s in-
vasion of Ukraine and the ensuing en-
ergy crisis, made the year even more dif-
ficult for Arla to navigate than the previ-
ous two. However, with agile and firm ex-
ecution we managed the volatile envi-
ronment, securing consecutive price in-
creases across our four business seg-
ments throughout the year.
Our performance price was 38.8 per
cent above the 2021 level, up from 39.7
EUR-cent to 55.1 EUR-cent per kg. Our
revenue reached EUR 13.8 billion, up
from EUR 11.2 billion in 2021, while the
profit share was 2.8 per cent, within our
target range.
The extraordinarily high returns
throughout the year supported our own-
ers in a year dominated by extraordinary
feed, fertiliser and energy costs.
As a result, our branded volumes across
our Europe and International segments
declined by 4.2 and 1.2 per cent, respec-
tively. Still, volumes remained above
2019 level as our brands were able to
sustain parts of the exceptional strong
growth created in two years of lock-
downs.
As the cost-of-living crisis gained mo-
mentum, we saw a significant down-
wards trend in consumer spending, par-
ticularly in Europe and Africa. People
continued to trade down to cheaper
products and consume less. By the end
of 2022, the European dairy category
consumption in retail was down by
around 4-5 per cent, compared to 2021.
Arla Foods Ingredients continued to de-
liver strong performance and Global In-
dustry Sales grew, strongly driven by
high commodity prices.
Even in volatile times, our commitment
to lead sustainable dairy stands strong. A
monumental proof point was our Board
of Directors’ historic decision to intro-
duce a new Sustainability Incentive
Competitive milk price
Scale to grow
Lead sustainable dairy
55.1
36.5
39.7
2020
2021
2022
7.7%
4.5%
25% 29%
7% 9%
-3.2%
2015
2021
2022
2030
2015
2021
2022
2030
2020
2021
2022
13.8
3.2%
10.6
11.2
3.0%
2.8%
143
155
101
13.9
3.0
13.6
13.5
2.7
2.6
2020
2021
2022
2020
2021
2022
2020
2021
2022
2020
2021
2022
2020
2021
2022
Read more
about our strategy
on page 10 and 26.
Within guidance
Outside guidance
1 Per kg of milk and whey.
2 Based on profit allocated to owners of
Arla Foods amba.
3 Between 2021 and 2022 we altered the methods of
creating efficiencies, due to the start of our new strat-
egy period. With the new strategy we launched our new
efficiency programme, Fund our Future. 2022 numbers
are therefore not fully comparable with historic num-
bers, related to our previous efficiency programme,
Calcium.
Financial key figures
(EURm)
Performance price
EUR-cent/kg owner milk
Income statement
Revenue
EBITDA
EBIT
Net financials
Profit for the year
Profit appropriation for the year
Individual capital
Common capital
Supplementary payment
Balance sheet
Total assets
Non-current assets
Current assets
Equity
Non-current liabilities
Current liabilities
Net interest-bearing debt including pension
liabilities
Net working capital
Cash flows
Cash flow from operating activities
Cash flow from investing activities
Free cash flow
Cash flow from financing activities
Investments in property, plant and equipment
Purchase of enterprises
2022
2021
2020
2019
2018
55.1
39.7
36.5
36.3
36.0
13,793
1,001
529
-80
400
11,202
948
468
-61
346
10,644
909
458
-72
352
10,527
837
406
-59
323
10,425
767
404
-62
301
39
74
269
8,746
4,611
4,135
3,168
2,915
2,663
2,986
1,442
184
-443
-259
269
-373
-
42
83
207
7,813
4,668
3,145
2,910
2,446
2,457
2,466
810
780
-482
298
-330
-452
-
41
81
223
7,331
4,413
2,918
2,639
2,296
2,396
2,427
679
731
-488
243
-293
-478
-
61
123
127
7,106
4,243
2,863
2,494
2,304
2,308
2,362
823
773
-571
202
-136
-425
-168
-
-
290
6,635
3,697
2,938
2,519
1,694
2,422
1,867
894
649
-432
217
-191
-383
-51
Financial key figures
(EURm)
Financial ratios
Profit share
EBIT margin
Leverage
Interest cover
Equity ratio
Inflow of raw milk (mkg)
Inflow from owners in Denmark
Inflow from owners in the UK
Inflow from owners in Sweden
Inflow from owners in Germany
Inflow from owners in Netherlands, Belgium and
Luxembourg
Inflow from others
Total inflow of raw milk
Number of owners
Owners in Sweden
Owners in Denmark
Owners in Germany
Owners in the UK
Owners in Netherlands, Belgium and Luxem-
bourg
Total number of owners
Environmental, social and governance
Progress towards 2030 CO₂e reduction (scope 1
and 2) market-based
CO₂e scope 3 from owner milk (kg)
CO₂e scope 3 per kg of milk and whey (kg)
Progress towards 2030 CO₂e reduction target
(scope 3 per kg milk and whey)
Average number of full-time employees
Gender diversity board
2022
2021
2020
2019
2018
2.8%
3.8%
3.0
19.6
35%
4,945
3,305
1,822
1,663
759
961
13,455
2,108
2,105
1,429
2,053
797
8,492
-29%
1.12
1.18
-9%
20,907
25%
3.0%
4.2%
2.6
23.7
37%
4,952
3,306
1,838
1,681
741
1,128
13,646
2,236
2,274
1,497
2,127
822
8,956
-25%
1.15
1.20
-7%
20,617
13%
3.2%
4.3%
2.7
16.8
35%
5,011
3,303
1,844
1,731
749
1,231
13,869
2,374
2,357
1,576
2,241
858
9,406
-24%
1.15
1.21
-7%
20,020
13%
3.0%
3.9%
2.8
12.0
34%
4,988
3,261
1,806
1,717
731
1,323
13,826
2,497
2,436
1,731
2,190
905
9,759
-12%
1.15
1.21
-7%
19,174
13%
2.8%
3.9%
2.4
14.9
37%
4,986
3,227
1,844
1,779
732
1,457
14,025
2,630
2,593
1,841
2,289
966
10,319
-4%
1.14
1.20
-7%
19,190
12%
We introduced a sustainability incentive
to our farmer owners to help fund and
motivate actions required to hit the
2030 emission reduction target on
farm. We earmarked up to 3 EUR-cent
per kg of milk for present and future
sustainability activities in addition to
the existing 1 EUR-cent for submitting
Climate Check data. Based on our cur-
rent milk volume, this corresponds to
EUR 500 million annually. The model is
a point-based system, in which the
farmers can collect points based on
their activities on the model’s 19 differ-
ent levers.
In an exceptionally difficult year for
dairy farming, we managed to increase
the milk price paid for our farmer own-
ers for 10 months in 2022. The average
prepaid milk price was 52.0 EUR-
cent/kg of milk in 2022 compared to
37.0 EURcent/ kg in 2021. Our perfor-
mance price, which measures the value
we add to our owners’ milk, increased
to 55.1. EUR-cent/kg of milk compared
to 39.7 EUR-cent/kg in 2021. The un-
precedented increases were primarily
driven by price increases both in com-
modities and branded products. In the
mean-time, production costs on farms
also significantly increased, putting our
farmers’ margins under pressure.
52.0
EUR-cent/kg
Average prepaid milk price
In January, Arla presented an ambitious
target of using 100 per cent green elec-
tricity in Europe by the end of 2025. By
September, we secured to reach this
target in Denmark with, amongst other
things, a 10-year power purchase
agreement signed. Over the course of
the 10-year agreement, the green en-
ergy from the turbines will provide an
annual saving of 58,000 tonnes of
CO2e, which corresponds to 8 per cent
of our total CO2e footprint for scope
1+2.
In 2022, we officially inaugurated a new
production plant at Pronsfeld dairy in
Germany. The expansion is our biggest
dairy investment to date and a key
driver to meet the growing internation-
al demand for sustainable, affordable
and nutritious dairy products.
Arla invested EUR 190 million in the
expansion of the Pronsfeld dairy to in-
crease the production of primarily milk
powder. The expansion will support the
expected annual branded volume
growth in Arla’s international business,
in line with our five-year strategy called
Future26.
In the past few
years, we have
accelerated our
sustainability
action to reach
our target of
30%1
scope 3
CO2e emissions
reduction by
2030. In 2022, we
started to see the
results as we
managed to
lower scope 3
emissions by
2 percentage
points in the year
and in total 9%
compared to our
2015 baseline.
Read more on page 15.
Read more on page 35.
Read more on page 41.
Read more on page 16.
1 Per kg of milk and whey
Natural, high in protein and low in
sugar and fat, Arla Protein is a success
story in 2022. Arla Protein have not
targeted the professional or hardcore
gym goers but all consumers living an
active lifestyle and championing all
shapes, sizes and backgrounds. By
focusing on the fuelling power of pro-
tein alongside delicious products,
such as milk-based beverages and
puddings, Arla Protein has resonated
with consumers and delivered 48.9
per cent volume growth in 2022.
Farmers and cows
We have 8,492 farmer owners, who are
responsible for over 1.5 million cows,
and who are thriving to produce dairy in
a sustainable way while protecting the
welfare of the cows and nature around
them. Our farmers are now also finan-
cially incentivised to reduce their
climate footprint.
Read more on page 35.
Protecting Nature
Regenerative Agriculture
Nutrients for Society
Renewable Energy
Innovation
Milk collection
We collect around 13.5 billion kg of raw
milk each year, mainly from our owners
in seven countries. We add value to our
owners’ milk through innovation, brand-
ing and marketing. The profit is shared
among the owners though the milk
payment.
Production & Packaging
We process milk at our 60 sites. We pro-
duce 6.8 billion kg of nutritious dairy
products each year. Our production and
packaging sites also create jobs across
several countries in the world. We pro-
vide our workers with safe working con-
ditions and fair pay. Our sites reduced
their emissions each year since 2015,
and our branded packaging is 93 per
cent designed for recycling.
Read more on page 43.
Customers
We sell our products in 144 countries to
hundreds of different customers, mostly
supermarket chains. Good cooperation
and working towards the common goal
of providing excellent service to the
consumers while lowering the environ-
mental footprint of shopping is key to
our success.
Consumers
We provide nutrition for millions of
people. Our health strategy focuses on
healthy innovations, inspiring good food
habits and improving access to afforda-
ble nutrition for low-income consumers.
Creating the future of dairy
Dairy is at a defining moment. Globally,
the demand for dairy is increasing, but
it’s also changing. Food choices are be-
ing shaped by the desire for sustainabil-
ity, while there also needs to be a step
change to halt poor diets and malnutri-
tion. Our food system requires re-think-
ing and with our Future26 strategy we
aim to secure our place as part of the
solution.
2026 Our new strategy aims at provid-
ing answers on how to ensure a healthy,
sustainable growth for our business. In
the first year of our Future26 strategy
we made good progress on our aims.
Significant steps on our sustainability
journey included accelerating our transi-
tion to green electricity in our European
production sites and the development
of our Sustainability Incentive Model. On
value creation, we delivered strong per-
formance in a number of our priority
growth markets, as well as in our food
service and ingredients businesses (AFI).
Branded volumes, however, were im-
pacted, particularly in Europe, by the
severity of the cost-of-living crisis.
2030 Together with our 8,492 farmer
owners, we committed ourselves to
contribute to the Paris agreement’s tar-
get of limiting global warming to 1.5°C.
Our 2030 emission reduction targets
are approved by the Science Based
Target initiative as aligned with climate
science. Read more on page 34.
2050 Our ambition is becoming
carbon net zero across our value chain.
Peer group index
We aspire to have a
competitive milk price
compared to our peers.
CO₂e reduction
We commit to the 1.5°C
ambition and to becoming
the most ambitious global
dairy cooperative.
Branded
volume growth
We aim to create brands and
products that bring value to
our consumers’ life through
health and nutrition.
We fund our future by
having an end-to-end focus
on becoming both more
efficient and more effective
in the way we work.
Efficiencies
Investments
Future26 steps up investments
to support owners & value creation.
Despite price increases, our sub-brand
Arla® Protein experienced exceptional
volume growth of 48.9 per cent in 2022.
55.1
13.8
-3.2%
55.1
13.8
36.4
36.3
36.5
39.7
10.4
10.5
10.6
11.2
CFO of Arla
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
7.7%
5.1%
4.5%
3.1%
2018
2019
2020
2021
2022
-3.2%
nflation and volatility throughout
the dairy supply chain dominated
2022. Stagnating global milk sup-
ply coupled with steady demand
drove prices to record heights. The
war in Ukraine accelerated the inflation-
ary pressures from the second quarter
and added significant volatility and un-
certainty to the markets, fuelling further
cost increases both on farm, in produc-
tion and in logistics. In the meantime,
consumer habits returned to the pre-
pandemic normal, with less in-home
consumption, suppressing our branded
volumes in retail, but accelerating
branded volume growth in food service.
We navigated the challenges with firm
execution and agile adaptation to
changing market realities. As a result,
our average pre-paid milk price
increased by 40.5 per cent compared to
2021, from 37.0 EUR-cent/kg to 52.0
EUR-cent/kg – much needed support
for our farmers in times of soaring feed,
fertiliser and energy costs. Our revenue
reached EUR 13.8 billion, up from
EUR 11.2 billion in 2021. The increase
was primarily driven by prices.
In 2022, earnings were driven by un-
precedented high margins on commod-
ity products which, together with high
production costs, put retail and food ser-
vice margins under pressure.
In 2022, certain negative economic and
societal changes started that will deter-
mine the development of our industry in
the coming years. Economic slowdown,
and especially decreased purchasing
power could negatively impact category
growth in retail
and also commodity prices. Therefore,
we expect 2023 and 2024 to be difficult
years yet again.We are confident that
the direction we set out in our Future26
strategy is the right one for us, and we
are pursuing our strategic aspirations
with all our efforts. Nevertheless, to
ensure the success of our strategy we
need to be able to adapt flexibly to
external trends. Therefore, we read-
justed our strategic expectations regard-
ing the pace of our branded volume
growth and efficiencies; however, we
expect the growth pace to pick back
up again from 2024. Read more on
page 25.
4%
2%
2015
2021
2022
2030
2015
2021
2022
2030
The slowly materialising effects of infla-
tion in the retail market were coupled
with the normalisation of consumption
in Europe after Covid-19, leading to a
year-on-year decline of around 4-5 per
cent in dairy consumption in retail. But-
ter and spreadables, which were in high
demand during the home-cooking trend
of the Covid-19 pandemic, were hit
hardest and declined by 7.0 per cent
compared to 2021.
On the flip side, the food service seg-
ment bounced back as consumers once
again started to spend on eating out. As
a result, consumption approximated
pre-pandemic levels in 2022, with a
slight slowdown in the last quarter.
%
2
9
.
Average inflation
in the euro zone
2021: 5.0%
Source: Eurostat
sufficient to keep production going. The
increase in food and agricultural product
prices was only somewhat slowed by the
opening of the safe grain corridor in the
Black Sea, and the record high yields
over the summer.
Production costs at European dairy
sites were also affected by inflation and
shortages, driving up prices for packag-
ing and ingredients, but especially
energy (on average natural gas prices
increased by 143 per cent compared
to 2021).
Economic slowdown on
the horizon
To slow down inflation, central banks
across the globe raised interest rates
during 2022. These developments led
to a slowdown of economic activity, ac-
celerating towards the end of the year.
Consequently, household purchasing
power declined in economies globally.
Global GDP growth contracted from
6.0 per cent in 2021 to 3.4 per cent
in 2022.
Inflation impacted demand
for premium food products
Inflation hit consumers with a lag com-
pared to businesses directly exposed to
the effect of inflation, therefore in the
first three quarters of 2022 grocery
shopping budgets did not shrink signifi-
cantly. However, more price-sensitive
buyers started to change their shopping
habits, and traded down to cheaper
products from the second half of the
year. This trend accelerated towards the
end of the year.
Several trends and factors
exacerbated inflation
The war in Ukraine, rising energy and
food prices, supply-demand imbalances
on the back of Covid-19 resulted in the
highest inflation rates in decades. Covid-
19 restrictions were lifted in most of the
world; however, the Chinese economy
still suffered under the country's strict
"zero-Covid" policy, which was lifted in
early 2023.
Europe, where inflation was mostly
driven by challenged supply chains and
high energy prices due to the war in
Ukraine, was hit hardest by raising
prices. On markets outside Europe, infla-
tion was more driven by the still rising
demand on the back of the economic
rebound after Covid-19, and supply
struggling to cover this increased de-
mand. The effect of these trends on
prices was less dramatic.
Europe was hit hardest
by inflation
In Europe, as the war was causing tragic
suffering and destruction in Ukraine, it
also had grave economic reverberations
across the whole region. The EU is
among the economies most exposed to
the war due to its geographical
proximity to Ukraine and heavy reliance
on imports of fossil fuels from Russia
and Ukrainian agricultural products.
Sanctions to halt Russian aggression
caused a sharp rise in energy prices,
which exacerbated inflation, already on
an upward trend due to heightened eco-
nomic activity after Covid-19 restrictions
were lifted.
Inflation in the euro zone increased by
9.2 per cent in 2022. However, the in-
crease started to slow down towards the
end of the year, as a result of energy
markets calming down when gas re-
serves across Europe proved to be
Stagnating supply drove up
dairy commodity prices
While demand for dairy products in gen-
eral remained firm globally throughout
most of 2022, major dairy producing re-
gions across Europe, Oceania and South
America were struggling with high input
costs, poor weather and margin ero-
sions, resulting in stagnating milk sup-
ply.
As supply did not grow as expected com-
pared to 2021, commodity prices
steeply increased during the first half of
2022, the trend slowly turning back dur-
ing the second half, as demand subdued
and we saw the first signs of production
uplift. In Europe, gouda prices increased
by 47.2 per cent and SMP prices in-
creased by 37.5 per cent compared to
2021.
Significantly increased farm
and production costs
All key milk production inputs – feed,
fertilizer, fuel and energy – saw record
high prices in 2022, putting pressure on
farmers' margins. Prices peaked during
the third quarter and began to fall
slightly as Russia granted safe passage
to agricultural products from Ukraine
through the Black Sea. However, uncer-
tainty around access to agricultural
products and the risk of energy short-
ages or further price increases remained
high.
Dairy farmers across the globe are also
facing growing uncertainty about poten-
tial climate-related regulations targeting
emissions from agricultural activities.
Many farmers, especially in Europe, have
proactively already begun their sustaina-
ble transformation, which further adds
to the growing cost base on farms, as
sustainability initiatives, although creat-
ing financial efficiencies in the long run,
come with investment costs.
Farmgate milk prices
compensated for higher costs
Driven by the supply and demand imbal-
ance in dairy, farmgate milk prices in-
creased significantly across all major
dairy producing regions during 2022.
In the EU-27, average farmgate milk
prices gained 40.2 per cent compared
to 2021. Higher milk prices helped to
offset cost increases for farmers, and led
to a slow uplift in milk supply towards
the end of the year.
From an Arla point of view, total milk de-
creased, from 13.6 to 13.5 billion kg.
The decrease came from both owner
and contract milk. The largest decrease,
14.8 per cent, was seen in non-owner
milk volumes, driven by declining intake
in the UK and the Netherlands. From our
owner countries, milk volumes declined
the most in Germany, by 1.1 per cent,
and in Sweden, by 0.8 per cent.
Natural gas and electricity prices
EUR per MWh
Commodity prices
(EUR-cent/kg, Milk Utilisation Equivalent)
400
300
200
100
-
70
60
50
40
30
20
2019
2020
2021
2022
2018
2019
2020
2021
2022
Electricity
Natural Gas
Gouda
SMP
Source: Nord Pool Group
Source: GDT
Significant milk price increase
driven by commodity prices and
firm business execution
Arla's average pre-paid milk price in-
creased to 52.0 EUR-cent/kg in 2022
compared to 37.0 EUR-cent/kg last
year, which constitutes a 40.5 per cent
increase. Our average performance
price, which measures the value Arla
adds to each kg of our owner's milk, was
55.1 EUR-cent/kg, a 38.8 per cent in-
crease compared to 2021 (from 39.7
EUR-cent/kg).
These unprecedented increases were
mainly driven by the commodity price
rallies and firm execution of price
increases across channels to regain
margins.
Average pre-paid milk price for our owners
EUR-cent/kg milk
Strategic branded volume-driven revenue growth, indexed to 2018
(Per cent)
2022
2021
5.1%
7.7%
4.5%
-3.2%
42.1
32.8
59.8
40.1
105
100
118
115
113
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2018
2019
2020
2021
2022
Price increases were necessary to com-
pensate our farmer owners for their
soaring production costs and ensure
that they can invest in a sustainable
transformation.
Our operational costs excluding raw milk
also increased, from EUR 5,599 million
in 2021 to EUR 6,175 million, driven by
inflation in energy prices, ingredients
and packaging.
Our transformation and efficiency pro-
gramme, Fund our Future, also contrib-
uted to the performance price, with EUR
101 million net savings.
Revenue growth driven by
prices
During 2022, revenue increased by 23
per cent to EUR 13.8 billion compared
to EUR 11.2 billion in 2021, with much
of the increase occurring in the second
half of the year. Revenue growth was al-
most exclusively driven by increased
prices. Low supply and steady demand
drove up commodity prices, while retail
price increases were driven by inflation
and increased production costs.
Prices contributed positively to the reve-
nue increase by EUR 2,713 million.
Slightly decreasing branded volumes
impacted revenue negatively by EUR
281 million, while the effect from cur-
rencies contributed positively by EUR
159 million.
Market conditions put pressure
on retail margins
In the past few years of nearly constant
crisis management, Arla showed that
our diverse and balanced portfolio
makes us ready to navigate a volatile
market. Whereas during the Covid-19
pandemic consumption of branded
products increased significantly fuelling
our branded volume growth, in the cur-
rent market situation dairy commodity
markets are putting pressure on retail
margins and sales volumes due to
higher retail prices. This was mainly
driven by the increased costs related to
milk, and general global inflation raising
the cost of energy, ingredients and
packaging.
Our branded volumes sold through retail
also came under pressure during 2022,
declining by 3.2 per cent (see details on
page 17). Retail volumes declined by 7.4
per cent, while branded retail revenue
increased by 11.4 per cent.
2022 was a challenging year for grocery
e-commerce across Europe; however,
we managed to grow revenue by 1.5 per
cent in line with expectations. In the
meantime, volumes sold through
e-commerce declined, driven by shop-
pers buying less and some penetration
losses.
Our food service channel
bounced back after Covid-19
After more than two years of the Covid-
19 pandemic restricting access to res-
taurants and cafes, our food service
business was thriving again in the re-
opened eating-out scene. We captured
business opportunities in a rising market
through strong delivery, key account
management and agility. Our food ser-
vice business delivered 9.2 per cent
branded volume growth compared to
8.0 per cent in 2021. Revenue grew by
31.5 per cent.
Fund our Future savings
on target
The volatility of the external environ-
ment, especially the swings in raw milk
availability put pressure on our
Financial leverage development
Target range: 2.8-3.4
transformation and efficiency pro-
gramme, Fund our Future. However, we
reached the expected net savings of
EUR 101 million, primarily delivered by
overperformance in commercial effi-
ciencies and international supply chain
productivity, and a lower marketing
spend.
assessment to find out how to prioritise
and execute some quick wins in 2022,
such as insulating pipes, replacing and
upgrading pumps and replacing light
bulbs with LED lamps. These initiatives
saved both CO2,e and contributed to
more efficient energy usage. Read more
on page 41.
Emission reductions on track
Our emission reduction programmes
delivered the expected reductions
in 2022.
Our scope 1 and 2 emissions lowered by
4 percentage points in 2022, and in
total by 29 per cent compared to our
2015 baseline. Our site sustainability
programme offered our 60 sites and
logistics centres a supplier-driven
agreements ensure that we reach our
goal of running our production exclu-
sively on green energy in Europe
from 2025.
Divestment of our Russian
business
Due to Russia's invasion of Ukraine in
February 2022 we decided to divest our
Russian business, and sold it to local
management who will continue to run
the business completely unrelated from
Arla. We also fully stopped exporting
products to Russia.
As exports were already much reduced
to Russia since the 2014 embargo, our
Russian business contributed EUR 56
million, or 0.5 per cent, to our revenue
in 2021. The divestment process led to
a net loss of EUR 19 million recognised
within other operating costs.
million last year. The income of EUR 156
million consisted of positive value ad-
justments of hedge instruments
amounting to EUR 225 million, partly
offset by negative value adjustments on
net assets measured in foreign curren-
cies (translation effect) amounting to
EUR 48 million. The increased value of
our hedge instruments, which secure
our future interest and energy costs at a
certain level, was due to significant in-
creases in the general interest level and
in the market cost for energy.
pension liabilities landed at the same
level as last year.
Cash flow challenged due
to high net working capital
Net working capital increased from
EUR 810 million last year to EUR 1,442
million, representing an increase of 78
per cent primarily due to higher milk
prices for our farmer owners and in-
creased costs especially within produc-
tion (packaging, ingredients, energy),
largely driven by inflation.
Robust financial position
In 2022, Arla stood strong and we kept
our robust financial position in a volatile
market. Our leverage landed at 3.0. Alt-
hough higher than last year (2.6), it is
still comfortably within our target range
of 2.8-3.4. This was primarily due to a
higher level of net interest-bearing debt
driven by increased funds tied up in net
working capital, while EBITDA was on the
same level.
The increased interest rate level re-
sulted in a higher value of interest swap
instruments. It also led to lower calcu-
lated headroom for performed goodwill
impairment tests. With lower headroom,
our goodwill positions were carefully
monitored and supporting business
cases assessed throughout 2022 not
leading to any impairment. Finally, the
increased interest rate led to lower pre-
sent value of gross pension liabilities. As
the majority of our pension liabilities are
hedged by corresponding pensions as-
sets with similar risk profiles, our net
This increase affected both our operat-
ing cash flow and our net interest-bear-
ing debt negatively. Cash flow from op-
erating activities decreased to EUR 184
million compared to EUR 780 million in
2021. Correspondingly, our net interest-
bearing debt increased to EUR 2,986
million compared to EUR 2,466 million
in 2021.
Our biggest recent investment
projects were finalised
In 2022, some of our main CAPEX in-
vestment projects from the past years,
such as the powder tower in Pronsfeld,
Germany, investments in the production
facilities in Bahrain and expansion of the
mozzarella production in Denmark were
finalised or came close to finalisation.
Cash flow from investing activities
amounted to EUR 443 million compared
to EUR 482 million in 2021.
We also entered significant agreements
supporting our green transition. We
signed several power purchase agree-
ments in our core markets. These
Our scope 3 emissions were reduced by
2 percentage points per kg of milk and
whey, and in total by 9 per cent com-
pared to our 2015 baseline. The reduc-
tion is a result of our farmers consist-
ently accelerating sustainability actions
on farm. Read more about how our
farmers reduce their emissions on page
36. In 2022, we made a bold step to en-
courage even more tangible action on
farm when we announced our Sustaina-
bility Incentive Model, which rewards
farmers for their sustainability actions
across 19 levers with up to 3 EUR-cent/
kg of milk. Read more on page 35.
Net profit within target range
In 2022, Arla achieved a net profit1 of
EUR 382 million, or 2.8 per cent of reve-
nue, which is at the bottom end of our
target range of 2.8-3.2 per cent. Profit
was driven by unprecedented high mar-
gins on commodity products, which, to-
gether with high production costs, put
retail and food service margins under
pressure.
Other comprehensive income
impacted by interest rates and
energy prices
Other comprehensive income was
EUR 156 million compared to EUR 171
2.8
2.7
2.6
2.4
3.0
2018
2019
2020
2021
2022
1 Excluding non-controlling interests' share of profit
Strategic branded volume-
driven revenue growth
-3.2%
2021: 4.5%
Strategic branded net
revenue growth
14.2%
2021: 5.7%
2022: -4.3%
2021: 4.4%
2022: -7.6%
2021: 0.5%
2022: -6.9%
2021: 6.1%
2022: 4.7%
2021: 2.7%
2022: 12.4%
2021: 33.8%
2022: 10.2%
2021: 7.8%
2022: 16.0%
2021: 2.9%
2022: 24.6%
2021: 11.7%
2022: 31.8%
2021: -5.0%
almost at 2021 volumes, with a slight
decline of 0.8 per cent, despite market
developments.
Lurpak®
Lurpak® experienced a volume decline
of 7.6 per cent compared to 2021, but
volumes sold were still higher than be-
fore Covid-19, successfully managing to
keep consumer interest that peaked
during the pandemic. The volume de-
cline was driven by price increases, and
an overall category decline. Revenue
grew by 16 per cent to EUR 750 million
from EUR 646 million in 2021. Perfor-
mance was most heavily impacted by
external market trends in the UK, where
Lurpak® still kept its leading position in
our branded business, but due to in-
creased prices, consumers started to
trade down to private label products.
Lurpak®'s position also strengthened in
the Netherlands, with 21.2 per cent vol-
ume growth in 2022. Lurpak® also deliv-
ered strong branded volume growth in
our international markets, most notably
in MENA and Rest of the world, by 3.6
and 9.0 per cent, respectively.
ollowing two years of exceptional
strategic branded volume growth in
retail during the Covid-19 pandemic, our
volumes declined by 3.2 per cent in
2022. The key reason for the decline is
the irregular pace of development in the
past two years, price increases and gen-
eral inflation. Even in the current diffi-
cult market, where dairy categories de-
clined in general, our brands showed
their power to generate value. Our
branded revenue increased by 14.2 per
cent to EUR 6,294 million in 2022.
Arla® brand
The Arla® brand, our umbrella brand
with various successful sub-brands cov-
ering multiple categories such as milk,
yoghurt, cream, powder and cheese was
generally challenged in 2022. Consum-
ers reacted to higher retail prices by
buying less and trading down; however,
after the Covid-19 lockdowns were
lifted, they started to eat out more, lift-
ing our food service volumes. Branded
volumes declined by 4.3 per cent com-
pared to 2021; however, we retained
our value market share in our core mar-
kets. Revenue increased by 10.2 per
cent to EUR 3,702 million from EUR
3,359 million in 2021. Some of our sub-
brands experienced exceptional volume
growth despite price increases. Arla®
Protein grew volumes by 48.9 per cent,
and our food service brand, Arla® Pro, by
20.4 per cent. From a market perspec-
tive, the Netherlands performed well,
%
3
1
1
.
Starbucks™
volume growth
in the UK
2021: 33.6%
In the difficult market of 2022, our
Starbucks™ ready-to-go coffee drinks
managed to grow volumes on virtually all
markets, and in total by 12.4 per cent.
Castello®
Our speciality cheese brand, Castello,
lost 6.9 per cent in volumes compared
to 2021, driven by consumers trading
down to cheaper products and in gen-
eral buying less cheese due to inflation-
driven price increases. This also resulted
in our market share being under pres-
sure. However, due to the heavy price in-
creases, revenue improved by 24.4 per
cent to EUR 239 million from EUR 192
million in 2021. To counter the trend of
consumers dropping out of the category
as they shop for fewer ingredients and
simpler meals as a means of saving
money, we worked in 2022 on a new
creative toolkit to position Castello as an
affordable delight.
Puck®
Puck®, our leading brand in MENA, over-
all grew volumes at 4.7 per cent, ahead
of the 2021 growth of 3.2 per cent.
Puck® managed to keep its leading posi-
tion as the number one spreadable
cheese brand in the region during 2022,
and gained further market share. Reve-
nue grew by 31.8 per cent to EUR 504
million, from EUR 383 million in 2021.
Performance was largely driven by our
core products in the region, Puck
processed cream cheese jars, which
grew volume-driven revenue at 6.7 per
cent. Puck shredded cheese also in-
creased volume-driven revenue by 13.3
per cent, mostly due to the economic
market recovery in Lebanon, a key mar-
ket for shredded cheese.
Starbucks™
Our StarbucksTM ready-to-drink (RTD)
coffee assortment, available in more
than 50 countries in the EMEA region,
delivered 12.4 per cent volume growth
in 2022, despite price increases across
the portfolio. All markets have contrib-
uted to the strong growth momentum
with the largest absolute contribution
coming from our biggest StarbucksTM
RTD market, the UK, growing 11.3 per
cent in volume and the highest percent-
age growth coming from the Nether-
lands with a volume growth of 30.4 per
cent. The majority of this volume growth
was driven by an increasing rate of sale
in our portfolio in existing markets. On
top of growing existing markets, we
have opened several new markets, most
notably South Africa. The most im-
portant innovation of the year was the
launch of StarbucksTM Multiserve – a
0.75 litre chilled coffee in a reclosable
carton – successfully opening the
StarbucksTM brand to in-home usage
occasions.
Strategic branded volume-driven
revenue growth
-4.2%
2021: 2.3%
Revenue, EURm
7,771
2021: 6,621
Revenue growth
17.4%
2021: 3.2%
Share of total Arla revenue
56%
2021: 59%
Despite the challenges, our
Netherlands/France/Belgium cluster
achieved 1.3 percent branded growth.
StarbucksTM delivered growth of 12.5
per cent, Arla® Protein grew by 48.9 per-
cent and our food service segment grew
by 9.2 per cent.
istorically high inflation led to signif-
icant price increases across our
Europe segment. Revenue increased by
17.4 per cent to EUR 7,771 million com-
pared to EUR 6,621 million in 2021.
Branded volumes declined by 4.2 per
cent as consumers traded down to
cheaper options. Some product catego-
ries and brands saw significant volume
decreases in line with general market
category decline. Such an example is
Lurpak® and the whole butter and
spreadable category, where volumes
declined by 12.3 per cent.
Arla Pro Slower Melt Soft Serve Mix is
one of our many popular food service
products. Arla Pro delivered 20.5 per
cent volume growth in 2022.
UK
Sweden
Denmark
Germany
The Netherlands, Belgium and
France
Finland
Strategic branded volume-driven
revenue growth 2022
Strategic branded volume-driven
revenue growth 2022
Strategic branded volume-driven
revenue growth 2022
Strategic branded volume-driven
revenue growth 2022
Strategic branded volume-driven
revenue growth 2022
Strategic branded volume-driven
revenue growth 2022
-7.3%
2021: 3.8%
-3.9%
2021: 0.8%
-1.1%
2021: 2.2%
-7.7%
2021: 1.7%
Revenue growth
Revenue growth
Revenue growth
Revenue growth
18.3%
2021: 6.1%
11.4%
2021: 5.1%
20.3%
2021: 0.6%
20.9%
2021: -3.2%
1.3%
2021: 8.4%
Revenue growth
23.1%
2021: 7.1%
-1.8%
2021: 0.2%
Revenue growth
9.7%
2021: -1.9%
Similar to other markets, the UK experi-
enced sustained exceptional inflationary
pressure throughout 2022. Revenue
grew by 18.3 per cent to EUR 2,989 mil-
lion compared to EUR 2,526 million in
2021, driven largely by necessary price
increases. At the same time, volumes in
our branded business declined by 7.3
per cent, as shoppers adjusted their con-
sumption behaviours in the face of un-
precedented inflation. Our butter brand
Lurpak®, a key product in the UK, was
hit especially hard by this trend, and
reduced volumes at 15.5 per cent. Chal-
lenged growth in retail branded volumes
was partially offset by continued positive
momentum in our food service channel,
which achieved 12 per cent branded
volume growth.
2022 was a year characterised by
steeply increasing dairy commodity
prices, price increases towards consum-
ers and a declining SEK. As a result, Arla
Sweden grew revenue by 11.4 per cent
to EUR 1,594 million from EUR 1,431
million in 2021, slightly negatively af-
fected by the weakening SEK. However,
volumes and market share declined, par-
ticularly in the milk and organic seg-
ments, as consumer behaviour re-
sponded to the pressure on household
budgets. Branded volumes declined by
3.9 per cent; however, StarbucksTM deliv-
ered growth of 3.8 per cent.
In Denmark, revenue grew by 20.3 per
cent to EUR 1,208 million from EUR
1,004 million in 2021, driven by price
increases. Price increases, however,
impacted branded volumes negatively,
as consumers preferred lower priced
products. Thus, volumes declined by 1.1
per cent. Despite this, our brands per-
formed relatively strong with market
share roughly on the same level as in
2021. Lurpak® did exceptionally well by
maintaining 2021 volumes with a slight
decline of 0.4 per cent, and was rated by
consumers as the most trusted food
brand.
Unprecedented cost inflation triggered
multiple price increases across our port-
folio in Germany in 2022. Total revenue
increased by 20.9 per cent to EUR 1,198
million from EUR 991 million in 2021,
driven by price increases. Private label
revenue increased, benefitting from
milk scarcity in the first half as well as
consumer shifts towards lower priced
products. Branded volumes declined by
7.7 per cent due to consumers shifting
to cheaper offerings. However, the
strong volume growth of StarbucksTM
continued at 8.2 per cent, and our food
service business rebounded with 19.4
per cent volume growth after some diffi-
cult years during Covid-19.
Our Netherlands, Belgium and France
cluster put forward historical high price
increases in 2022, as production costs
and dairy commodity prices significantly
increased. As a result, revenue increased
to EUR 443 million from EUR 360 mil-
lion in 2021. Despite production chal-
lenges, we managed to continue to
grow our brands and gain market share.
Melkunie PROTEIN, StarbucksTM,
Lurpak® and Arla® Pro continued to
deliver impressive double-digit growth
of 49.7, 30.4, 15.0 and 15.7 per cent, re-
spectively, in revenue to EUR 443 mil-
lion, from EUR 360 million in 2021. In
2022, our retail customers again rated
us the number one supplier in the dairy
category.
2022 was another year full of disrup-
tions with inflation significantly pushing
up costs. Our revenue grew to EUR 339
million compared to EUR 309 million in
2021, driven by price increases. Our
branded volumes in our retail segment
declined by 1.8 per cent. Selected
brands did very well despite the chal-
lenging market conditions. Starbucks
and Arla Pro, for example, both grew vol-
umes in 2022 by 29.9 and 12.8 per cent,
respectively. Our food service channel
also delivered volume growth at 2.7 per
cent after a few challenging years due to
Covid-19. Again in 2022, we focused on
delivering world-class innovations
across our portfolio, such as launching a
probiotic quark range in a sustainable
fibre cup and using personalised lids
from consumers in our Luonto+ yoghurt
cup range.
ur international business grew reve-
nue by 17.2 per cent to EUR 2,463
million from EUR 2,101 in 2021. The
majority of the development is related
to price increases, which were necessary
to offset the increasing production
costs. Branded volumes were under
pressure as a result of price increases,
and the divestment of our Russian busi-
ness due to the war in Ukraine also
impacted overall volume growth nega-
tively, which landed at -1.2 per cent (or
0.9 per cent, excluding Russia).
Despite higher prices and declining de-
mand, we also achieved record branded
volume growth in our largest regions,
namely the Middle East and North Africa
(MENA), Rest of the world and South-
East Asia (SEA), where volumes grew by
4.3, 8.6 and 21.3 per cent, respectively.
Our Chinese business, however, strug-
gled in 2022, as local raw milk prices
slightly declined, whereas European
milk prices significantly increased,
resulting in reduced competitiveness for
European products in China.
Puck® is the number one spreadable
cheese brand in MENA. In 2022, Puck
delivered 4.7 per cent volume growth.
Strategic branded volume-driven
revenue growth
-1.2%
2021: 9.4%
Revenue, EURm
2,463
2021: 2,101
Revenue growth
17.2%
2021: 6.4%
Share of total Arla revenue
18%
2021: 19%
Middle East and North Africa
North America
South-East Asia
West Africa
China
Rest of the world
Strategic branded volume-driven
revenue growth 2022
Strategic branded volume-driven
revenue growth 2022
Strategic branded volume-driven
revenue growth 2022
Strategic branded volume-driven
revenue growth 2022
Strategic branded volume-driven
revenue growth 2022
Strategic branded volume-driven
revenue growth 2022
4.3%
2021: 5.2%
-0.6%
2021: 8.3%
21.3%
2021: 27.1%
-17.8%
2021: 13.3%
-44.1%
2021: 12.4%
-2.0%
2021: 8.5%
Revenue growth
Revenue growth
Revenue growth
31.3%
2021: -1.9%
20.1%
2021: 7.0%
49.4%
2021: 5.3%
Revenue growth
1.3%
2021: 16.5%
Revenue growth
Revenue growth
-44.3%
2021: 23.7%
12.0%
2021: 9.7%
Our business in MENA delivered strong
growth in 2022, with revenue increasing
to EUR 964 million from EUR 734 mil-
lion in 2021, driven by price increases.
Despite heightened prices, the MENA
region delivered branded volume
growth of 4.3 per cent. The positive
momentum in winning retail market
share continued; however, with some
categories decreasing due to pressure
on household budgets. Food service in
the region had another strong year with
significant branded volume growth of
31.7 per cent.
In North America, overall revenue in-
creased by 20.1 per cent to EUR 347
million from EUR 289 million in 2021,
driven by price increases and favourable
foreign exchange rates. Where our US
business was able to achieve minor
branded growth of 1.4 per cent, Canada
was able to maintain their strong market
positions in an environment with declin-
ing categories and consumers trading
down. Demand in the food service sec-
tor rebounded similarly to other mar-
kets; however, our business in North
America is more focused on retail, there-
fore the food service rebound did not
significantly impact our performance.
In our SEA region we also delivered
on our growth ambitions during a turbu-
lent year of inflation and currency
challenges. We grew our revenue by
49.4 per cent to EUR 269 million from
EUR 180 million in 2021 through price
increases and 21.3 per cent branded
volume growth. Arla® Dano in Bangla-
desh continued to show strong branded
growth of 18.0 per cent despite price in-
creases. The Philippines, and especially
our food service segment in the Philip-
pines, performed exceptionally well,
with branded volume growth of 41.7 per
cent. Our food service business grew
volumes by 29.9 per cent across SEA.
Our branded volumes in China declined
by 46 per cent, mainly due to increasing
European milk prices, which challenged
Arla's competitiveness in the Chinese
market. The challenge mostly impacted
our UHT and cheese businesses,
whereas the early life nutrition segment
was less impacted. Also, we successfully
took control over the ELN business,
which previously was operated by
Yashili. Total revenue declined by
44.3 per cent to EUR 131 million from
EUR 235 million in 2021. In 2022, UHT
milk continued to make up the biggest
share of our business in China.
In spite of a challenging macroeco-
nomic environment in the West African
markets with declining dairy categories,
high inflation and currency challenges,
we delivered satisfying growth through
agile price management. Revenue grew
by 1.3 percent from EUR 155 million in
2021 to EUR 157 million in 2022, driven
by price increases across markets. How-
ever, the West African markets were
challenged by a decline in consumption,
which led to a branded volume decline
of 17.8 per cent. To address the lower
disposable incomes of our consumers,
we launched a new affordable product –
Dano Sabi in Nigeria and Hye Me Ma in
Ghana. The establishment of a farm in
Kaduna state in Nigeria is progressing
well and is expected to be operational
during the first half of 2023.
We exited our Russia business and
divested our Russian subsidiary, formerly
part of the Rest of the world organisa-
tion. This in isolation reduced revenue
by EUR 30 million compared to 2021.
The remaining Rest of the world, now in-
cluding Australia, European subsidiaries
and Distributor Sales, delivered volume-
driven growth of 8.6 per cent, and total
revenue of EUR 569 million in 2022, sig-
nificantly driven by price increases. Key
drivers of the branded volume growth
were StarbucksTM, Lurpak® and Milex
early life nutrition with 24, 9 and 16 per
cent of growth, respectively. A contin-
ued focus and investments in the food
service channel delivered branded vol-
ume growth of 29.2 per cent. Despite
shoppers trading down and many cate-
gories declining due to inflation most
markets contributed to the growth.
n 2022, AFI faced a very dynamic
market environment and was subject
to record-high energy and raw material
prices. However, strong demand for our
specialised whey protein and lactose
products allowed us to protect our -
margins.
AFI's 2022 performance was driven by a
continuous effort to produce new inno-
vations and despite inflationary pressure
on raw materials and energy, our highly
specialised whey protein and lactose
products kept the strong momentum
during 2022. We continued to deliver
improvements in our underlying prod-
uct mix and our pricing followed market
developments. This resulted in revenue
growth of 29.5 per cent to EUR 1,028
million compared to EUR 794 million in
the same period last year. ‘
The value-added protein volumes grew
by 6.8 per cent to a total value-add
share of 80.4 per cent compared to
74.0 per cent in the same period last
year. The Advanced Nutrition business,
primarily producing early life nutrition
products, was challenged during 2022
following rising production costs and
strategic customers facing difficult mar-
ket conditions in China. However,
we also successfully secured
new customers during
2022 and our outlook
for the business remains
positive.
Specialised proteins produced
by AFI are also used in a vari-
ety of Arla products. Our new
Arla Protein Refresh car-
bonated soft drink contains
10 grams of protein to aid re-
covery after a workout.
Growth of the value-add segment
6.8%
2021: 14.5%
Value-add share
80.4%
2021: 74.0%
Revenue, EURm
1,028
2021: 794
Share of total Arla revenue
8%
2021: 7%
Share of milk solids sold through
Global Industry Sales
23.6%
2021 22.1%
Revenue, EURm
2,531
2021: 1,686
Revenue growth
50.1%
2021: 9.4
Share of total Arla revenue
18%
2021: 15%
The flexibility of our Global Industry
Sales (GIS) business model enabled us
to shift milk volumes throughout the
year, as the effects of inflation changed
demand between retail and commodity
markets.
European and global dairy commodity
market prices increased significantly
during the year, with an unprecedented
acceleration during the first half of the
year. The price increases were driven
globally by stagnating milk production
due to higher production costs both on
farm and in the dairies, combined with
high demand in the industrial sector.
The overall share of milk solids sold
by our Global Industry Sales rose to
23.6 per cent compared to 22.1 per
cent last year. GIS revenue increased by
50.1 per cent to EUR 2,531 million from
EUR 1,686 million in 2021 as a result of
commodity price increases. The strong
results of our Industry Sales were a key
driver behind the competitive milk price
to our farmer owners.
Our newly inaugurated
Pronsfeld powder tower
significantly increased
our capacity to serve the
growing industrial de-
mand for milk powder.
demand balance to be restored on the
dairy market over the course of 2023. As
a result, commodity prices began to
sharply decline during the fourth quarter
of 2022, and returned to 2022 January
levels.
We expect to see a continued slowdown
in branded growth due to the reduced
buying power of consumers and fear of
recession. As we see it now, our branded
volumes will decline by 3.5 to 1.5 per
cent. We, however, expect the growth
pace to pick back up again from 2024.
See how we adjusted our strategic ex-
pectations to the changing external
market on the next page.
Our revenue is expected to be in the
range of EUR 13.6-14.2 billion. The
profit share is expected to be between
2.8 and 3.2 per cent, and leverage
between 2.4 and 2.8. We expect to save
EUR 55-85 million through our effi-
ciency programme.
Our target to further reduce our emis-
sions in our production and on farm
remains unchanged.
Recession on the horizon
2023 will undoubtedly be another diffi-
cult year with the challenging global
economic environment and the ongoing
effects of the war in Ukraine continuing
to impact the energy market and supply
chains. Global GDP growth is forecasted
to be lower than in 2022 at 2.7 per cent.
Towards the end of the year, we saw a
downward turn in feed and fertilizer
prices, and as a result of easing cost
pressures on farmers a slight uptake in
milk supply. We expect the supply and
Outlook
20221
Results
2022
Outlook
2023
1 As announced in H1 2022
n the first year of our Future26 strat-
egy, we made progress on our targets
of driving value creation in the global
dairy category and being a leader in the
transition to a more sustainable produc-
tion to help address the twin challenges
of climate change and providing access
to nutrition to a rapidly growing world
population.
Significant steps on our sustainability
journey included accelerating our transi-
tion to green electricity at our European
production sites and the development
of our Sustainability Incentive Model
(see page 35).
In terms of value creation, we delivered
strong performance in a number of our
priority growth markets as well as in our
food service and ingredients businesses
(AFI), but were impacted, particularly in
Europe, by the severity of the cost of liv-
ing crisis.
The cost of living crisis, which is expect-
ed to continue to impact consumers
throughout 2023, has led to downward
revisions of two key economic indicators
on which our Future 26 strategy was
built – specifically GDP growth and
global demand for dairy. As such, we
undertook a review of our Future26
strategy, which concluded that while the
majority of Future26 remains relevant
and therefore unchanged, our branded
volume growth and yearly efficiency am-
bitions needed to be adjusted.
The economic impact is most severe in
2022 and 2023 and we expect a return
to growth conditions from 2024. Based
on these assumptions, we expect a
branded volume decline of 3.5-1.5 per
cent
for 2023 and then expect growth in the
range of 1-4 per cent from 2024-2026.
Our yearly efficiencies have been
changed from a target of EUR 100 mil-
lion annually to a range of EUR 70-100
million annually.
Our peer group index ambition of 103-
107 across Future26 and our CO2e tar-
gets for scopes 1, 2 and 3 remain un-
changed, as does our ambition to be-
come carbon net zero across our value
chain by 2050.
Stagnating demand for dairy
Forecasted yearly growth
Economic slowdown
Global GDP growth, 2020-2024
Peer group index
Scopes 1+2
Growing population
2020-2030
Growing urban population
2020-2030
Scope 3 per kg
of milk and whey
Efficiencies
Branded
volume growth
Investments
Our specialty cheese brand, Castello®, offers a wide va-
riety of exciting flavours, pineapple being one of them.
This cheese is a unique blend of pineapple and soft
cheese, which creates a sweet and tangy taste.
Climate-related risks
In 2022, we included a detailed cli-
mate-related risk assessment in our
yearly risk assessment process to un-
derstand the risks and opportunities
Arla is facing due to climate change and
what can we do to mitigate these risks.
We followed the recommendations of
the Task Force for Climate-related
Financial Disclosures (TCFD) to map out
and assess our key climate-related risks.
Read the risk details on page 32. Our
TCFD summary table is on page 143.
Risk identification, assessment
and mitigation
In 2022, we further strengthened our
risk management process by enhancing
the approach across business units,
ensuring a shared understanding and
clear roles for risk identification, assess-
ment and mitigation. Our enterprise risk
management framework, which will be
further rolled out in 2023, improved
our risk infrastructure, communication
and documentation.
Arla's risk management aims to effec-
tively identify, assess and reduce risks
and uncertainties, mitigate adverse
internal and external impacts, and
capture business opportunities to max-
imise value creation. To identify our key
risks, risk owners across the organisa-
tion constantly monitor trends that
could potentially have an impact on
Arla in the future. These emerging risks
are assessed according to a two-dimen-
sional heat map that estimates the
impact of the risk on operating
profit and the likelihood of the risk
materialising.
The most significant risks are regularly
reviewed and assessed by the Executive
Management Team (EMT) and the
Board of Directors (BoD). While the BoD
has the responsibility for maintaining
robust risk and compliance manage-
ment as well as an internal control sys-
tem, the EMT is accountable for the
risks, responsible for the effectiveness
of the risk mitigation efforts and the
identification of related opportunities.
The EMT reviews our risk map and
based on their review the top risks are
presented to the BoD. Both the EMT
and BoD take action to avoid unneces-
sary risks and mitigate others. The pro-
cess is flexible and allows for a quick as-
sessment of risks which might suddenly
arise, as we have seen with Covid-19
and the war in Ukraine.
Understand
Plan
Act
· Risk map or catalogue
· Classification of risk types (peripheral,
market-specific, company specific risks)
· Estimates of the probability of occurrence
· Assessment of risk impact
· Risk in operative planning
· Risk in strategic planning
· Risk in investment valuation
· Risk-return portfolio management
· Contingency measures
· Business continuity measures
· Communication measures
· Reporting to the EMT and BoD regularly
· Mitigating actions put in place
l
a
c
i
t
i
r
C
r
o
j
a
M
e
t
a
r
e
d
o
M
l
a
c
i
t
i
r
C
r
o
j
a
M
e
t
a
r
e
d
o
M
Possible
Likely
Very likely
Possible
Likely
Very likely
Peripheral risks
1. Climate-related regulatory changes
2. Political instability and economic turmoil
Market-specific risks
3. Transformation of consumer behaviour
4. Loss of competitiveness in branded portfolio
5. Loss of international competitiveness due to in-
creased production costs
Company-specific risks
6. Major cyber attack
7. Major product quality and safety issues
8. Currency volatility
Transitional risks
A. Regulations to reduce emissions in produc-
tion
B. Regulations to reduce emissions from agri-
cultural activities
C. Land use regulations
D. Environmental footprint and origin labelling
E. Change in dietary guidelines and trends
Physical risks
F. Extreme weather events
Risk description
Peripheral risks:
These risks are
outside of our
management's
direct control.
Market-specific
risks: These risks are
considered managed
within the strategic
and business
planning process.
Company-specific
risks: These are risks
Arla can directly
manage and
mitigate. They serve
as a starting point for
the development of
global policies and
internal control
procedures.
Transitional risks:
Risk stemming from
societal and
economic shifts
towards a low-carbon
and more climate-
friendly future.
Physical risks:
These risks relate
to the physical
consequences of
the changing climate,
such as rising
temperatures, more
frequent extreme
weather events,
floods etc.
· European governments became more
interventionist on climate and sus-
tainability regulation. Some initiatives
supported our strategy while others
created risk (see risks 1 and A, B, C).
Key changes in Arla's risk
position in 2022:
· Global political and economic instabil-
ity increased, driven by Russia's inva-
sion of Ukraine, China's Covid-19 re-
sponse and political unrest in some of
our international markets (see risk 2).
· The risk of our competitiveness de-
creasing due to looming recession
and the elevated input costs in
Europe also increased in 2022 (see
risks 4 and 5).
Climate-related
regulatory changes
Read more about climate-re-
lated risks on page 32
A number of climate-related regulations that would have an
impact on the dairy industry are being discussed both at EU
level and in individual European countries. Denmark has
proposed an emission tax on industry operations and is
committed to introducing a carbon tax on methane and ni-
trous oxide emissions from agricultural activities.
Peripheral risk
· Higher production costs on farm.
Increased
· Lower milk volumes.
· Reduced flexibility of operations.
· We are actively reducing our own, and our farmers' CO2e
emissions. In 2022, we introduced a Sustainability
Incentive Model to drive even more climate action
on farm.
· We are staying alert in our supply chain for a potential
reduction in milk intake.
Political instability and
economic turmoil
As a global company, Arla is exposed to global political and
economic instability or recession. We expect the next few
years to be difficult ones in this respect.
Peripheral risk
Increased
Transformation of
consumer behaviour
See more details in climate-re-
lated risks D and E on page 32
Constant transformation of consumer preferences is a
given in the food industry, but the fastening pace and the
volatility of these trends could significantly affect our busi-
ness.
Market-
specific risks
Stable
Loss of competitiveness
in branded portfolio
In the current high inflationary environment with an eco-
nomic recession on the horizon, consumers are expected
to choose more low-cost alternatives.
Market-
specific risks
Stable
· Economic instability and recession affect demand for
· Balancing our growth between higher and lower risk
dairy, exchange rates and commodity prices.
markets in our International segment.
· Political unrest or wars can affect the global food value
chain through, for example, a shortage of animal feed
and disruption of logistics networks. These, in turn,
could impact our milk volumes and profitability.
· Increasing the agility of our supply chain.
· If Arla's sustainable transformation does not match the
speed of changing consumer trends, we could lose
market share and sales volumes.
· Understanding and closely tracking consumer needs.
· Providing a wide range of options to consumers seeking
more sustainable meal choices.
· Ensuring consumers understand the nutritional and
health benefits of our products and brands.
· Our brands are at the core of our value generation
model. Slow development in branded revenue will
impact profitability negatively.
· Keeping our branded portfolio relevant and affordable
to our consumers through innovation and strong sales
execution.
· Price pressure on our branded product could make our
brands less competitive on the market.
Loss of international
competitiveness due to
increased production
costs
In 2022, inflation was exceptionally high globally; however,
Europe was hit harder by this trend, as it was exacerbated
by Russia's war on Ukraine.
Market-
specific risks
New,
increased
· On our key growth markets in International we are in
many instances competing with dairy companies based
outside of Europe. These companies have a competitive
edge over Arla if the current level of input costs is
maintained.
· Maintaining a cost-efficient supply chain by evolving to
be less dependent on our European sites by exploring
possibilities in production and sourcing on our interna-
tional markets where we have strategic commercial
interests.
Risk category
Year-on-year movement
Year-on-year movement: We assess the year-on-year movement of each risk by evaluating shifts in the likelihood of
their occurrence and their potential impact. The sum of these movements gives us the year-on-year position shift.
Major cyber attack
There is a growing trend in crimeware targeting manufac-
turing companies, which affects our industry as well.
Company-
specific risks
· Potential damage to our ability to manufacture, deliver
· Strengthening our processes around mitigating
and sell our products.
IT security vulnerabilities.
Major product quality and
safety issues
We have a complex and long value chain, with a large
variety of products. Ensuring that our products are safe to
consume and are appropriately labelled, and keeping our
employees safe and healthy are key to the success of Arla.
Currency volatility
As a significant part of Arla's revenue is generated in cur-
rencies other than EUR or DKK, our key financial risk relates
to the fluctuation of currencies in our global markets.
Increased
Company-
specific risks
Stable
Company-
specific risks
Stable
· Major product quality and/or food safety issues may
· We are constantly improving our quality and food safety
lead to a loss of brand reputation and reduced trust in
our products.
· Downgrade of products may lead to financial losses.
management programmes.
· Food safety and compliance with health and safety
regulations is a top priority across our supply chain.
· Currency deterioration increases sales prices in the
individual markets, affects Arla's competitiveness
and potentially impacts revenue and profit.
· Arla has owners in several countries, including the UK
and Sweden. Purchase of owner milk and operations in
countries outside the euro zone means that our perfor-
mance price measured in EUR is exposed to fluctuations
in the GBP and SEK exchange rates.
· Centralised currency exposure management.
· Reducing short-term exposure through hedging
activities.
Read more in Note 4 to the financial statements.
Risk category
Year-on-year movement
Year-on-year movement: We assess the year-on-year movement of each risk by evaluating shifts in the likelihood of
their occurrence and their potential impact. The sum of these movements gives us the year-on-year position shift.
Regulations to reduce
emissions in production
Regulations to reduce
emissions from
agricultural activities
Land use regulation
Environmental footprint
and origin product
labelling
Change in dietary
guidelines and trends
Extreme weather events
Denmark has proposed an emission tax on industry opera-
tions. Arla's operations will be impacted by this. There is the
potential for other countries to follow Denmark and intro-
duce similar taxes or employ other regulatory tools to re-
duce emissions in the future.
The Danish government has committed to introducing a
carbon tax on methane and nitrous oxide emissions from
agricultural activities. Our Danish farmer owners will be sub-
ject to this tax; however, currently the details regarding the
level and the implementation of the tax are unclear.
EU-level proposals to reduce the emissions impact from
land use includes peat soil restoration and increasing for-
estry. National initiatives to improve water and air quality
such as in the Netherlands may also reduce livestock num-
bers in our core markets.
Regulatory risk
Stable
· Increased production costs in countries with CO2e regu-
lations, for example a CO2e tax
· We are constantly lowering our CO2e emissions in our
production. Our science-based target is to lower scope
1 and 2 emissions by 63 per cent by 2030.
· We are also aiming at running our European operations
solely on green electricity by 2025.
Regulatory risk
Increased
· Our Danish farmer owners' production costs would in-
crease significantly, which could have a negative impact
on milk volumes, causing commodity sourcing issues.
· Reducing our emissions on farm is part of our business
strategy. Our target is to reduce scope 3 emissions by
30 per cent per kg of milk and whey by 2030.
Regulatory risk
Stable
· These regulations would mean less land for producing
feed for cows, which could lead to herd size and milk
volumes dropping.
· Reducing livestock numbers would also negatively af-
fect milk volumes.
· To understand the potential impact of such regulation
better and to provide our farmers with solutions, we are
aiming to measure land use, including the use of peat
soils to our Climate Checks from 2023.
Governments and the EU are increasingly looking at intro-
ducing mandatory sustainability-related labelling covering
carbon footprint, country of origin and nutrition.
Regulatory risk
Increased
· Mandatory origin labelling will increase the complexity
of our operations and reduce our efficiency, as we col-
lect milk from seven European countries.
· We are working on establishing methodologies, pro-
cesses and systems to calculate our products' environ-
mental footprint.
· Carbon and nutrition labelling that oversimplifies the
complexities of a sustainable and nutritious diet could
mistakenly drive consumers away from dairy.
National dietary guidelines could reduce the amount of
animal-based foods recommended based on concerns
about their carbon footprint, ignoring their nutritional
contribution.
Heat waves, draughts, floods and other extreme weather
events are becoming more and more common due to
climate change. New animal diseases and pests are also
a consequence of climate change that the agricultural
sector has to face.
Consumer risk
Increased
· Schools and other institutions might change their offer-
ings for kids and young adults, which can have long-
term repercussions for their dietary preferences.
· We are educating about the nutritional benefits of dairy
in schools and inspire hundreds of thousands of people
through our recipe sites and social media accounts.
Physical risk
Stable
· Extreme weather events could have an adverse effect
on crop yield and disrupt operations or the distribution
infrastructure.
· Heat waves are especially detrimental for the cows'
productivity and could affect milk volumes.
· Our core milk production countries are relatively resili-
ent to extreme weather events; however, we are,
together with our farmer owners, working on better
understanding and mitigating the impact of changing
weather conditions.
Risk category
Year-on-year movement
Year-on-year movement: We assess the year-on-year movement of each risk by evaluating shifts in the likelihood of
their occurrence and their potential impact. The sum of these movements gives us the year-on-year position. shift.
Arla is the world’s largest producer of
organic dairy. Our organic milk is produced
with a special care for animal well-being and
the environment, including free grazing for
the cows and avoiding the use of artificial
pesticides and fertilisers.
Arla set Science Based Targets for
2030, using 2015 as a baseline. Direct
greenhouse gas emissions (scope 1)
and emissions related to purchased
energy (scope 2) should be reduced
by 63 per cent in absolute terms. For
scope 3 emissions, among other
areas, we are focusing on reducing
emissions from sourcing of raw milk.
The target is to reduce the carbon
footprint from scope 3 by 30 per cent
per kg standardised milk and whey.
Read more on page 130.
For details about climate-related risks,
go to page 32.
.
By 2025, we aim to use only renewable
electricity at our production sites and
offices in Europe.
Read more on page 41.
2022
2015
2021
2022
2030
2050
2022
2015
2021
2022
2030
2021
2022
2025
Our 2025 ambition is that 100 per cent of
the packaging used for Arla’s own brands is
recyclable. Read more on page 43.
2022
2025
2030 Ambitions Our ambition is to remove the use of
virgin fossil-based plastic in packaging used for Arla’s
own brands by 2030.
Read more on page 43.
2030 Ambitions Our ambition is to cut food
waste by 50 per cent by 2030 (vs. 2015).
rla made a bold step in 2022 when
we announced our Sustainability
Incentive model which ties the milk
price farmers receive to sustainability
actions on farm. After the Sustainability
Incentive model will come into effect in
2023, farmers can earn up to 2.4 EUR-
cent per kg of milk1 for their actions
contributing to achieve our 2030 target
of reducing scope 3 CO₂e emissions by
30 per cent per kg of milk and whey, as
well as other sustainability actions such
as enhancing biodiversity.
To reward past action and motivate
further environmental improvements
on farms, our Board of Directors are
earmarking EUR 500 million2 annually to
be re-distributed to farmer owners,
based on their individual points col-
lected in the incentive model.
From the start, the model will be funded
from the raw milk value, and our aim is
that over time, our tangible
“The support from our
members, even in a time
of great uncertainty, is a
testament to our
commitment to be at the
forefront of progressive dairy
farming and set the standard
for how to push our whole
sector forward”
Jan Toft Nørgaard
Chairman of the Board
sustainability actions will raise the value
of our raw milk and bring more returns
to our owners through commercialisa-
tion. Rewarding farmer owners for taking
sustainability action will send a clear
message to customers and consumers
that a share of the price they pay for
more sustainable Arla products and con-
cepts is directed to the farmers who
take the most action.
Our farmers were heavily involved in cre-
ating the model to ensure it is fair to all
farmers, easy to understand and enables
the commercialisation of on-farm sus-
tainability activities. The model is a
point-based system in which the farmer
can collect points based on their activi-
ties on the model’s 19 different levers.
Activities with bigger improvement
potential for climate and nature will lead
to the most points – and therefore also
the biggest financial incentive. We iden-
tified these activities through our
Climate Checks. For each point that a
farmer is able to achieve, they will
receive 0.03 EUR-cent per kg of milk.
The first incentive payment will be paid
out as part of the monthly milk price for
July 2023, based on milk delivered in July
and the data submitted in the Climate
Check 2022 as well as new data and
documentation submitted by the farm-
ers. Farmers also receive a 1.0 EUR-cent
per kg of milk incentive to submit their
climate date.
For an average Arla farmer with an aver-
age annual milk production of 1.2 mil-
lion kg, it is estimated that at least
26,000 euro of their milk price is
achieved based on his or her sustainable
actions in the first full year.
The model is future-proof, as 20 of the
maximum 100 points are reserved for
future levers and new actions. When all
the points are ready to be distributed
farmers will be able to earn up to 3.0
EUR-cent per kg of milk for their climate
actions.
1Over time, the model will include even more sustainability actions, and then farmers can earn up to 3.0 EUR-cent per kg of milk for their actions. 2Based on our current milk volume, and the assumption that the farmers achieve the maximum point, plus they receive the 1.0 EUR-cent for submitting their data.
Climate checks and the Big5
Our Climate Check tool helps Arla
farmer owners identify farm greenhouse
gas emissions (CO₂e) and suggests
actions for reducing emissions further.
Climate Checks measure six key areas:
number of animals, feed composition,
crop production, use of fertiliser, ma-
nure handling, and use of electricity, fuel
and renewable energy. The farmers’ an-
swers are validated by external climate
advisors, who also support farmers to
create personalised emission reduction
plans based on their results.
In 2022, 95 per cent of Arla's active
farmer owners participated in the
Climate Checks, covering 99 per cent
of Arla's owner milk pool. The average
Arla owner produces milk with 1.12 kg
of CO₂e per kg milk.
Following the introduction of the
Climate Check tool in 2020, we have
conducted a further analysis of the first
data set. This shows that 78 per cent
of the variation in carbon footprint
between farms stems from five areas,
which we refer to as the Big 5 (see
next page).
1.12
CO2e per kg of owner milk
Strategic ambition
our science-based target is to reduce scope 3
emissions per kg of milk and whey by 30 per cent
by 2030.
Benchmarking and knowledge
sharing drive Big5 performance
In 2022, we further developed our
on-farm emission reduction actions by
introducing benchmarking and system-
atic knowledge sharing to support our
owners. An important first step to
increase awareness of how impactful
the Big5 can be is to ensure that every
farmer understands their current perfor-
mance on the five levers. Arla therefore
introduced a new benchmarking model
designed to give a clear picture of how
the farm performs compared to similar
farms as well as to indicate the potential
within reach for each of the Big5 areas.
The potential is defined by what the
best-performing farms in the bench-
mark group have been able to accom-
plish by being very efficient on the lever
in question. The benchmark groups are
created based on geographical region,
herd size and feed type.
The results of the benchmarking are dis-
cussed on knowledge building events
organised by Arla, where farmers can
talk to their peers who are achieving
very good results within one lever or the
other, and learn what can be done to im-
prove. To motivate farmer participation,
farmers can earn one point in the incen-
tive model for participating in sessions
which Arla categorised as knowledge
building events.
1. Feed efficiency
If farmers manage to maximise
the milk per feed ratio and
minimise feed waste, the milk
will be more climate efficient.
2. Protein efficiency
Carefully measuring feed with
the right protein levels means
less nitrogen, a greenhouse
gas, in the manure.
3. Animal robustness
Cows that live a long and
healthy life will produce more
milk over their lifetime which
improves climate efficiency.
4. Fertiliser use
Matching precisely the amount
of fertiliser with the plants’
needs and using different
methods to spread the muck
can improve the yield per car-
bon emission ratio.
5. Land use
Feed yield on farms can
also be optimised to
increase climate
efficiency.
Where our emissions come from
Peat soil: 9%
Feed purchased and home-grown: 33%
Manure storage : 10%
Cow's digestion of feed: 41%
Energy: 5%
Other emissions: 2%
Large-scale on-farm pilot to
reduce methane emissions
To find new, more efficient ways of
reducing emissions on farm, Arla has
a programme for pilot and innovation
farms.
In one of the pilots, Arla, together with a
global purpose-led science-based
company, Royal DSM, in 2022 started
a large-scale on-farm pilot with the
methane reducing feed additive
Bovaer®, which can potentially reduce
methane emissions from cows who
consume it by 30 per cent.
Methane emissions are one of the dairy
industry’s biggest climate challenges.
From an Arla perspective, 40 per cent of
total emissions from Arla farms are com-
ing from cows’ digestion of feed.
To tackle this problem and speed up our
emission reduction, our farmer owners
are piloting the use of the new feed ad-
ditive Bovaer® with 10,000 dairy cows
across more than 50 farms in Denmark,
Sweden and Germany.
Bovaer® works by suppressing the en-
zyme that triggers methane production
in a cow’s digestive system. It takes ef-
fect immediately and is scientifically
proven to not affect the milk quality. Just
a quarter of a teaspoon of Bovaer®
added daily to each cow’s feed will ena-
ble a consistent reduction in methane
emissions of 30 per cent, on average.
The most effective climate
actions – The Big5
The big 5 represent the most effective
climate action areas that all Arla farmers
can work with to lower their farm’s car-
bon footprint, and they also play a key
role in the sustainability incentive
model. 49 points out of the possible 80
that are available from the start come
from big 5 activities. These actions are
also excellent tools for farm manage-
ment, creating efficiencies for the farm-
ers as they progress.
Arla and partners will transfer
wind power into green fertiliser
The four large farmer-owned Danish
cooperatives Arla, DLG, Danish Agro, and
Danish Crown joined forces in 2022 and
founded a new company, Zero Emission
Fertilizer Denmark, which will investi-
gate the possibility of producing a car-
bon-neutral fertiliser in Denmark.
CO2e emissions in agriculture, as they
are mainly produced by energy from
natural gas and coal.
With a carbon-neutral fertiliser based on
green ammonia from wind turbine
power, emissions from the use of
chemical fertilisers can be reduced by
up to 30 per cent.
Today, chemical fertilisers are a
prerequisite to cultivating high enough
yields to meet the global demand for
food. However, the use of chemical
fertilisers accounts for a significant
During the next 9-12 months, the newly
established company will carry out a
series of feasibility studies, which will
form the basis for decision-making for a
possible investment in the production.
The effort to improve animal welfare is
constantly in focus. It is also critical for
Arla to continue developing and
strengthening our farming practices in
relation to protecting and improving
nature on farms, especially in the areas
of soil health, water-holding capacity
and to enhance ecosystem services.
Animal welfare in Arla
In Arla, we strongly believe that animals
should be treated well, and the welfare
of our herds is a key concern for our cus-
tomers and consumers too. We put
great efforts in ensuring that Arla cows
are well-cared for: our owners have to
submit an extensive report on their
herds’ well-being four times a year.
Animal robustness is one of the Big5 lev-
ers in our incentive model. To gain evi-
dence on how to improve on this lever,
in 2022 we launched a pilot with 19
farms, where farmers, supported by vet-
erinarians, focus on how to prevent the
most common cow diseases.
However, we know that it is not good
enough that cows live a long life. We
also want to ensure that our farmers’
cows are healthy and happy. On our UK
innovation farm, we are working on cre-
ating a ‘happiness’ measure based on
automated animal behaviour monitor-
ing. This project aims to explore and
identify positive behaviours that can be
used as further welfare indicators for
dairy cattle.
In an audit process harmonised across
all owner countries, farmers are also vis-
ited by external experts specialised in
animal welfare at least once every three
years, to have their herds checked-on.
We report the result of these audits in
our ESG section. Read more on page
135.
Biodiversity and soil
health in focus
Addressing climate change must go
hand in hand with tackling biodiversity
loss – both are crucial for our planet’s
future survival. All Arla farmers are com-
mitted to maintaining and enhancing
the nature and biodiversity on their
farms, and to engage in farming prac-
tices that enhance carbon sequestration
in the ground.
In our new Sustainability Incentive
model farmers can earn 8 points for
their actions to conserve biodiversity
and carbon farming. The levers for
carbon farming were defined based on
the fact that plants with bigger roots
increases carbon capture, therefore we
would like to encourage farmers to grow
grass and keep permanent grasslands,
as those have the most roots. As for bio-
diversity, farmers initially can collect
points for submitting their Biodiversity
and Soil Health Check data.
98.4%
No major cleanliness issues
99.8%
No major body condition issues
99.5%
No major mobility issues
100%
No injury issues
1 Share of audited farmers without major issues in animal welfare
In 2022, our scope 1 and 2 emissions
decreased 4 percentage points and
reached a total reduction of 29 per cent
compared to our 2015 baseline.
This year, we faced the short-term need
to convert to oil from natural gas due to
the war in Ukraine to ensure supply
continuity. We were very conscious of
the increased emission from this
conversion as oil is approximately 30 per
cent more polluting than natural gas
measured on CO2e.
Until the switch can be made from oil
back to gas, we will offset the increased
emissions with electricity certificates.
Our long-term plans to accelerate our
transition from fossil energy with a num-
ber of initiatives such as energy optimi-
sation, electrification, green electricity,
alternative thermal energy are still
on track.
29%
Scope 1 and 2 CO2e emission
reductions
Strategic ambition
We aim for 63 per cent reduction in scope 1
and 2 emissions by 2030 (baseline: 2015) .
Where our emissions come from
Production: 89%
Logistics: 11%
Energy and fuel efficiency
In 2022, we saw a need for accelerating
our energy efficiency plans at our sites
as energy prices skyrocketed, and we
faced big risk of energy disruptions. We
therefore launched two sustainability
programmes to help accelerate the en-
ergy reductions, build clear investment
roadmaps and start our transformation
journey.
Site sustainability programme
Our site sustainability programme was
rolled out to 6 of our biggest C02-emit-
ting sites in 2022. The sites sustainabil-
ity programme builds a tailored transfor-
mational plan for the sites and it
Collaborating with customers
to optimise routes
Route and delivery optimisation in
Denmark, Sweden and the UK brought
significant emissions savings during the
year. We proactively engaged our key
customers and logistics suppliers in all
three countries, organised workshops
with them, and as a result we decreased
delivery frequency and reduced CO2e
emissions.
One of the most successful collabora-
tions of 2022 was with one of our key
customers in the UK. For larger stores of
this customer, we directly deliver milk
from our warehouses, however smaller
shops pose a challenge, as delivering
there often requires multiple drops due
to lack of storage capacity in the shop.
Together with our customer, we came
up with the solution of delivering to
their depots instead. To make this possi-
ble, we started to box our milk bottles
instead of delivering them on trollies as
before – this way the depot could han-
dle the packages.
The initiative significantly lowered the
delivery frequency, saved CO2e, and
improved service level and availability
for the stores participating.
spans from engagement initiatives,
energy optimisation boost, external
thermal system transformation study
to energy competence mapping and
focused energy performance manage-
ment.
Site management and employees take
an active role in defining a plan, as we
believe a key enabler for success is that
everyone at the sites takes ownership of
the journey. When the programme is
finalised on a site, the site will have a
clear roadmap to reach their 2030 tar-
get including investment plans, KPI
structure and capability upskilling as
needed.
Pronsfeld in Germany is one of the sites
which completed the site sustainability
programme. They identified 55 initia-
tives yielding 35,000 tons CO2e reduc-
tion (-67%) over 7-8 years, exceeding
their 2030 target by 3,000 tons, but
now the hard work starts in implement-
ing these initiatives.
Quick wins in 2022
We also offered the assessment of
quick-win areas for our 60 sites and
logistics centres. We identified three
areas for 2022, through a supplier-lead
screening and assessment process:
· Insulating steam and hot water pipes
and valves to minimise heat loss
· Replacing and upgrading pumps to be
more energy efficient
· Replacing light bulbs with LED lamps
for more efficient lighting.
Scaling up solar power
To reach our ambitious green electricity
target we entered into a 10-year power
purchase agreement in Denmark with
Better Energy for the usage of four new
solar parks. The solar parks will cover ap-
proximately one third of Arla's electricity
consumption in Denmark by 2024. It is
the most extensive agreement on
renewable electricity without public
subsidies in Danish history. Besides
Denmark, Arla also made a significant
investment in solar power in Tychowo,
Northwestern Poland, where we have a
packaging, mixing and distributing site.
The solar panels will cover 85 per cent
of the site’s electricity demand. We also
installed solar panels on the rooftop of
our production site in Bahrain, which will
cover 20 per cent of the site’s electricity
needs.
Wind power purchase
agreement
In the fall we entered into a 10-year
power purchase agreement with
Eurowind Energy, which, combined with
the Better Energy contract, means that
we secured 100 per cent green electric-
ity for all our production in Denmark –
next step is to enter into similar setups
in other markets where we operate.
Over the course of the 10-year agree-
ment, which will come into effect in
2025, the green energy from the tur-
bines will provide an annual saving of 58
million kg of CO2e, which corresponds to
8 per cent of Arla's total CO2e footprint
for scope 1 and 2.
Piloting new technologies
with fossil free fuels
To gather a better understanding of
where we could scale up transitioning to
fossil free fuels in our logistics fleet and
production sites, we continued to test
several new technologies in 2022. We
continued our trials with biogas trucks,
which are run by biogas produced pri-
marily from cow manure. We started a
successful collaboration in Sweden with
some of our gas suppliers to ensure bio-
gas circularity, and explored how we
could scale the number of ‘poop trucks’
in the UK. Also, we extended our electric
vehicle fleet in Sweden and looked at
the potential in intermodal transporta-
tion in Germany, where we tried to use
different types of vehicles to cover one
of the key logistics routes. In production
we have engaged with suppliers in
Germany and Denmark with the aim to
pilot hydrogen in our production facili-
ties in Pronsfeld and Hoco.
Combatting food waste
with digital sensors
We continuously work on reducing our
food waste to ensure proper utilisation
of our milk, which increases the value
we add to our owners’ milk, and also
means more nutritious food for the
growing population.
In three of our UK production sites, we
saved around 3 million litres of raw milk
this year by installing real-time material
loss sensors. These enable us to meas-
ure if there is milk in the water used for
flushing and cleaning, and find patterns
which can be used to reduce or elimi-
nate the wastage of milk. The sensors
measure whether the liquid going
through the pipes is water, a mix of wa-
ter and milk or milk. Based on the meas-
urement, the liquid is s either automati-
cally discarded as waste water or col-
lected to use for, e.g., animal feed or
biogas. With this system, the amount
of milk in waste water was reduced by
10-14 per cent compared to last year.
%
0
0
1
Green electricity
In Denmark, it is fully
secured that we will
reach the electricity
target. In coming
years, we’ll focus on
other European
countries.
n Arla, we use more than 300,000
tonnes of packaging each year. Pack-
aging solutions must ensure the safety
and quality of food products, with the
lowest possible environmental footprint
while minimising food waste. We strive
to ensure that no material goes to
waste, that we keep packaging emis-
sions at a minimum and that we do not
deplete any natural resources that can-
not be renewed. We also design our
packaging so it can be sorted, collected
and recycled.
Strict legal requirements related to food
safety and hygiene make packaging
design complex. Additionally, packaging
must safeguard our products during dis-
tribution, in the store and in our home.
Packaging is also essential to securing
access to our nutritious products around
the world. We are selling our products in
more than 144 different countries with
very different collection and recycling
infrastructure, and especially in our
international markets some materials
cannot yet be recycled.
2022 progress
Designed for recycling 93%
Recyclable in market where sold 54%
Designed for recycling, but not in the
market where sold 39%
Not recyclable 7%
Towards 100% recyclability
Arla’s overall long-term ambition is to
reach full recyclability. As a first step, our
2025 target is to ensure that 100 per
cent of packaging used for Arla’s own
brands is designed for recycling.
Given these conditions, especially
related to our international markets,
we measure our packaging recyclability
progress towards two criteria:
1. Designed for recycling
This means that a packaging or a spe-
cific part of the material is recyclable in
at least one of Arla Europe’s markets.
2. Recyclable in market where sold
This means that a packaging or a spe-
cific part of the material is recyclable in
the market where the product is sold.
During 2022, we developed a thorough
methodology and tool that enables us
to measure recyclability more accu-
rately and use the data transparency to
prioritise initiatives within recyclability.
A comprehensive assessment is made
for each material to determine whether
it is recyclable in a given market, based
on commonly acknowledged references
for recyclable packaging design and re-
cycling systems in that market. Each as-
sessed product packaging unit is con-
verted into weights of different materi-
als used and multiplied by sales vol-
umes. The consolidated number is cal-
culated as the weight of sold recyclable
packaging material compared to the to-
tal weight of packaging materials used.
What is virgin fossil-based plastic?
Virgin fossil-based plastic means plastic
derived from fossilised material such as
crude oil. In order to phase this out we
use less plastic and better plastic, priori-
tising recycled plastic and renewable
material (such as paper and cardboard).
Our popular Arla Skyr Icelandic style
yoghurt brand converted 7 per cent of
its portfolio from virgin fossil-based plas-
tic to cups made with 100 per cent recy-
cled plastic. This has halved the CO2e
emissions of the packaging.
In 2022, we launched fully recyclable
packaging for a selection of our cheeses
in UK (such as Apetina white cheese and
paneer). Cheese foils are traditionally
not designed to be recycled so this is
the start of a long journey for Arla and
will continue towards 2025.
Creating recyclable packaging to reduce
littering for some of our markets has
its own challenges. An example of this
is our powdered milk sachets sold in
Bangladesh. These sachets are tradition-
ally not recyclable due to a mix of plastic
and aluminium. In 2022, we reached a
breakthrough solution on our popular
affordable nutrition product, Arla® Dano
Daily Pushti. Through a partnership with
our packaging supplier, Arla developed a
simplified sachet and established a pilot
recycling project with local collection
stations to recycle these sachets into
other uses such as plastic furniture.
Global purchasing policy
Clear and consistent procurement prac-
tices are fundamental to minimising
risks to food safety, the environment
and human rights in our supply chain.
Our policy sets out 11 principles for pur-
chasing in Arla to ensure a clear and uni-
form process when buying goods and
services. Among other procedural re-
quirements, the policy also requires
compliance with Arla Foods’ Code of
Conduct for Suppliers.
Our Code of Conduct for suppliers was
revised and further strengthened in
2022 in areas related to climate, health
and safety and labour rights. As a result,
we have now more firm requirements
towards suppliers, for example regarding
working hours and recruitment prac-
tices.
Supplier audits
During 2022, 58 physical, virtual and
desktop supplier audits were conducted.
Risk commodities
Based on our thorough risk analyses,
and in line with international practice,
we identified some commodities we use
that are linked to particular sustainability
challenges. These are palm oil, soy,
cocoa and forest fibre1. We have sourc-
ing position papers to mitigate the risks
and contribute positively to more sus-
tainable and responsible practices. This
includes reducing the risk of negative
impact on human rights and the envi-
ronment.
ur suppliers from all over the world
have a major impact on our sustain-
ability performance, and we expect
them to sign our code of conduct for
suppliers, which governs environmental,
social, business ethical and human
rights aspects. Our ways of working in
our upstream supply chain is outlined in
our Statement on Responsible Sourcing.
Cocoa
Soy
Palm oil
Forest fibre
Share of certified cocoa
Share of certified soy
Share of certified palm oil
Share of certified forest fibre in Europe
100%
2021: 100%
100%
2021: 100%
81%
2021: 86%
99%
2021: 98%
Our policy is to use 100 per cent
UTZ/Rainforest Alliance-certified cocoa
for our branded products, and we con-
tinue to comply with this goal.
Arla’s ambition is to buy only segre-
gated, certified, and traceable palm oil
ingredients. When this is not possible,
we use mass-balance or cover the use
by Round Table of Sustainable Palm Oil
(RSPO) credits.
In Arla, soy is used .as an ingredient, pri-
marily in dairy cow protein feed, and to a
smaller extent in some Arla products.
Our ambition is that all soy is responsibly
sourced, defined as certified according
to internationally recognised third party
certifications systems. In Arla, soy in ani-
mal feed must be certified according to
the ProTerra or Round Table of Respon-
sible Soy (RTRS), or covered with RTRS
credits.
Although we use recycled fibres wher-
ever possible, some packaging requires
virgin forest fibre to comply with food
safety regulations. Our ambition is to
use only FSC®-certified forest fibre
materials in Europe. Where FSC®-certi-
fied forest fibre is not available, we
accept forest fibre from national certifi-
cation schemes if a PEFC due diligence
process has proven it comes from a
reputable source.
1Vanilla is also a key flavouring ingredient in many Arla products, however, due to the low volumes used in total we do not have a
specific target related to vanilla. In 2021, we joined the Sustainable Vanilla Initiative (SVI), which aims to secure a stable supply of
high-quality vanilla that is produced in a socially, environmentally and economically sustainable way.
Arla®'s gut health range is on a mission to
make it easy and enjoyable to nourish your
gut with fermented bases that are diverse in
good bacteria cultures and added vitamins,
minerals and fibre.
A core responsibility for Arla is to ensure
that our products are safe for consumers
to eat and drink. The target for recalls is by
default defined as zero.
Read more on page 47.
4
2
1
1
ZERO PRODUCT RECALLS
2023 TARGET
0
2018
2019
2020
2021
2022
2030 ambitions Access to
adequate, affordable and healthy
food is a basic human right, and we
want to provide high-quality
products that meet consumers'
nutritional
needs around the world. Our
ambition is to reach more and
more non-European consumers
with affordable food.
Read more on page 48.
Our long-term 2026 target to increase
gender diversity is to ensure that there is
no more than 60 per cent of the same
gender in any team in Arla. We are also
aiming to achieve this in our top
management teams.
Read more on page 51.
Women
2022
%
0
6
-
0
4
Women
2022
2026
Men
Men
Our safety vision for our colleagues aims at
having zero lost-time accidents per million
working hours.
Read more on page 52.
8
6
5
4
4
ZERO ACCIDENTS
2023 TARGET
2018
2019
2020
2021
2022
boundaries and providing the growing
world population with nutritious food is
a key challenge for Arla and the food in-
dustry in general. Solving this challenge
is our licence to operate. Therefore,
stepping up our healthy innovations is a
core element of our new strategy. We
aim at reaching more people to inspire
healthy food preparation and help peo-
ple eat well. Improved access to nutri-
tion and affordable foods are also part of
our strategic ambitions.
Our guiding star – Arla®
Nutrition Criteria
When we are developing new, more sus-
tainable and healthier products, our
guiding star is the publicly available
Arla® Nutrition Criteria, a set of internal
standards that reflect current scientific
evidence and guidance from key global
health authorities. The criteria set re-
quirements for protein and calcium con-
tent and limit the amount of added sug-
ars, salt and fat. Following the criteria,
we have been making significant
Our health strategy
In 2022, we laid the groundwork for up-
dating our 2026 health strategy. Striking
a balance between protecting planetary
1
Product recall in 2022
One of Arla's core responsibilities is to ensure
that products are safe for consumers to eat and
drink. The target for recalls is by default defined
as zero.
improvements to the health value of our
products.
Food safety first
Helping people to eat a healthy diet is
important, but first and foremost we
must make sure that our products are
safe to eat and drink. By following the
principles set out in the global Arla
quality and product safety policy, we
continue to strengthen our quality cul-
ture resulting in one recall in 2022. Our
Quality, Environment, Health and Safety
(QEHS) manual is updated yearly since
its launch in 2020. Aimed at reducing
complexity and aligning ways of work-
ing, the manual covers all the QEHS
requirements included in international
standards, our internal requirements
and the requirements of several
customers.
Labelling checks on our branded prod-
ucts were performed on our European
and International markets in 2022. Both
mandatory and voluntary information
for consumers was evaluated on ran-
domly selected products. The checks
showed that with strong collaboration
between local and global teams we were
able to ensure regulatory compliance on
all markets. There were no findings at
any authority inspection that resulted in
a fine. In cases of incompliance or incon-
sistency, the markets were informed
about measures to improve.
1.8
EUR million for health research projects
Three new health nutrition research projects
received funding of EUR 1.8 million from the Arla
Food for Health partnership this year.
Research partnerships to
shape the future of nutrition
To be at the forefront of dairy nutrition
and keep discovering the health effects
of dairy, Arla takes part in a research
partnership with the two largest Danish
universities under the name Arla Foods
for Health (AFH). Three new research
projects were selected to receive financ-
ing for 2022 in the total amount of
EUR 1.8 million. The private-public part-
nership consists of Arla Foods, Arla
Foods Ingredients, University of
Copenhagen and Aarhus University.
The ambition of this partnership is to
push boundaries and foster world-class
dairy science. Subsequently results can
be applied in food design and new nutri-
tional solutions with a potentially posi-
tive impact on global nutritional status
and public health. AFH and its partners
are also committed to creating impact
by disseminating scientific insight. The
collaboration between the partners in-
cludes a targeted and coordinated
public outreach that can serve as a basis
for a science-based nutrition and health
dialogue with external stakeholders – in-
cluding authorities, NGOs, universities
and other industries.
The three projects awarded in 2022 will
investigate:
· The link between fermented dairy
products and metabolic health
· How caseins effect gut comfort in
infants
· The effect of a conventional diabetes
diet versus a carbohydrate-reduced
high-protein diet on type 2 diabetes
patients.
Of the ten current projects two were fi-
nalised during 2022. A total of 41 papers
have now been published based on sup-
ported projects.
Improving access to
healthy nutrition
Malnutrition exists in nearly every coun-
try of the world, putting people at risk of
diet-related diseases and leading to mil-
lions of deaths. Arla is committed to im-
proving access to affordable dairy nutri-
tion for lower income consumers in de-
veloping countries. We are focusing on
addressing the needs of groups experi-
encing or at high risk of undernutrition
and micronutrient deficiencies through
affordably priced dairy products; for
example, in Bangladesh with Dano Daily
Pushti, and in Nigeria, Senegal and
Ghana with Dano Cool Cow. Before
launching these products, we con-
ducted thorough analyses of the mar-
kets to create a price point that works
for low-income consumers there.
All-time high inflation rates in food
prices led to a severe decrease in pur-
chasing power among low-income con-
sumers during 2022; however, we man-
aged to reach over 87 million consum-
ers with our affordable nutrition prod-
ucts. To address the challenge of lower
budgets, Arla came out with a new, more
affordable milk-based powder named
"Dano Sabi" in Nigeria and "Hye me ma"
in Ghana.
In Bangladesh, we also addressed the
growing inflation by reaching out to
more people in need of affordable dairy
nutrition. However, 2022 was particu-
larly challenging for the Pushti Ambas-
sadors Programme1 in Bangladesh,
which aims at bringing affordable nutri-
tion to the doorsteps of rural house-
holds through a sales force of female
entrepreneurs. Poor recruitment and
retention during 2022 led to limited
rural reach. Therefore, a revised model
and other partner agencies to expand
Arla's reach to rural communities is be-
ing negotiated.
1 The programme is in its third year and is supported by the Danish Ministry of Foreign Affairs, and implemented by Dutch NGO, bopinc, and local social enterprise, iSocial.
Reducing salt in cheese
products
Salt is one of the essential elements that
cause differences in food taste. How-
ever, too much salt in food is not good
for our health, so we work hard at im-
proving our recipes to provide the same
taste experience with less salt. One of
our key focus areas for this is our cheese
products in MENA. In 2022, we man-
aged to lower the salt content of the
popular Puck® cream cheese jars and
our feta cream cheese by 14 per cent
and 26 per cent, respectively.
Arla Protein skyrocketed
growth
Natural, high in protein and low in sugar
and fat, Arla Protein is a success story.
Arla Protein has not targeted profes-
sional or hardcore gym goers but all
consumers living an active lifestyle and
championing all shapes, sizes and back-
grounds. By focusing on the fuelling
power of protein alongside delicious
products, such as milk-based beverages,
quarks and puddings, Arla Protein has
resonated with consumers and deliv-
ered 48.9 per cent volume growth
in 2022.
Milk-based powder launched
in Africa
The increasing food insecurity due to
global inflation in 2022 posed an urgent
task of increasing access to affordable
nutrition products. To address this chal-
lenge, our global nutrition and innova-
tion team created a new milk-based
powder named "Dano Sabi" in
Nigeria and "Hye me ma" in Ghana.
To make it even more affordable, we
reduced the protein content compared
to milk powder, but ensured it is a
healthier, more nutritious alternative
to other creamers.
yoghurt. The yoghurt recipe contains
our whey permeate – an ingredient rich
in milk minerals and lactose – to opti-
mise yoghurt production. Following
acceptability testing with consumers
market launch was delayed by ongoing
geopolitical challenges.
From papaya waste to dried
fruit snack with whey protein
Papaya is the fourth most popular fruit
crop in Ethiopia, and yet around 30 per
cent of the annual harvest is lost
through spoilage. As a product innova-
tion partner in a public-private project
led by GAIN, AFI has developed proto-
type recipes for a snack bar made with
papaya pulp and milk and whey-based
ingredients. The objective is to reduce
post-harvest loss and provide easily
accessible nutrition for low-income con-
sumers. In 2022, AFI organised technical
training for the staff of the Ethiopian
company that will produce the bar.
Building up the dairy supply
chain in Ethiopia
Ethiopia has 12 million dairy cows, but
much of their milk never reaches con-
sumers. Our subsidiary, Arla Foods Ingre-
dients (AFI), is lead business partner in a
Global Alliance for Improved Nutrition
(GAIN) project to build a sustainable
dairy supply chain in the country. As part
of that, the project partners equipped a
local dairy to produce an affordable
almost 9.5 million bowls of cereal) to
schools across the UK since 2020.
As well as providing milk for partner
schools, Arla and Magic Breakfast are on
a mission to help children better under-
stand where the milk comes from. In
2022, for the first time during the part-
nership we invited primary school chil-
dren down to a farm in Yorkshire to see
the action unravel and help them under-
stand nature and how food is produced.
The best lunchbox comes
back empty
Our cheese brand in MENA, Puck®,
has always been an important source of
cooking inspiration in the region. In
2022, Puck® ran a campaign targeted at
mothers who are searching for ways to
make their kids' lunch boxes healthier
and more nutritious. In Middle Eastern
schools, the first lunch box is served
early in the day, almost as an extension
of breakfast, therefore it is a key occa-
sion to form healthy eating habits.
Recipes and packing inspiration were
developed together with our Global
Nutrition team to make sure the lunch-
boxes contain everything necessary for
a balanced meal. The lunchbox cam-
paign was designed and executed by the
MENA branch of our in-house agency,
The Barn, and consisted of search en-
gine-friendly articles and promotions
through local social influencers. The
content was well received by mothers,
as evidenced by the increased engage-
ment metrics across Puck®'s channels.
Reaching millions through
recipe inspiration
We believe inspiration and knowledge
about cooking is the best way to de-
velop good food habits, and we provide
cooking inspiration around the world on
our national websites and in brochures.
We are also increasingly using social me-
dia platforms to more actively engage
consumers and spread the word about
sustainable and healthy eating.
Our Instagram account, @arladk, target-
ing the Danish market with recipes and
cooking hacks, shows how effective this
tool can be. The follower count of
@arladk grew from 60,000 to over
1 Arla donates EUR 1.3 million to the foundation annually.
171,000 during 2022, and the content
had over 40 million views.
The engagement rate is one of the best
among similar big brands, and it proved
to be also significantly more cost effec-
tive to reach consumers via this plat-
form.
Habits, nonsense and friends
Our popular educational programme
for primary school children, Food mov-
ers, reached over 56,000 students in
Denmark. This year, the teaching mate-
rial, divided into three different levels,
focused on how to change habits
around food, how to learn to be critical
about information circling on social
media, but first and foremost how food
is best enjoyed together. The pro-
gramme has been running since 2016
with yearly changing topics, this year
being "Habits, nonsense and friends."
Making sure kids do not
skip breakfast
As a supplier to school canteens, we
have an important role in helping
students get a nutrient-rich diet that
enables them to feel good during the
school day and to lay the foundation for
good eating habits throughout life.
Regular breakfast is one of the most
important parts of healthy eating habits,
and for that reason Arla Sweden started
a free breakfast – skolfrukost – pilot in
2018. The results, with students arriving
on time, calmer classrooms, and better
self-perceived school performance,
have created a lot of attention and in-
spired more schools and municipalities.
In 2022 Arla cooperated with five
different schools that served free school
breakfast and shared the learnings to
schools and municipality from all over
the country.
Ensuring that school children have
access to nutritious breakfast is also a
focus area for Arla UK. We have been
working with Magic Breakfast1, a charity
aiming to end hunger as a barrier to
education in UK schools, to provide over
950,000 milk donations (enough to fill
ur new strategy is part of our Business
Strategy, Future26. We strongly
believe that diversity enables innova-
tion, better decision-making and higher
performance.
Our targets and progress
To ensure tangible progress, our new
strategy measures diversity and inclu-
sion using three key performance indi-
cators: inclusion favourability, gender
equality and ethnic diversity in the
workforce.
Inclusion favourability is measured using
an index based on answers from our
yearly employee engagement survey.
In 2022, the average score across the
index was 86 per cent, and one of the
aspects, belonging, increased by six
points compared to 2021.
For gender diversity we have a short-
term (2023) target of no more than
70 per cent of one gender in the work-
force, and our long-term 2026 target
aims at having no more than 60 per cent
of one gender in a team across the top
28%
Share of women in management
Our target for gender balance in management –
defined as one level below our Executive
Management Team – is no more than 60 per
cent of one gender by 2026.
three organisational levels in Arla. In
2022, 42 per cent of our office workers
were women.
Leadership training to build
an inclusive culture
To roll out our strategy and make it
come alive, we needed to onboard and
align the leadership layer first-hand, so
we organised onboarding sessions and
leadership trainings for top-and mid-
managers across the organisation in
2022. More than 500 leaders and col-
leagues across 50 teams spent four
hours on what diversity and inclusion
means, how our subconscious biases
influence our everyday decision-making
and how to fight these biases.
Diversity and inclusion
dashboard
We also educated people leaders in how
to use our newly established D&I Dash-
board in Power BI based on our global
gender equality target. Each people
leader has data on their own team
across data points such as Employee
Lifecycle, Performance, Promotions
and Equal Pay. Data transparency and
accountability are important to reveal
potential subconscious biases.
Competitive and equal
pay across all job bands
We strive to offer fair and competitive
remuneration at market level and in line
with local legislation and have a struc-
tured approach to remuneration, ensur-
ing that salaries are unbiased towards
gender, age, seniority, tenure, national-
ity or any other factors.
ustainability is not just about reduc-
ing our climate impact. Sustainability
is also about the people working for us
in the entire value chain. We listen, we
act and we try to lead by example in our
industry.
Employee engagement survey
points out focus areas
Our annual engagement survey is an
important tool for ensuring our global
organisation is a good place to work.
This year's response rate was 86 per
cent, on a par with last year. This means
that more than 17,000 colleagues took
the time to complete the survey. The
53,061 individual comments set a new
record, providing a rich dataset for iden-
tifying areas in need of improvement.
Based on this feedback, our Executive
Management Team (EMT) identified
three focus areas for 2023. One is unac-
ceptable behaviour, which will remain a
top priority for the third year running.
The number of reported unacceptable
behaviours dropped significantly since it
became a focus area; however, as we
have a target of zero tolerance this will
continue to be a key priority.
The second priority area is eradicating
unnecessary bureaucracy. Specifically,
we need to look at the tools we use, how
we collaborate and our decision-making
processes. These are the areas the EMT
and other leaders will analyse in greater
detail in 2023.
86%
Response rate in our yearly employee
engagement survey
The result is on a par with last year and shows
strong engagement.
The third area is strengthening our capa-
bilities to deliver our Future26 strategy.
Enablement is a key theme for the com-
ing year, which will be reflected in local
business plans as well.
Keeping our employees safe
across the value chain
Arla has a comprehensive and long
value chain and offers a large variety of
jobs across geographies. Our employees
are key to the success of Arla, and it is
our ambition to provide all employees
with safe and healthy working condi-
tions.
Our vision is called "Zero Loss", towards
which we made significant progress in
the last five years. However, during
2022 we saw a slight increase in our
accident frequency rate, from 4.3 in
2021 to 4.4 in 2022. Sadly, one fatality
occurred at one of our Danish logistics
centres in 2022. Our first priority is to
support family and team members as
well as investigating root cause of the
accident to prevent it from happening
again. Read more in our ESG section
on page 128.
In 2022, we continued the roll-out
of our behaviour safety programme
CornerStones. The programme includes
trainings, self-assessments and process
confirmations. Thoroughly investigating
accidents and incidents, with shared
learnings across markets and a trend
analysis based on safety observations
captured in our reporting system LIA
resulted in a dynamic risk register, which
allow us always to focus on the critical
areas.
We are also making sure that our basic
rules are observed via a systematic
approach by checking and validating
compliance with key internal and exter-
nal procedures called Critical12.
We are also protecting our employees
through our partnership with SOS Inter-
national, where the key focus is risk miti-
gation when operating across borders
and managing supply and distribution
chains.
4.4
Lost-time accidents per million working
hours
Our ambition is to have zero accidents per year.
Training colleagues is
key to our growth
Colleague development is essential to
maintaining a high level of motivation
and engagement and enabling the con-
tinued growth of our business.
During the past two years, Covid-19 has
accelerated the trend towards more
online training, including the introduc-
tion of digital training technologies such
as HoloLens and virtual reality. Even
though we can now again sit together in
"classrooms", online training proved to
be so effective that we are aiming at
conducting 80 per cent of training activ-
ities virtually. At our production sites,
virtual technologies enable fast and
easy upskilling.
In 2022, there were 359 enrolments in
leadership and people management
development trainings.
Human rights governance
Arla is committed to respecting human
rights across our entire value chain. We
adhere to the United Nations Guiding
Principles on Business and Human
Rights (UNGP) and the OECD Guidelines
for Multinational Enterprises. Our work is
guided by our Code of Conduct "Our
Responsibility" and our human rights
policy, in which we have elaborated our
commitment and expectations to stake-
holders. Arla's human rights work is gov-
erned by our EMT and managed in vari-
ous business functions. We engage with
stakeholders, including experts, unions,
right-holders and NGOs, on our human
rights management.
Human rights due diligence
Based on our analyses, Arla has the high-
est risk of causing, contributing or being
linked to negative human rights impacts
when operating in our non-European
growth markets due to national contexts
and the complexity of business opera-
tions. Therefore, we prioritise
conducting human rights impact assess-
ments in these markets and also to carry
out a due diligence process whenever
we enter a new joint venture or receive
an allegation. We continue to improve
and implement our systematic human
rights due diligence process in compli-
ance with UNGP and OECD, as illustrated
below.
Salient human rights issues
Arla's salient human rights issues are
identified based on our due diligence
processes, risk assessments and regular
stakeholder dialogues. Salient human
rights are defined as the rights at risk of
the most severe negative impact on
people through business activities and
relationships. The issues identified as
most salient across Arla's value chain are
working conditions, living standard,
modern slavery, health and access to a
grievance mechanism.
Human rights risk assessments
In 2022, Arla continued to identify and
address potential and actual human
rights risks and impacts in our value
chain, with a focus on our business oper-
ations in the Middle East. Together with
local teams, our global human rights
team completed on-location human
rights risk assessments in Qatar, Saudi
Arabia and Bahrain. The purpose of the
assessments was to follow up on human
rights risks in our own operations and to
include third-party employees at our
sites, key suppliers and service providers
in the assessments.
Arla's salient human rights issues
formed the basis for the assessments,
with focus on particular risks in the
region, including employer-provided
housing standard, fair recruitment and
passport withholding, working condi-
tions, health and safety, and wages. On
all three markets, Arla's own operations
showed solid performances and did not
reveal critical risks in relation to Arla's
salient human rights issues. Findings
indicated a need for Arla to strengthen
processes in relation to assessments of
local suppliers and service providers.
Further, the assessments identified
actual risks in relation to third-party
employees, key suppliers and service
providers. Arla has initiated a dialogue
with relevant external parties to address
these risks, and we continue to follow
up on action plans to resolve the identi-
fied issues.
International dairy
development
We also continued our work on human
rights risks related to our international
dairy development programmes in
Nigeria, Indonesia and Bangladesh. This
includes addressing issues related to
gender, land rights, security, food safety,
health and safety in farming and
processing as well as distribution.
Code of Conduct for Suppliers
and Business Partners
It is essential for Arla to operate in a
responsible manner, and we expect our
suppliers and business partners to live
up to the same standards. At the end of
the year, we launched an updated Code
of Conduct for Suppliers and Business
Partners. The aim is to strengthen our
human rights efforts to support suppli-
ers and business partners in understand-
ing our expectations and to prepare Arla
for continued compliance with increas-
ing regulatory measures and documen-
tation requirements in relation to man-
datory due diligence in value chains. The
ultimate goal is to minimise risk to peo-
ple and safeguard our business.
Arla is a member of AIM Progress, which
is a forum assembled to enable and pro-
mote responsible sourcing practices.
The update is inspired by AIM Progress'
work.
Access to grievance
mechanism
In 2022, Arla continued to communi-
cate the recently improved whistle-
blower service "EthicsLine". During the
year, we carried out a compliance check
of 38 non-European entities, which
shows an increase in EthicsLine aware-
ness of 40 per cent compared to 2020.
place for all Arla and third-party employ-
ees. However, findings indicate that the
insurance agreement varies for third-
party employees. We will address this
with suppliers.
Right not to be subjected
to slavery, servitude or
forced labour
The risk of modern slavery remains a
challenge in our value chain, and we
continue our efforts to mitigate the
risks. Examples of this include the
launch of a revised purchasing policy,
supported by training for new col-
leagues and cost owners, and ensuring
that migrant worker colleagues keep
their passports and identity documents,
unless they require otherwise, and sign a
letter of consent. Interviews conducted
with third-party employees in the Middle
East revealed indications of "hidden"
fees being paid to recruitment agencies
in the country of origin. We have ad-
dressed this directly and we are in dia-
logue with the third-party suppliers to
end this practice.
In Europe, we continue our work on
awareness raising, including self-assess-
ment checkpoints on farms, and we will
continue to explore opportunities for
collaboration with our European Works
Council for further collaboration and
awareness raising. We have not received
any modern slavery reports in 2022.
advisor, concerns were raised about how
to mitigate potential adverse impacts on
the settlers who are unable to continue
farming in the project area. A plan for
the inclusion of settlers was made, lead-
ing to the enrolment of 500 household
members of existing settlers in the pro-
ject (equal to 50 per cent of the project
beneficiaries), a grievance mechanism
committee was established to handle
reports of concerns and finally compen-
sation payment for landed properties
was commenced.
Right to health
Nutrition
All over the world, inflation and increas-
ing prices, also on food, put access to
nutrition at risk. Arla seeks to improve
access to nutrition where we operate,
including at our sites. As an example of
our efforts in 2022, we decided to run a
pilot project on workforce nutrition in
the United Arab Emirates.
The objective of this pilot project was to
assess our workforce nutrition pro-
gramme and identify opportunity areas
for enhancement. The pilot revealed
that we make health checks available
and have a breastfeeding programme.
However, we found gaps in workforce
nutrition education and providing
healthy food at work.
Health insurance in non-European
markets
All Arla colleagues should have access
to health services on fair terms. Findings
from employee interviews in the Middle
East show that health insurance is in
rla's salient human rights issues
form the basis for our reporting
structure. We report on findings from
our global human rights work, including
findings from risk assessments con-
ducted in 2022 in the Middle East.
important ways to support people to get
out of poverty, realise human rights and
achieve the sustainable development
goals. We participate in the AIM Working
Group on Living Wage to gain insights
and share knowledge.
Right to enjoy just and
favourable conditions at work
Safe and healthy working conditions
Over the year, we continued the imple-
mentation of Arla's global behavioural
safety programme Arla CornerStones.
The focus continues to be on increasing
the maturity level in the health and
safety work in production facilities glob-
ally. We see very strong performance in
both our European and non-European
markets. See page 52 for more about Ar-
la's health and safety efforts.
Living wage
Aligned with international frameworks,
Arla understands and appreciates that
paying living wages is one of the most
In 2022, we collaborated with the Fair
Wage Network to finalise our pilot pro-
ject on three different markets (Poland,
Senegal and the US), investigating the
wages for our own as well as for third-
party employees working at our sites.
Findings from the pilot project show that
the employees most at risk of not re-
ceiving a living wage are the third-party
employees. We have similar findings
from employee interviews conducted in
the Middle East.
We will continue our work in 2023, in-
cluding more markets to get a more
complete overview of Arla's living wage
status and to evaluate and decide next
steps.
Right to adequate standard
of living
Employer-provided housing
We continuously work to ensure ade-
quate accommodation for our migrant
colleagues in Saudi Arabia, the United
Arab Emirates, Oman and Qatar. In 2022,
we were able to visit many of these
housing facilities to follow up on im-
provement projects. During the visits,
we identified that Arla-provided accom-
modation meets or exceeds ILO stand-
ards for employer-provided housing as
well as local standards, leaving only mi-
nor improvement areas, such as availa-
bility of common recreational facilities.
Land rights
Involuntary resettlement may result in
long-term hardship, impoverishment
and conflicts for the affected communi-
ties and persons. When establishing the
6,000-hectare Kaduna State-managed
Damau Household Milk Farm, where Arla
Foods Nigeria plays a pivotal role as an
meeting the growing needs and
demands in Nigeria.
The Milky Way Partnership continued its
capacity building programmes in collab-
oration with the Advancing Local Dairy
Development in Nigeria project
(ALDDN), targeting pastoralist farmer
clusters in Kaduna State. The delivery
of sufficient milk volumes to Arla's dairy
plant in Kaduna is still a challenge to
be addressed.
Going forward, the partnership between
CORET, the Milk Value Chain Founda-
tion, SEGES Innovation and the Danish
Agricultural and Food Council will focus
on enhancing a climate-resilient, sus-
tainable and productive dairy value
chain in Nigeria to reduce CO2e emis-
sions at local farm level by 50 per cent
while improving farmer income from
dairy significantly through stable sup-
plies to Arla. The new programme is sup-
ported by the Danish Ministry of Foreign
Affairs and will kick off in 2023.
Pilot organic dairy farming
in Indonesia
Arla is lead commercial partner in a
partnership project managed by
SEGES Innovation to support Indonesian
cooperative farmers at Setia Kawan
Nongkojajar Dairy Farm Cooperative
(KPSP) in East Java in converting to or-
ganic dairy farming. During 2022, four
organic demo-farms were established to
become the first certified organic dairy
farms in Indonesia. The first organic
calves were already born in 2022, and
the cows started to produce the first
Impact of Arla's international dairy development programmes
3,291
Farmers enrolled in Arla's international dairy development programmes (accumulated since 2017).
24,350
Farmer participants in capacity building activities (accumulated since 2017).
In 2022, together with local business
partner PRAN Dairy, and the Department
of Agriculture, Dhaka University, Arla
completed the first phase of the dairy
development programme. This included
a series of expert seminars on cow man-
agement, a training-of-trainers field visit
focusing on capacity development and
sustainable dairy farming practices, and
recruitment and training of new farmers
under the programme.
ever certified organic milk in Indonesia.
Mazaraat Artisan Cheese has now be-
come a full member of the consortium,
and will offtake, process and launch
high-end organic cheese from 2023
with support from Arla and Indolakto.
The Indonesian NGO, Bina Swadaya,
KPSP and The Danish Centre for organic
farming have conducted training in or-
ganic cow management, barn design,
organic feed, use of herbal medicine,
conversion costs etc. KPSP has man-
aged to develop and produce the first
organic feed.
Transition to a greener dairy
production in Bangladesh
Arla is committed to supporting the de-
velopment and greenifying of the dairy
industry in Bangladesh and helping to
improve the livelihood of local farmers.
s a global, farmer owned dairy com-
pany we are committed to support-
ing local dairy farmer communities
across the world. Arla's international
dairy development programmes con-
tribute to building climate-resilient and
commercially viable dairy value chains in
strategic growth markets to improve
farmer capacity and provide nutritious
food to a growing population.
Sustainable dairy value chains
Dairy farmers in developing countries
are hit the hardest by climate change,
which is a critical challenge to food se-
curity, nutrition and livelihoods. Arla is
committed to utilising its expertise to
enhance resilience among dairy farmer
communities to aid the transition to-
wards more robust and sustainable food
systems. This includes promoting re-
source-efficient dairy farm production,
improving animal welfare, enhancing
food safety and quality, energy-optimi-
sation, reducing food waste and provid-
ing access to affordable nutrition.
Strong dairy partnerships
Arla's dairy development programmes
build on strong partnerships between
commercial and non-commercial part-
ners, including governments, local and
international NGOs, funding institutions,
research and knowledge institutions,
farmer associations, farmer coopera-
tives and businesses. By combining
knowledge, resources and networks,
dairy development partnerships en-
hance the implementation of effective
capacity building programmes and via-
ble business models to create a deeper
sustainability impact.
Resilient dairy farming
in Nigeria
We continued to scale up activities in
Nigeria. Construction of the Arla Farm is
progressing and is expected to be com-
pleted in March 2023. Plans for the
import of heifers to the farm are being
finalised, and we expect them to arrive
in the first half of 2023, while milk sup-
ply is expected to begin in the third
quarter.
The Damau Household Milk Farm took
off during 2022. Construction of infra-
structure and the selection of dairy
farmers to be enrolled is progressing.
The first farmer cooperatives have been
registered with 20 per cent of women in
leading positions. Arla will offtake the
milk from the expected 1,000 farmers to
create a stable income and to process
the milk into nutritious dairy products
Arla® B.O.B milk, sold on our UK market, is a
fat-free skimmed milk that tastes as full-fla-
voured semi-skimmed. It is free of artificial in-
gredients and additives, and is enriched with
naturally occurring milk protein to deliver a
taste as good as semi-skimmed.
Arla is a cooperative owned by 8,492
dairy farmers in seven countries. Ensur-
ing that all of our owners are able to
raise their voice and seek representation
for their opinions is essential in a trust-
worthy and successful cooperative.
Therefore, Arla’s management is shared
between elected owner representatives
– our Board of Directors – and the cor-
porate executives of the company. The
details of our governance are regulated
by our Articles of Association.
Cooperative Governance
The two main farmer owner representa-
tion and decision-making bodies of Arla
are the 19-member Board of Directors
(BoD) and the 187-member Board of
Representatives (BoR).
Owners
In 2022, 8,492 milk-producing farmers
in Denmark, Sweden, Germany, the UK,
Belgium, the Netherlands and Luxem-
bourg were the joint owners of Arla. The
cooperative is divided into four geo-
graphical areas (Denmark, Sweden, the
UK and Central Europe), which are fur-
ther divided into regions and member
districts. All cooperative owners have
the opportunity to influence significant
decisions. In 2021, the cooperative had
8,956 joint owners. The decline in the
number of owners is partly due to farm-
ers who stopped producing milk or sold
their business to another owner, and to
a lesser extent due to owners resigning
to supply another dairy company. This
decline is in line with the trend seen in
the whole dairy sector over a number
of years.
Board of Representatives
The BoR is the supreme decision-mak-
ing body of our cooperative governance.
It comprises 187 members, of whom
175 are cooperative owners and 12 are
employee representatives. Owner repre-
sentatives are elected every other year.
14 owners, 2 external members and 3 em-
ployee representatives
DK SE CE UK
CEO and COO
175 farmer owners
12 employee representatives
8,492 dairy farmers
DK
SE
CE
UK
Executive Board and
6 officers
20,907
DK 74
SE 47
CE 25
UK 29
· Europe
· International
· Global Industry
Sales and Plan-
ning
· Supply Chain
· Agriculture,
Sustainability and
Communication
· Marketing &
Innovation
· Human
Resources
· Finance, Legal,
IT & Strategy
They also take care of other stakeholder
interests in the company: lenders, inves-
tors in bond instruments and employ-
ees, among others. The BoD consists of
14 farmer owners and two external
members elected by the BoR, and three
employee representatives elected by
the cooperative’s employees. The com-
position of the elected members of the
BoD reflects Arla’s ownership structure
across the member areas.
Area forums and Joint Area Council
Arla has four area forums, corresponding
to the four member areas, The forums
serve as an interface with the Board of
Directors and the management of Arla.
Members of the forum serve as ambas-
sadors representing Arla among all
members. The forums hold two meet-
ings a year.
The joint Area Council consists of four
members of BoR from each of the re-
spective areas, elected to the council by
ballot. The BoD appoints the chairman
and additional members to the council.
The council focuses on cross-area
owner matters, including general mem-
bership terms and the global milk supply
agreement.
The next election is scheduled for May
2024. The BoR makes decisions, includ-
ing appropriation of profit for the year,
and elects the BoD. The BoR meets at
least twice a year.
District meetings
Every owner of Arla is part of the mem-
ber district where their farm is located.
Each year in March, owners convene for
a local annual assembly in their respec-
tive districts to ensure their democratic
influence on Arla’s decision-making. The
members in the district elect members
to represent their district on the BoR.
The districts also have their own elected
district councils.
Regional boards
In the Danish and Swedish area, the re-
gional board consists of the members of
the Board of Representatives elected in
the region. In the Central European and
United Kingdom area, the regional board
consists of all district council chairmen
and vice-chairmen in the region. Re-
gional boards meet as soon as possible
after the yearly district meetings to dis-
cuss owner matters relevant for the re-
gion.
Board of Directors
Elected by the BoR, the BoD is responsi-
ble for ensuring that Arla is managed in
the best interest of the farmer owners.
This responsibility involves strategic
direction setting, monitoring the com-
pany’s activities and asset management,
maintaining the accounts satisfactorily
and appointing the Executive Board.
experts. The functional experts cover
the management areas of Supply Chain
(CSO), Agriculture, Sustainability and
Communications (CASO), Marketing and
Innovation (CMO), Human Resources
(CHRO) and Finance, IT, Legal and Strat-
egy (CFO). The members of the EMT
keep each other informed of all signifi-
cant developments in their business ar-
eas and align on all cross-functional
measures.
Employees
Arla has 20,907 full-time equivalents
(FTE) globally, compared to 20,617 last
year. Our employees are represented
by three elected members on the BoD
and 12 elected members on the BoR.
Besides being represented in the higher
decision-making bodies of Arla, our
employees also have work councils. All
councils comprise employee and em-
ployer representatives. The European
Works Council (EWC) is our high-level
forum for dialogue between manage-
ment and employees, and discussions
about corporate matters. In 2022, sus-
tainability and digitalisation were major
items on the agenda of the two annual
EWC meetings.
Corporate governance
Corporate governance in Arla is shared
between the Executive Board and the
BoD. Together they define and ensure
adherence to the company’s strategic
direction, organise and manage the
company, supervise management and
ensure compliance.
Executive Board
The Executive Board, appointed by the
BoD, is responsible for managing the
company, ensuring the proper long-
term growth, setting the strategic direc-
tion, following up on targets and defin-
ing company policies, while striving for a
sustainable increase in company value.
Furthermore, the Executive Board en-
sures appropriate risk management and
risk controlling, as well as compliance
with statutory regulations and internal
guidelines. The Executive Board is com-
prised of the CEO and another member
of the Executive Management Team,
currently the Executive Vice President of
our Europe segment.
Executive Management Team
The Executive Management Team (EMT)
is appointed by the Executive Board. The
EMT is responsible for Arla’s day-to-day
business operations, preparing strate-
gies and planning the future operating
structure. The EMT consists of the Exec-
utive Board, a leader of the international
commercial segment and five functional
In 2022, the two former external advi-
sors, Nana Bule and Florence Rollet,
were elected as ordinary BoD members
by the BoR. As the result of the elections
during the spring, three new members
joined the BoD: Daniel Halmsjö as Swe-
dish farmer representative and Anders
Olsson and Grant Cathcart as employee
representatives. Walter Lausen (DE),
Jonas Carlgren (SE), Harry Shaw (UK) and
Håkan Gillström (SE) stepped down from
their roles.
Competencies and
diversity of the BoD
Despite their mostly similar background
in agriculture and dairy, our BoD is
equipped with a wide range of skills and
expertise, enabling them to conduct
first-class global governance. The com-
petencies of the BoD are evaluated
every other year in a transparent pro-
cess approved by the BoR. Based on the
results of the evaluation, board mem-
bers can enrol in different trainings to
further strengthen their skillset.
Key topics and decisions
in 2022
Our BoD had 12 ordinary and 4 extraor-
dinary meetings. Five of the meetings
were one and a half day physical meet-
ings, and the rest were held online. Key
topics the BoD addressed this year were:
· The increasingly uncertain and volatile
external market was on top of the
BoD’s agenda in 2022. In light of the
market realities, the BoD revised our
strategic aspirations towards 2026.
Read more on page 26.
· The war in Ukraine and its conse-
quences for Arla. The BoD was part
of the decision to divest our Russian
business. Read more on page 16.
· The development and announcement
of the Sustainability Incentive model,
which is going to reward farmer own-
ers for sustainability actions on their
farms. Read more on page 35.
10
8
2
14
5
15
1
11
3
6
17
16
9
13
18
19
4
12
Gender composition of the BoD1
Tenure of the BoD
Nationalities of the BoD
75%
Male
25%
Female
52%
0-3 years
16%
4-7 years
32%
8+ years
DK
8
SE
5
UK
3
DE
1
BE
1
FR
1
1 According to the Danish Company Act, §99b, only members elected at the company’s general meeting are included.
1
Jan Toft Nørgaard (DK)
Born: 1960 Member since: 1998
Occupation: Dairy farmer
Internal positions: Chairman of the Board,
the Learning and Development Committee
and the Remuneration Committee
External positions: Member of the
Company Board of the Danish Agriculture
and Food Council (2009)
2
Manfred Graff (DE)
Born: 1959 Member since 2012
Occupation: Dairy farmer
Internal positions: Vice Chairman of the
Board, Area Chairman of Central Europe,
Chairman of the Joint Area Council and the
Member Relation Group, member of the
Learning and Development Committee
and the Remuneration Committee
External positions: Member of the Board
of German Milch NRW (2007) and the
Board of the German Federation of
Cooperatives (2015).
3
Anders Olsson (SE)
Born: 1966 Member since 2022
Occupation: Technical Coordinator at
Götene Dairy.
4
Arthur Fearnall (UK)
Born: 1963 Member since: 2018
Occupation: Dairy farmer
Internal positions: Area Chairman of UK,
Chairman of the Farmer Sustainability
Working Group, member of the Joint Area
Council, the Member Relation Group and
the Global Appeals Committee.
5
Bjørn Jepsen (DK)
Born: 1963 Member since: 2011
Occupation: Dairy farmer
Internal positions: Chairman of the
Organic Committee.
External positions: Vice Chairman of
Skjern Bank (2012) and the Danish Dairy
Board (2019), member of the cattle
section of the Danish Agriculture and Food
Council (2009), the Board of the Danish
Cattle Levy Fund (2009) and the Board of
the Danish Milk Levy Fund (2019).
6
Daniel Halmsjö (SE)
Born: 1982 Member since: 2022
Occupation: Dairy farmer
Internal positions: Member of the Global
Appeals Committee.
10
Ib Bjerglund Nielsen (DK)
Born: 1960 Member since: 2013
Occupation: Dairy production worker
External positions: Member of the Dairy
Workers’ Union, DK (2005)
11
Inger-Lise Sjöström (SE)
Born: 1973 Member since: 2017
Occupation: Dairy farmer
Internal positions: Area Chairman of
Sweden, member of the Joint Area Council,
the Member Relation Group and the
Learning and Development Committee.
External positions: Chairman of the Board
of the Swedish Dairy Association (2022),
Board member of Tillväxtbolaget (2022),
Dairy Ambassador for the UN High-Level
Political Forum (2022),
-
Florence Rollet (FR)1
Born: 1966 Member since: 2019
Occupation: Head of the MSC in luxury
marketing and management, EMLyon,
France.
8
Grant Cathcart (UK)
Born: 1970 Member since: 2022
Occupation: Quality Controller, QEHS, at
Oswestry Packaging Plant.
External positions: Member of the
National Cheese Forum, UK (1999), and
the National Works Council, UK (2012).
9
Gustav Kämpe (SE)
Born: 1977 Member since: 2021
Occupation: Dairy farmer
Internal positions: Member of the
Remuneration Committee and the Farmer
Sustainability Working Group.
External positions: Member of the
Swedish Dairy Association (2021).
12
Johnnie Russell (UK)
Born: 1950 Member since: 2012
Occupation: Dairy farmer, chartered
accountant
Internal positions: Member of the
Learning and Development Committee,
the Remuneration Committee and the
Organic Committee
External positions: Chairman of the ING
Bank UK Pension Fund (2010) and two
other entities (2013 and 2015
respectively).
13
Jørn Kjær Madsen (DK)
Born: 1967 Member since: 2019
Occupation: Dairy farmer
Internal positions: Member of the
Learning and Development Committee,
Member of the Board of Andelssmør
A.M.B.A (2020)
External positions: Member of the Board
of GLS-A (2018).
14
2
Marcel Goffinet (BE)
Born: 1988 Member since: 2019
Occupation: Dairy farmer
Internal positions: Member of the Global
Appeals Committee, the Learning and
Development Committee, the Organic
Committee and the Preparatory Working
Group.
External positions: Chairman of the Board
of Agra Ost Agriculture Research (2016),
member of the municipal government of
St.Vith (2018) and the Bauernbund Farmer
Association (2012).
15
Marita Wolf (SE)
Born: 1959 Member since: 2021
Occupation: Dairy farmer
Internal positions: Chairman of the Global
Training Committee, member of the
Organic Committee.
External positions: Member of the Board
of the Swedish Dairy Association (2003),
member of the Board of the Swedish
Farmers Foundation for Agriculture (2022).
16
Nana Bule (DK)
Born: 1978 Member since: 2019
Occupation: Operating Advisor, Goldman
Sachs Asset Management
External positions: Member of the Board
of Energinet (2018) and Chair of the
Danish Government Digital Council (2022).
17
René Lund Hansen (DK)
Born: 1967 Member since: 2019
Occupation: Dairy farmer
External positions: Member of the cattle
section and the Company Board of the
Danish Agriculture and Food Council
(2019) and the Board of Agri Nord (2012).
18
Simon Simonsen (DK)
Born: 1970 Member since: 2017
Occupation: Dairy farmer, Valuation
Consultant DLR Kredit A/S
Internal positions: Member of the
Remuneration Committee.
External positions: Dairy Ambassador for
the UN High-Level Political Forum (2017).
19
Steen Nørgaard Madsen (DK)
Born: 1956 Member since: 2005
Occupation: Dairy farmer
Internal positions: Area Chairman of
Denmark, Chairman of the Global Appeals
Committee and the Preparatory Working
Group, member of the Joint Area Council
and the Member Relation Group.
External positions: Chairman of Danish
Dairy Board (2012), Deputy Chairman of
the Company Board of the Danish
Agriculture and Food Council (2014),
Chairman of the Agro Food Park Steering
Committee (2016), the Danish Milk Levy
Fund (2012).
Reading key
Owner
Employee
External
1-19 Link to the
group photo
1 Florence Rollet not present for the group photo
8
5
3
4
6
7
1
2
Gender composition of the EMT
Tenure of the EMT
Nationalities of the EMT
87%
Male
13%
Female
37%
0-3 years
38%
4-7 years
25%
8+ years
DK
4
SE
2
UK
1
FR
1
1
Peder Tuborgh (DK)
Born: 1963
Position: CEO, member of the Executive
Board, Head of Milk and Trading, Chairman
of Arla Foods Ingredients.
Experience: Peder has been with Arla
since 1987, formerly under MD Foods, and
has held various senior management and
executive positions, including Marketing
Director, Divisional Director and Executive
Group Director. Peder has worked in
Germany, Saudi Arabia and Denmark as
part of his longstanding career with Arla
Education: Master’s degree in Economics
and Business Administration from the
University of Odense.
External positions: Member of the Global
Dairy Platform (2006), Chairman of
AgriFoodTure (2022).
2
Peter Giørtz-Carlsen (DK)
Born: 1973
Position: COO, Executive Vice President of
Europe, member of the Executive Board.
Experience: Peter joined Arla in 2003 as
Vice President of Corporate Strategy and
has held various senior positions in Arla,
including Executive Vice President of
Consumer DK and UK, before he became
Executive Vice President of Europe in
2016.
Education: Master’s degree in Business
Administration, Organisation and
Management from the Aarhus University.
School of Business and Social Sciences.
External positions: Board member in AIM,
the European Brands Association (2018),
member of the Policy and Issues Council
(PIC) of the UK’s Institute of Grocery
Distribution (IGD) (2016), Vice Chairman of
the Board of the European Dairy
Association (EDA) (2020), member of the
Board of the Toms group (2022).
3
Torben Dahl Nyholm (DK)
Born: 1981
Position: CFO, Executive Vice President,
Finance, Legal, IT, and Strategy.
Experience: Torben joined Arla in 2012
after working several years in the M&A
consultancy industry. Starting out in Arla
as a Business Controller in Corporate Fi-
nance, he has subsequently held a num-
ber of significant project and leadership
roles across the finance organisation fo-
cusing mainly on the interface between
finance and strategy, latest as Head of
Performance Management.
Education: M.Sc. in Finance and Inter-
national Business from Aarhus Univer-
sity.
4
Simon Stevens (UK)
Born: 1965
Position: Executive Vice President, In-
ternational.
Experience: Simon joined Arla in 2002
as UK Sales Director before becoming
Senior Vice President of Sales and Mar-
keting, where he played a major role in
the significant transformation of the UK
business. In 2016, Simon became SVP
Commercial Ops Europe and in 2020
Head of MENA region based in Dubai.
Prior to Arla, Simon worked 14 years for
Unilever in various Sales and Marketing
Director roles in the UK, the Netherlands
and Italy.
Education: 1st class BSc Hons degree in
Management Sciences from Loughbor-
ough University.
External positions: Member of the
Board of Mengniu (2021).
5
Ola Arvidsson (SE)
Born: 1968
Position: CHRO, Executive Vice President,
HR.
Experience: Ola joined Arla in 2006 as
Corporate HR Director, and has been Chief
HR Officer of Arla since 2007. He came to
Arla from Unilever, where he held various
director positions across Europe and the
Nordics, with his last position as Vice
President of HR. Prior to Unilever, Ola
served as an Officer in the Royal Combat
Engineering Corps in the Swedish Army.
Education: Master’s degree in HR
Management from Lund University.
External positions: Member of the Board
of AP Pension (2014), Central Board
member of the Confederation of Danish
Industry (2018).
6
David Boulanger (FR)
Born: 1970
Position: CSO, Executive Vice President,
Supply Chain.
Experience: David joined Arla in October
2020. He has 26 years of experience in
Supply Chain & Operations and held
several senior leadership positions in the
food industry within Mars, Mondelez &
Danone in various geographies. Most
recently, before joining Arla as Chief
Supply Chain Officer, he was Senior Vice
President Operations of Danone’s
Specialized Nutrition Division, operating
globally in the Early Life & Medical
Nutrition fields.
Education: Engineering degree from the
Ecole Civil des Mines de Paris in France and
Master’s degree in Mathematics.
External positions: Member of the board
of Global Baby SAS (2021).
8
Patrik Hansson (SE)
Born: 1967
Position: CMO, Executive Vice President
Marketing and Innovation.
Experience: Patrik has many years of
experience from working in international
consumer goods companies within
finance, marketing, sales and general
management. Patrik worked for 13 years in
Procter and Gamble, mainly in marketing,
before he joined Arla in October 2011 as
VP Marketing and Sales in Sweden. In
2015, he moved to Malaysia to start up
Arla’s regional headquarter in South East
Asia. In 2016, he returned to Europe where
he held the roles of Group Vice President in
Sweden, and later in Germany, before
taking up the current role as CMO in 2022.
Education: Master’s degree in Engineering
Physics from Chalmers and a master’s
degree from Gothenburg University.
7
Hanne Søndergaard (DK)
Born: 1965
Position: CASO, Executive Vice President,
Agriculture, Sustainability &
Communication.
Experience: Hanne has been with Arla for
33 years, first joining under MD Foods and
then moving to the UK where she played a
leading role in developing the Arla UK
business. She became Vice CEO of Arla UK
before she in 2010 moved into a global
marketing role as Senior Vice President of
Brands and Categories. In 2016, she
became CMO and Executive Vice President
and joined Arla’s Executive Management
Team. In January 2021, Hanne became
Executive Vice President of Agriculture,
Sustainability and Communication.
Education: Business degrees from the
Aarhus University School of Business and
Social Sciences and Harvard Business
School.
External positions: Member of the Board
of Arla Fonden (2012), member of the
Technical University of Denmark (2016),
member of the Danish Climate Forest
Foundation (Klimaskovfonden) established
by the Ministry of Environment of Denmark
(2021), Board member of the Danish
Agriculture & Food Council (2022).
Short-term components
Long-term components
Branded volume growth
Profit
Efficiencies
Leadership
Branded volume growth
Performance versus peer group
variable pay. Pension contributions
and non-monetary benefits such as
company car, telephone etc. are also
part of the package.
Levels of fixed remuneration are set
based on individual experience, contri-
bution and function, while variable pay
reflects performance against annual
business targets. The variable pay com-
ponent consists of an annual short-term
incentive (STI) plan and a long-term
(three-year) incentive (LTI) plan. The STI
is composed of the same elements for
all executives. From 2023 onwards,
scope 1 and 2 C02e reduction will be
part of the STI scheme. The main com-
ponents of the LTI are branded volume
growth, and the group’s performance
versus a peer group (see graphs).
e have a structured approach to
remuneration, ensuring that sala-
ries are unbiased towards gender,
nationality and age.
Remuneration governance
Arla’s remuneration practice is governed
by the remuneration guidance set by
the Board of Directors (BoD) and
reviewed regularly. The BoD is guided by
the recommendations of the Remunera-
tion Committee (RemCo), consisting of
six board members, including the chair-
manship. The RemCo works as a prepar-
atory committee for the BoD as well as
the Board of Representatives (BoR), with
a special focus on the BoD, BoR and the
Executive Board. It is also the Commit-
tee’s responsibility to ensure that the
remuneration guidance, practices and
incentive programmes support the
strategy of Arla and create value for the
owners by enabling Arla to attract and
retain the best qualified elected repre-
sentatives, executives, directors and key
employees. The RemCo meets four
times a year.
Our remuneration practices
Remuneration packages are con-
structed to ensure attraction, engage-
ment and retention of the best senior
managers, and at the same time should
drive strong performance in both short
and long-term business results. In line
with Scandinavian practice, the majority
of the remuneration is fixed. However, in
recent years, the variable part of the
remuneration has increased to ensure
that total remuneration is also depend-
ent on achieving Arla’s short and long-
term financial targets. All executives and
members of senior management are
employed on terms according to inter-
national standards, including adequate
non-compete restrictions, as well as
confidentiality and loyalty restrictions.
Our performance measures
Board of Directors (BoD)
The remuneration of the BoD comprises
a fixed fee and is not incentive-based.
We believe this ensures that the Board is
primarily focused on the cooperative’s
long-term interests. Beyond a minimal
travel per diem, no additional compen-
sation is paid for meeting attendance or
committee service. The BoD’s remuner-
ation is assessed and adjusted on a
bi-annual basis and approved by the
BoR. The most recent adjustment made
was in 2022. For more details on specific
amounts, refer to page 119.
Executive Board and Executive
Management Team (EMT)
The compensation elements and
approach for the Executive Board and
the Executive Management Team
(together: executives) are identical.
Remuneration paid to the Executive
Board is assessed annually by the BoD
based on recommendations from
RemCo. The EMT’s remuneration is set
by the CEO. For more details on specific
amount, go to page 119.
The remuneration package for the exec-
utives is based on external benchmarks
against European and international
FMCG companies, providing a competi-
tive and sustainable mix of fixed and
Taxes recognised in income statement,
20221
DE,NL,BE,LUX, 14%
DK, 13%
UK, 25%
SE, FI, 10%
International & Other, 37%
Taxes recognised in income statement,
20211
DE,NL,BE,LUX, 12%
DK, 16%
UK, 34%
SE,FI, 9%
International & Other, 29%
Cooperative and corporate tax
As a cooperative, Arla’s farmer owners
are also our suppliers, and earnings are
not accumulated in the company, but
paid to the owners in the form of the
highest possible milk price. Based in
Denmark, Arla Foods amba is governed
by the Danish tax rules for cooperatives
paying income tax in Denmark based on
the value of its equity.
Arla operates several subsidiaries glob-
ally. Our subsidiaries are primarily lim-
ited liability and private limited compa-
nies subject to regular corporate taxa-
tion. Transactions between Arla compa-
nies are determined and documented in
accordance with OECD’s Transfer Pricing
Guidelines to ensure we operate on
market terms.
Value generation and tax
contribution
In 2022, Arla generated a total value of a
EUR 7,043 million from the milk sup-
plied. Milk from our farmer owners gen-
erated EUR 6.7 billion in milk payments,
while other farmers received milk pay-
ments of EUR 519 million. As a result,
the majority of the taxes are paid at farm
level subject to local tax rules.
The value generated by our activities
cascades further into societies via vari-
ous types of tax payments that are either
born or collected by the Arla group.
In line with our ambition to continuously
increase transparency by disclosing de-
tails on our taxes, selected value drivers
for tax and economic contribution are
presented for the countries in which our
farmers are based and collectively for
the rest of the world.
Arla will continue to increase transpar-
ency on our tax reporting and imple-
ment the EU Directive on public coun-
try-by-country reporting by 2024 at the
latest.
1 Current and deferred taxes
n Arla, we acknowledge that tax is vital
for the economic and social develop-
ment. We are strongly committed to
paying our taxes legally due and report-
ing transparently on our tax practices.
Taking a responsible and transparent ap-
proach to tax matters supports the strat-
egy of growing our company on a solid
foundation, and is in line with our com-
mitment to the UN Sustainable Develop-
ment Goals (SDGs). Our tax payments
contribute directly and indirectly to the
majority of the SDGs, but in particular to
SDG number 16 – development of
effective, accountable and transparent
institutions.
We are committed to paying taxes in the
countries where we operate and gener-
ate value as well as ensuring that re-
quirements on tax reporting and tax
transparency are met. We strive for an
open dialogue with tax authorities and
the general public around the world re-
garding our business and our tax affairs.
In order to always adhere to our key tax
principles, our global tax function is or-
ganised to ensure that we have the right
policies, people, tax controls and proce-
dures in place to promote strong tax
governance. Part of this work is the con-
tinuous evaluation of available tax
incentives and reliefs to ensure that the
use of such are always to be anchored in
commercial substance.
Our key tax principles
Our approach to tax matters conforms
with Arla’s global Code of Conduct and is
founded on a set of key tax principles
approved by the Board of Directors:
· Arla aims to report the right and proper
amount of tax according to where
value is created
· Arla is committed to paying taxes
legally due and to ensure compliance
with legislative requirements in all
jurisdictions in which the business
operates
· Arla does not use tax havens to reduce
the group’s tax liabilities
· Arla will not set up tax structures in-
tended for tax avoidance which have
no commercial substance and do not
meet the spirit of the law
· Arla is transparent about our approach
to tax and our tax position
· Disclosures are made in accordance
with relevant regulations and applica-
ble reporting standards such as (IFRS)
· Arla builds on good relations with tax
authorities and trusts that transpar-
ency, collaboration and proactiveness
minimise the extent of disputes
reports from its whistleblowing function.
All reports qualifying as whistle-blower
reports were further investigated, and
appropriate measures have been taken
for all substantiated reports.
Fraud investigations
Openness and trust are among our core
values and incorporated into our Code
of Conduct. If employees or our stake-
holders believe that our Code of Con-
duct has been violated, we encourage
them to report these violations.
In 2022, we saw an increase in the num-
ber of reported fraud allegations com-
pared to 2021, from 14 to 18, which
shows the increased trust in our anony-
mous reporting system. None of the
investigations resulted in material finan-
cial losses to the group, but they pro-
vided us with valuable knowledge about
the state of our control environment.
Internal controls
We maintain a coherent system of inter-
nal controls, which are regularly as-
sessed for effectiveness and adequacy.
In 2022, we expanded our control envi-
ronment and reporting with climate-
related financial disclosures in line with
our strategic focus on sustainability and
new external reporting requirements.
Data ethics policy
In 2022, Arla’s data ethics policy was
published on our internal policy portal.
During the year, we carried out pilot
testing of the policy principles in existing
and new projects in some of our func-
tional areas. We focused on including
relevant employees in understanding
how to evolve best practices and embed
data ethics further in the business. The
work will continue in 2023 with an
awareness campaign and training of
relevant employees.
Policy framework
We continuously work on improving our
corporate policies to reflect local legisla-
tions and our values and commitments
as stated in our Code of Conduct.
Our policies govern general employee
behaviour in key areas of good business
conduct, guide us to act responsibly
and with integrity, and govern our
ways of working as one aligned and
efficient Arla.
Whistle-blower system
Arla’s whistle-blower function provides
employees and other stakeholders a
channel, where they can anonymously
report suspected non-compliance with
Arla’s Code of Conduct or criminal acts.
The reports are made through an exter-
nally hosted function, and strict princi-
ples of confidentiality and non-retalia-
tion applies. In 2022, Arla received 25
c
Lurpak® is our premium butter brand that has been
crafted by Danish dairy farmers for over 100 years.
Lurpak has a unique, rich and creamy taste due
to the high-quality milk used, and craftsmanship
applied in the production.
Income statement .................................................................................... 68
Comprehensive income ......................................................................... 68
Profit appropriation .................................................................................. 69
Balance sheet ............................................................................................. 70
Equity.............................................................................................................. 71
Cash flow ....................................................................................................... 74
4.1 Financial risks ...................................................................................... 96
4.2 Financial items ................................................................................. 103
4.3 Net interest-bearing debt ........................................................... 105
4.4 Derivatives ......................................................................................... 109
4.5 Financial instruments ................................................................... 110
4.6 Sale and repurchase arrangements ....................................... 111
4.7 Pension liabilities ............................................................................ 112
5.1 Tax ......................................................................................................... 116
5.2 Provisions .......................................................................................... 118
5.3 Fees to auditors appointed by the board of
representatives ....................................................................................... 118
5.4 Management remuneration and transactions with
related parties ......................................................................................... 119
5.5 Contractual commitments, contingent assets and
liabilities ..................................................................................................... 120
5.6 Events after the balance sheet date....................................... 120
5.7 General accounting policies ...................................................... 121
5.8 Group chart ....................................................................................... 122
1.1 Revenue ................................................................................................ 78
1.2 Operational costs .............................................................................. 80
1.3 Other operating income and costs ............................................ 83
1.4 Key performance indicators .......................................................... 83
2.1 Net working capital, other receivables and current
liabilities ........................................................................................................ 85
3.1 Intangible assets and goodwill .................................................... 88
3.2 Property, plant and equipment ................................................... 91
3.3 Associates and joint ventures ...................................................... 94
Statement by the board of directors and the executive
board ........................................................................................................... 125
Independent auditor's report ............................................................ 126
Development
(EURm)
(EURm)
Revenue
Production costs
Gross profit
Sales and distribution costs
Administration costs
Other operating income
Other operating costs
Share of results after tax in joint ventures and associates
Earnings before interest and tax (EBIT)
Specification:
EBITDA
Depreciation, amortisation and impairment losses
Earnings before interest and tax (EBIT)
Financial income
Financial costs
Profit before tax
Tax
Profit for the year
Allocated as follows:
Arla Foods amba's share of profit for the year
Non-controlling interests
Total
Note
1.1
1.2
2022
13,793
-11,145
2021
11,202
-8,822
2,648
2,380
1.2
1.2
1.3
1.3
3.3
1.2
4.2
4.2
5.1
-1,771
-439
162
-131
60
-1,573
-427
110
-75
53
529
468
1,001
-472
529
37
-117
449
-49
400
382
18
400
948
-480
468
14
-75
407
-61
346
332
14
346
23%
26%
11%
13%
3%
47%
75%
13%
13%
6%
-2%
13%
164%
56%
10%
-20%
16%
15%
29%
16%
Profit for the year
Other comprehensive income
Items that will not be reclassified to the income statement:
Remeasurements of defined benefit schemes
Tax on remeasurements of defined benefit schemes
Items that may be reclassified subsequently to the income statement:
Value adjustments of hedging instruments
Fair value adjustment of certain financial assets
Adjustments related to foreign currency translation
Tax on items that may be reclassified to the income statement
Other comprehensive income, net of tax
Total comprehensive income
Allocated as follows:
Arla Foods amba's share
Non-controlling interests
Total
Note
2022
2021
400
346
4.7
4.4
-1
2
225
-3
-48
-19
156
-3
10
39
-1
127
-1
171
556
517
538
18
556
503
14
517
Comprehensive income
Comprehensive income consists of realised profit for the year
and other value adjustments that have yet to be realised and
are recognised directly in equity. Profit for the year amounted
to EUR 400 million and other comprehensive
income amounted to EUR 156 million. Other comprehensive
income was primarily unrealised value adjustments on hedg-
ing instruments of EUR 225 million and adjustments related to
foreign currency translation of EUR -48 million.
(EURm)
Profit for the year
Non-controlling interests
Arla Foods amba's share of profit for the year
Profit appropriation:
Supplementary payment for milk
Interest on contributed individual capital
Total supplementary payment
Transferred to equity:
Common capital (reserve for special purposes)
Individual capital (contributed individual capital)
Total transferred to equity
Appropriated profit
2022
400
-18
382
260
9
269
74
39
113
382
2021
346
-14
332
203
4
207
83
42
125
332
Profit appropriation
The supplementary payment for 2022 was EUR 269 million
including interest. This corresponded to 2.2 EUR-cent/kg of
owner milk. Contributed individual capital carried interest of
2.9 per cent in 2022, corresponding to EUR 9 million. The
Board of Directors approved an half-year supplementary
payment of EUR 61 million based on the first six months of
owner milk deliveries. The remaining amount corresponding
to EUR 208 million will be paid out in March 2023 subject to
approval of the annual report by the Board of Representatives.
Arla's retainment policy prescribes a maximum of 1.0 EUR
cent/kg of owner milk minus interest on individual contrib-
uted capital to be retained. In 2022, this equalled a retainment
of 0.9 EUR cent/kg of owner milk, corresponding to EUR 113
million. According to the retainment policy, the retained earn-
ings must be split 1/3 on individual capital (individual contrib-
uted capital) and 2/3 on common capital (reserve for special
purposes). The amount allocated to common capital is re-
duced by EUR 9 million corresponding to the interest paid out
in connection with the supplementary payment. In addition,
the individual contributed capital was adjusted for amounts
paid out to members who reached a ceiling of 7.5 EUR-cent of
individual capital per kg of owner milk.
EUR-cent/kg
EURm
EUR-cent/kg
EUR-cent/kg
Individual capital
Common capital
EURm
39
74
0.3
0.6
EUR-cent/kg
EURm
Supplementary
payment, excluding
interest
Interest
2.1
0.1
260
9
EUR-cent/kg
Cash flow of supplementary payment for 2022
(EURcent/kg)
Supplementary
payment
Half-year supple-
mentary payment,
September 2022
Interest
Final supple-
mentary
payment,
March 2023
* Please refer to Note 1.4.1 for further information
on the performance price.
(EURm)
Assets
Non-current assets
Intangible assets and goodwill
Property, plant, equipment and right-of-use assets
Investments in associates and joint ventures
Deferred tax
Pension assets
Other non-current assets
Total non-current assets
Current assets
Inventory
Trade receivables
Derivatives
Other receivables
Securities
Cash and cash equivalents
Total current assets
Total assets
Note
2022
2021
Development
(EURm)
Note
2022
2021
Development
3.1
3.2
3.3
5.1
4.7
2.1
2.1
4.5
2.1
4.5
954
3,031
565
22
16
23
4,611
1,772
1,267
239
319
432
106
4,135
946
3,072
530
21
69
30
4,668
1,248
1,007
74
285
434
97
3,145
8,746
7,813
1%
-1%
7%
5%
-77%
-23%
-1%
42%
26%
223%
12%
0%
9%
31%
12%
Equity and liabilities
Equity
Common capital
Individual capital
Other equity accounts
Supplementary payment to owners
Equity attributable to the owners of Arla Foods amba
Non-controlling interests
Total equity
Liabilities
Non-current liabilities
Pension liabilities
Provisions
Deferred tax
Loans
Total non-current liabilities
Current liabilities
Loans
Trade payables and other payables
Provisions
Derivatives
Other current liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
2,150
540
203
208
3,101
67
3,168
161
28
86
2,640
2,915
709
1,597
20
36
301
2,663
2,062
542
46
207
2,857
53
2,910
245
24
64
2,113
2,446
628
1,445
18
86
280
2,457
5,578
4,903
8,746
7,813
4.7
5.2
5.1
4.3
4.3
2.1
5.2
4.5
2.1
4%
0%
341%
0%
9%
26%
9%
-34%
17%
34%
25%
19%
13%
11%
11%
-58%
8%
8%
14%
12%
(EURm)
Equity at 1 January 2022
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners
Transactions with non-controlling interests
half-year supplementary payment
Supplementary payment regarding 2021
Foreign currency translation adjustments
Total transactions with owners
Equity at 31 December 2022
Equity at 1 January 2021
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners
Transactions with non-controlling interests
Supplementary payment regarding 2020
Foreign currency translation adjustments
Total transactions with owners
Equity at 31 December 2021
Common capital
Individual capital
Other equity accounts
Supplementary
payment
Capital
account
Reserve for
special
purposes
Total
Contributed
individual
capital
Delivery-
based
owner
certificates
Injected
individual
capital
889
1,173
2,062
-
-1
-1
2
-
-
-
13
15
74
-
74
-
-
-
-
-
-
74
-1
73
2
-
-
-
13
15
903
1,247
2,150
878
1,090
1,968
-
7
7
1
-
3
4
83
-
83
-
-
-
-
-
83
7
90
1
-
-
3
4
889
1,173
2,062
334
39
-
39
-15
-
-
-
-10
-25
348
302
42
-
42
-11
-
-
1
-10
334
61
147
-
-
-
-5
-
-
-
-1
-6
55
-
-
-
-4
-
-
-
-6
-10
137
65
146
-
-
-
-4
-
-
-
-4
61
-
-
-
-4
-
-
5
1
147
Reserve
for value
adjustment
of hedging
instruments
Reserve
for fair
value
through
OCI
Reserve for
foreign
exchange
adjustments
-14
-
225
225
-
-
-
-
-
-
211
-53
-
39
39
-
-
-
-
-
-14
8
-
-3
-3
-
-
-
-
-
-
5
9
-
-1
-1
-
-
-
-
-
8
52
-
-65
-65
-
-
-
-
-
-
-13
-74
-
126
126
-
-
-
-
-
52
Total
542
39
-
39
-24
-
-
-
-17
-41
540
513
42
-
42
-19
-
-
6
-13
542
Total
46
-
157
157
-
-
-
-
-
-
203
-118
-
164
164
-
-
-
-
-
46
Equity
attributable to
the owners of
Arla Foods
amba
Non-
controlling
interests
2,857
382
156
538
-22
-
-61
-211
-
-294
3,101
2,586
332
171
503
-18
-
-227
13
-232
53
18
-
18
-
-11
-
-
7
-4
67
53
14
-
14
-
-6
-
-8
-14
Total
equity
2,910
400
156
556
-22
-11
-61
-211
7
-298
3,168
2,639
346
171
517
-18
-6
-227
5
-246
2,857
53
2,910
Total
207
269
-
269
-
-
-61
-211
4
-268
208
223
207
-
207
-
-
-227
4
-223
207
Development in equity
(EURm)
Understanding equity
Equity accounts regulated by the Articles of Association can
be divided into three main categories: common capital, indi-
vidual capital and other equity accounts. The characteristics of
each equity category are explained below.
Supplementary payment
The account for proposed supplementary payment represents
the transactions of supplementary payments in the year, and
the balance represents the amount to be paid out following
the approval of the annual report.
Common capital
Common capital is by nature unallocated to individual mem-
bers and consists of the capital account and the reserve for
special purposes. The capital account represents a strong
foundation for the cooperative's equity, as the non-impair-
ment clause, described on the next page, ensures that the ac-
count cannot be used for payments to owners. The reserve for
special purposes is an account that in extraordinary situations
can be used to compensate owners for losses or impairment
affecting the profit for appropriation. Amounts transferred
from the annual profit appropriation to common capital are
recognised in this account.
Individual capital
Individual capital is capital allocated to each owner based on
their delivered milk volumes. Individual capital consists of con-
tributed individual capital, delivery-based owner certificates
and injected individual capital. Amounts registered in these ac-
counts will, subject to approval by the Board of Representa-
tives, be paid out if owners leave the cooperative. Amounts al-
located to contributed individual capital as part of the annual
profit appropriation are interest-bearing.
Other equity accounts
Other equity accounts include accounts prescribed by IFRS.
These include reserves for value adjustments of hedging
instruments, the reserve for fair value adjustments of certain
financial assets and the reserve for foreign currency transla-
tion adjustments.
Non-controlling interests
Non-controlling interests represent the share of group equity
attributable to holders of non-controlling interests in group
companies.
Development in equity
Equity increased by EUR 258 million in 2022, totalling EUR
3,168 million at 31 December 2022. The equity share was 35
per cent, calculated as equity excluding non-controlling inter-
ests of EUR 3,101 million divided by total assets of EUR 8,746
million.
Comprehensive income
Profit for the year amounted to EUR 400 million compared to
EUR 346 million last year, and other comprehensive income
amounted to EUR 156 million compared to EUR 171 million
last year. Other comprehensive income included income and
expenses as well as gains and losses that are excluded from
the income statement and not realised at the balance sheet
date. Other comprehensive income of EUR 156 million was
due to positive value adjustments on hedging instruments,
negative value adjustments on net assets measured in foreign
currencies, and remeasurement of pension assets and liabili-
ties.
Total equity
1 January
2022
Profit for
the year
Other
comprehensive
income
Supplementary
payment
related to 2021
Other
transactions
with owners
half-year supple-
mentary payment
Other
equity
adjustments
Total equity
31 December
2022
Transactions with farmer owners
The Board of Directors decided to pay out an half-year supple-
mentary payment of EUR 61 million for milk deliveries in the
first six months of the year. An additional supplementary pay-
ment of EUR 208 million was proposed to be paid out subject
to the Board of Representatives' approval of the annual report.
This adds up to a total supplementary payment of EUR 269
million for the year, which includes interest on individual con-
tributed capital.
A supplementary payment related to 2021 totalling EUR 211
million was paid out in March 2022. Other transactions with
farmer owners amounted to EUR 22 million net. They con-
sisted of EUR 24 million paid out to owners resigning or retir-
ing from the cooperative and an amount of EUR 2 million re-
lating to payments from new members.
In 2023, it is expected that EUR 25 million will be paid out to
owners resigning or retiring, subject to approval by the Board
of Representatives.
Other equity adjustments
Other equity adjustments amounted to EUR -4 million com-
pared to EUR -14 million last year. Other equity adjustments
related to transactions with non-controlling interests of
EUR -11 million and foreign exchange rate adjustments of
EUR 7 million.
Delivery-based owner certificates are equity instruments is-
sued to the original Danish and Swedish owners. Issue of these
instruments ceased in 2010.
Reserve for fair value adjustments through OCI comprises the
fair value adjustments of mortgage credit bonds classified as
financial assets measured at fair value through other compre-
hensive income.
Accounting policies and regulations according
to the Articles of Association and IFRS
Common capital
Technical items such as remeasurement of defined benefit
pension schemes, effects of disposals and acquisitions of non-
controlling interests in subsidiaries and exchange rate differ-
ences in equity instruments issued to owners are recognised
in the capital account. Furthermore, the capital account is im-
pacted by agreed contributions from new owners of the coop-
erative.
The annual profit appropriation to common capital is recog-
nised in the reserve for special purposes. It may, upon the
Board of Director's proposal, be applied by the Board of Repre-
sentatives for the full or partial offsetting of material extraordi-
nary losses or impairment in accordance with article 20.1(iii) of
the Articles of Association.
Injected individual capital is equity instruments issued in con-
nection with cooperative mergers and when new owners enter
the cooperative.
Balances on delivery-based owner certificates and injected in-
dividual capital instruments carry no interest.
Balances on contributed individual capital, delivery-based
owner certificates and injected individual capital can be paid
out over three years upon termination of membership of Arla
Foods amba in accordance with the Articles of Association,
subject to approval by the Board of Representatives. Balances
are denominated in the currency relevant to the country in
which owners are registered. Foreign currency translation ad-
justments are calculated annually and the effect is transferred
to the capital account.
Individual capital
Individual capital instruments are regulated in article 20 of the
Articles of Association and the general membership terms.
Proposed supplementary payment to owners is recognised
separately in equity until approved by the Board of Represent-
atives.
Equity instruments issued as contributed individual capital re-
late to amounts transferred as part of the annual profit appro-
priation. The individual balances carry interest at 12 months
CIBOR + 1.5 per cent which are approved and paid out to-
gether with the supplementary payment in connection with
the annual profit appropriation.
Other equity accounts
Reserve for value adjustments of hedging instruments com-
prises the fair value adjustment of derivatives classified as and
meeting the conditions for hedging of future cash flows where
the hedged transaction has not yet been realised.
Reserve for foreign currency translation adjustments com-
prises foreign currency translation differences arising during
the translation of the financial statements of foreign compa-
nies, including value adjustments relating to assets and liabili-
ties that constitute part of the group's net investment and
value adjustments relating to hedging transactions securing
the group's net investment.
Non-impairment clause
Under the Articles of Association, no payment may be made by
Arla Foods amba to owners which impairs the sum of the capi-
tal account and equity accounts prescribed by law and IFRS.
The non-impairment clause is assessed on the basis of the
most recent annual report presented under IFRS. Individual
capital accounts and the reserve for special purposes are not
covered by the non-impairment clause.
No pay-out of individual capital can be made without retain-
ment of a corresponding amount in either the cooperative's
unallocated equity, the individual capital accounts or the re-
serve for special purposes as specified in article 20.1.(i), (ii) and
(iii) of the Articles of Association.
Non-controlling interests
Subsidiaries are fully recognised in the consolidated financial
statements. Non-controlling interests' share of the profit for
the year and of the equity in subsidiaries is recognised as part
of the consolidated profit and equity, respectively, but is listed
separately.
On initial recognition, non-controlling interests are measured
at either the fair value of the equity interest or the propor-
tional share of the fair value of the acquired companies' identi-
fied assets, liabilities and contingent liabilities. The measure-
ment of non-controlling interests is selected on a transac-
tional basis.
Milk payment to owners
The on-account settlement of owner milk is recognised as a
production cost in the income statement.
The supplementary payment is based on the profit for the year
as part of the profit appropriation. The supplementary pay-
ment is recognised as a reserve in the equity statement until
approved by the Board of Representatives, based on a recom-
mendation by the Board of Directors.
The supplementary payment is settled as an half-year supple-
mentary payment based on the first six months of milk deliver-
ies, and a final supplementary payment at year-end. The half-
year supplementary payment for the year was recognised in
equity.
(EURm)
EBITDA
Reversal of share of profit in joint ventures and associates
Reversal of other operating items without cash impact
Change in net working capital
Change in other receivables and other current liabilities
Dividends received, joint ventures and associates
Interest paid
Interest received
Taxes paid
Cash flow from operating activities
Investment in intangible assets
Investment in property, plant and equipment
Sale of property, plant and equipment
Operating investing activities
Acquisition of financial assets
Sale of financial assets
Sale of enterprises
Financial investing activities
Cash flow from investing activities
Note
3.3
2.1
3.1
3.2
3.2
2022
1,001
-60
21
-707
11
15
-67
23
-53
184
-92
-373
13
-452
-16
17
8
9
2021
(EURm)
half-year supplementary payment
Supplementary payment regarding 2021
Transactions with owners
Transactions with non-controlling interests
New loans obtained
Other changes in loans
Payment of lease debt
Payment to pension plans
Cash flow from financing activities
Net cash flow
Cash and cash equivalents at 1 January
Net cash flow for the year
Exchange rate adjustment of cash funds
Cash and cash equivalents at 31 December
948
-53
-80
-90
103
24
-45
8
-35
780
-45
-452
13
-484
-26
14
14
2
Note
4.3.c
4.3.c
4.3.c
4.3.c
2022
-61
-211
-22
-11
810
-143
-71
-22
269
10
97
10
-1
106
2021
-
-227
-18
-6
172
-147
-73
-31
-330
-32
126
-32
3
97
-443
-482
(EURm)
Note
2022
2021
Free operating cash flow
Cash flow from operating activities
Cash flow from operating investing activities
Free operating cash flow
Free cash flow
Cash flow from operating activities
Cash flow from investing activities
Free cash flow
184
-452
-268
184
-443
-259
780
-484
296
780
-482
298
Cash flow from financing activities was positive at EUR 269
million compared to a negative cash flow of EUR 330 million
last year, comprising transactions with owners and the effect
of funding activities inclusive cash management. Transactions
with owners constituted a negative cash flow of EUR 294 mil-
lion, specified as an half-year supplementary payment of E
UR 61 million, a supplementary payment regarding 2021 of
EUR 211 million and a net payment of individual capital of
EUR 22 million.
The net cash flow from other financing activities was EUR 563
million, consisting of new loans obtained amounting to
EUR 810 million and repayments of EUR 236 million. Please
refer to Note 4.3 for more details.
Cash and cash equivalents at 31 December 2022 amounted
to EUR 106 million compared to EUR 97 million last year.
An insignificant amount of cash and cash equivalents at
31 December 2022 was deposited in restricted accounts.
Accounting policies
The consolidated cash flow statement is presented according
to the indirect method, with cash flow from operating activi-
ties determined by adjusting EBITDA for the effects of non-
cash items such as undistributed profit in joint ventures and
associates, changes in working capital items and other non-
cash items.
Cash flow development
Cash flow from operating activities decreased by 76.4 per cent
to EUR 184 million compared to EUR 780 million last year, pri-
marily driven by cash tied up in increased net working capital
positions. Higher milk prices and inflation in production costs
in general drove up the net working capital positions and re-
sulted in a negative cash flow effect from net working capital
of EUR 707 million.
Cash flow from investing activities amounted to EUR 443 mil-
lion compared to EUR 482 million last year. CAPEX invest-
ments amounted to EUR 373 million compared to EUR 452
million last year. Several of prior years' significant investment
projects were finalised, and new investments included invest-
ments in a capacity increase for milk-based beverages in
Esbjerg, Denmark, a packaging equipment upgrade in Oak-
thorpe, UK, and growth investments in Arla Foods Ingredients.
Investments in intangible assets amounted to EUR 92 million
compared to EUR 45 million last year. The increase was
primarily due to investments in a general upgrade of our
SAP platform.
The effect of financial investing activities was EUR 9 million
net and related to proceeds paid and received from various
minor activities.
Illustration of cash flow
(EURm)
A
D
T
B
E
I
l
a
t
i
p
a
c
g
n
k
r
o
w
i
t
e
N
w
o
l
f
d
n
a
s
t
n
e
m
y
a
p
r
e
h
t
O
h
s
a
c
g
n
i
t
a
r
e
p
o
n
o
t
c
a
p
-
m
i
n
a
h
t
i
w
s
t
n
e
m
t
s
u
d
a
j
m
o
r
f
w
o
l
f
h
s
a
C
s
e
i
t
i
v
i
t
c
a
g
n
i
t
a
r
e
p
o
s
e
i
t
i
v
i
t
c
a
g
n
i
t
s
e
v
n
I
w
o
l
f
h
s
a
c
e
e
r
F
d
n
a
s
t
n
e
m
y
a
p
y
r
a
t
n
e
m
e
p
p
u
S
l
s
r
e
b
m
e
m
g
n
v
a
e
i
l
s
e
i
t
i
v
i
t
c
a
i
g
n
c
n
a
n
i
f
r
e
h
t
O
h
s
a
c
n
i
e
s
a
e
r
c
n
I
Basis for preparation
The consolidated financial statements are based on the
group's monthly reporting procedures. Group entities are
required to report using standard accounting principles in
accordance with International Financial Reporting Standards
as adopted by the EU (IFRS).
The consolidated financial statements are prepared on a going
concern basis. Please refer to Note 5.7 for the group's general
accounting principles and applied accounting policies.
In response to the Guidelines on Alternative Performance
Measures (APMs) issued by the European Securities and Mar-
kets Authority (ESMA), we have provided additional infor-
mation on the APMs used by the group. These APMs, and in
particular the performance price, are deemed critical to under-
standing the financial performance and financial position of
the group. As they are not defined by IFRS, they may not be
directly comparable with those of other companies that use
similar measures. Definitions are provided in the glossary and
supported by the calculations in Note 1.4. The group's general
accounting principles are disclosed in Note 5.7, while account-
ing policies for the respective areas are explained in the rele-
vant note sections.
Applying materiality
Our focus is to present information that is considered of
material importance to our stakeholders in a simple and
structured way.
Considering the potential future impact of strategic risks
When preparing the consolidated financial statements, identi-
fied strategic risks were considered. In addition to the going
concern assumption applied, market and regulatory risks –
including sustainability-related risks – were considered. In
addition to the potential direct impact on Arla's performance,
these risks could potentially also negatively impact future milk
volumes delivered by the owners of Arla Foods amba and
thereby indirectly the future value in use of certain parts of the
asset base. These risks are monitored closely and no material
impairments were identified. An assessment of the
impact of risk on future performance is by nature subject to
judgement, and different conclusions could materialise in
the future. Please refer to pages 27-32 for more details on
strategic risks.
Currency exposure
The group's financial position is significantly exposed to cur-
rencies, both due to transactions conducted in currencies
other than the EUR and due to the translation of financial re-
porting from entities not part of the euro zone. The most sig-
nificant exposure relates to financial reporting from entities
operating in GBP and SEK, and to transactions involving sales
in USD or USD-related currencies. Please refer to page 29 for
more details on currencies as part of the strategic risks and to
Note 4.1.
Special focus areas for 2022
Comparability
The group's activity level is normally determined by the vol-
ume of milk delivered by the owners and by the success of
moving milk volumes into branded positions and to interna-
tional markets. 2022 was yet another very unusual year with
general macroeconomic uncertainty leading to unexpectedly
high inflation and record high commodity prices, especially in
the dairy sector. This resulted in record high revenue based on
stable milk volumes delivered. Arla's performance was nega-
tively impacted by a historical increase in our cost base which
was only partly mitigated by the short-term effects of hedging.
Although this on a net basis led to a correspondingly historical
high performance price, our owners – based on the
increased costs on their farms – hesitated and only late in
2022 started to increase milk volumes.
Funds tied up in net working capital positions increased dra-
matically, leading to a corresponding increase in net-interest
bearing debt. Despite this Arla succeeded in keeping leverage
at 3.0, comfortably within our target range of 2.8 to 3.4.
The unexpected development in 2022 makes comparison
with previous years difficult – both from a performance per-
spective and from a financial position perspective. As the vola-
tility and uncertainty continues into 2023, predictions are diffi-
cult and stakeholders should not expect the reported results
to be representative of the coming years.
with details on the group's performance and
rentability.
with development and composition of the
group's inventory and trade balances.
providing details on production capacity, intangi-
ble assets and financial investments.
with details on funding of the group's activities.
providing additional disclosures including tax
cost and management remuneration, general
accounting principles and accounting policies
are described in Note 5.
Valuation of inventory
Due to the macroeconomic volatility and the related effect
on commodity prices, the valuations of individual cost compo-
nents (such as milk-based components, additives, packaging,
energy etc.) in our standard cost models were frequently
updated throughout 2022 and thoroughly reviewed at
31 December 2022.
The conversion from standard cost to reflect cost at the time
of production for the individual inventory categories was also
carefully assessed.
Furthermore, net realisable value was assessed based on the
price development in milk commodity products in particular at
the end of the year. Please refer to Note 2.1 Inventory for
more details.
Valuation of certain assets and liabilities based on
projection of expected future cash flow
Due to the significant increases in interest rates, the valuation
of goodwill, gross pension liabilities and interest hedging in-
struments was carefully considered. The increased interest
rates negatively impacted the headroom for certain goodwill
positions, reduced the gross pension liability and significantly
increased the value of fixed rate interest hedging contracts.
Please refer to Note 3.1 Goodwill, Note 4.4 Hedging instru-
ments and Note 4.7 Pension liabilities for more details.
Classification of power purchase agreements
Arla has set ambitious targets for CO2e emission reductions,
both on farm (scope 3) and within Arla's dairy production
(scopes 1 and 2).
savings on farm and is expected to have a positive effect on
sales and the value of our brands.
To support the reduction of scope 1 and 2 CO2e emissions,
Arla signed a ten-year power purchase agreement (PPA) in
2022 providing annual savings of 58,000 tonnes of CO2e. The
PPA is structured as a supplier contract which is not classified
as a lease or derivative, and thus will not have any significant
impact on Arla's financial position or income statement going
forward. Please refer to page 41 for further information on
the PPA.
Climate-related risks in the financial statements
Climate related risks are high on the agenda at Arla. The man-
agement has assessed the impact on the consolidated finan-
cial statements from such risks and the initiatives that have
been implemented or will be implemented in order to mitigate
these risks. There was no material impact on the consolidated
financial statements 2022 from climate changes or the action
taken to address climate-related risks. Potential future im-
pacts were also evaluated.
Please refer to the Risks and opportunities section on pages
27-32 and the Environmental ambition and progress section
on pages 33-44 in the management review for descriptions of
the risks and progress on sustainability.
Points of consideration are described below.
Risk of decline in milk volumes
The milk supply from farmer owners declined slightly during
2022. Climate-related risks that can potentially accelerate this
development in the future are:
A new incentive model for owners will be introduced during
the summer of 2023, allowing up to 3 EUR-cent per kg of de-
livered milk to be paid if certain sustainability initiatives on the
farm are realised. This is one of the key levers to achieve CO2e
· Regulations to reduce emissions from agricultural activities.
The Danish government has committed to introducing a car-
bon tax on methane and nitrous oxide emissions from
agricultural activities. Our Danish farmer owners will be sub-
ject to this tax; however, the details regarding the level and
the implementation of the tax are currently unclear. The tax
would increase production costs and could potentially force
farmers to reduce production or leave the business. Initia-
tives implemented and backed by our Future26 strategy are
targets for the reduction of scope 3 CO2e emissions sup-
ported by an incentive model rewarding sustainability ac-
tions on farms.
Risk of impairment of production capacity
As a consequence of the above climate-related risks, Arla
could face impairment of its production capacity due to:
· Equipment becoming outdated in the sustainability
transformation
· Excess production capacity if milk volumes and operations
decline.
· Extreme weather events like heat waves, draughts or floods
which can have a negative impact on crop yields and cows'
productivity.
· Land use regulations to reach EU climate targets of convert-
ing agricultural land to woodlands which could potentially re-
duce the production of cow feed and shrink herd numbers
on farms.
The potential consequences of the above were considered as
part of our impairment test conducted during 2022 and our
assessment of the value in use of property, plant and equip-
ment. Non-current assets in the balance sheet were not af-
fected by such impairment in 2022. Sustainability is now an in-
tegral part of all CAPEX investments which ensures future in-
vestments to address the risks identified.
Risk of increased production cost
Climate-related risks that could potentially affect the future of
dairy operations are:
· Regulations to reduce emissions from production. Denmark
has proposed an emission tax on industry operations. Arla's
operations will be impacted by this. There is the potential for
other countries to follow Denmark and introduce similar
taxes or employ other regulatory tools to reduce emissions
in the future. This would make dairy production more expen-
sive compared to countries where such initiatives are not im-
plemented, which would harm Arla's competitiveness. We
are constantly lowering CO2e emissions from operations
which is supported by the Future26 strategy's science-based
target of lowering scope 1 and 2 CO2e emissions by 63 per
cent by 2030.
· The transformation of consumer behaviour driven by con-
sumers pushing for more sustainable products increases the
need for sustainable dairy production to stay competitive.
Significant accounting estimates
and judgements
Preparing the group's consolidated financial statements re-
quires management to apply accounting estimates and judge-
ments that affect the recognition and measurement of the
group's assets, liabilities, income and expenses. The estimates
and judgements are based on historical experience and other
factors. By nature, these are associated with uncertainty and
unpredictability which can have a significant effect on the
Significant accounting estimates
and judgements
Estimate/
Judgement
Note
1.1
2.1
2.1
3.1
3.3
4.7
5.1
Measurement of revenue and rebates
Estimate
Valuation of inventory
Measurement of trade receivables
Valuation of goodwill
Estimate
Estimate
Estimate
Classification of investments
Judgement
Valuation of pension plans
Tax
Estimate
Estimate
The International segment accounted for 17.9 per cent of to-
tal revenue compared to 18.8 per cent last year. Revenue in
International increased to EUR 2,463 million compared to
EUR 2,101 million last year, driven by prices and positive for-
eign exchange rate effects from USD.
Arla Foods Ingredients accounted for 7.5 per cent of total rev-
enue compared to 7.1 per cent last year. Revenue increased to
EUR 1,028 million compared to EUR 793 million last year,
mainly driven by price increases.
Global Industry Sales and other segments represented 18.3
per cent of total revenue, growing by 50.1 per cent to EUR
2,531 million compared to EUR 1,686 million last year. The
significant increase was due to commodity price increases, pri-
marily driven by stagnating global milk supply.
Revenue was positively impacted by foreign exchange rate
movements of EUR 159 million, primarily driven by USD.
amounts recognised in the consolidated financial statements.
The most significant accounting estimates are listed below
with reference to further comments in the notes.
Revenue development
Revenue increased by 23.1 per cent to EUR 13,793 million
compared to EUR 11,202 million last year. The increase was
driven by price increases both in commodities and retail due
to stagnating global milk supply and general inflation.
Strategic branded sales volumes declined by 3.2 per cent
compared to an increase of 4.5 per cent last year. The price in-
creases negatively impacted volumes sold within our branded
positions as some consumers started buying cheaper prod-
ucts. The negative volume development was also due to a
shift back to less home cooking and more food service after a
couple of years of strong volume growth during the Covid-19
pandemic.
Europe is Arla's largest commercial segment, accounting for
56.3 per cent of total revenue, compared to 59.1 per cent last
year. Revenue in Europe increased to EUR 7,771 million com-
pared to EUR 6,621 million last year. The increase was driven
by higher prices. Strategic branded revenue in Europe de-
clined by 4.2 per cent primarily driven by Lurpak®.
Revenue split by commercial segment
Europe 56% (59%)
International 18% (19%)
Arla Foods Ingredients 8% (7%)
Global Industry Sales and other sales 18% (15%)
2022
2021
13,793
(EURm)
11,202
(EURm)
Development in revenue
(EURm)
Table 1.1.a shows total revenue by country and includes all
sales that occur in the countries, irrespective of organisational
structure. Therefore, the figures cannot be compared to our
commercial segment review on pages 19-24.
Table 1.1.a Revenue split by country
(EURm)
United Kingdom
Germany
Sweden
Denmark
Netherlands
Saudi Arabia
Finland
China
Oman
USA
Other*
Total
*Other countries include, among others, Belgium, Canada, UAE, Spain, France, Australia
Table 1.1.b - Revenue split by brand
(EURm)
Arla
Lurpak
Puck
Castello
Milk-based beverage
Other supported brands
Strategic branded revenue
Arla Foods Ingredients
Global Industry Sales, private label and other
Total
2022
3,474
1,737
1,717
1,306
775
468
337
328
302
278
3,071
2021
2,891
1,301
1,546
1,082
598
342
309
419
158
215
2,341
Share of
revenue
in 2022
25%
13%
12%
9%
6%
3%
2%
2%
2%
2%
22%
13,793
11,202
100%
2022
3,702
750
504
239
353
746
6,294
1,028
6,471
2021
3,359
646
383
192
293
599
5,472
794
4,936
13,793
11,202
Accounting policies
Revenue is recognised when a contract exists with a customer
for the production and transfer of dairy products across vari-
ous product categories and geographical regions. Revenue by
commercial segment or market is based on the group's inter-
nal financial reporting practices.
Revenue is recognised in the income statement when a per-
formance obligation is satisfied at the price allocated to that
performance obligation. This is defined as the point in time
when control of the products has been transferred to the
buyer, the amount of revenue can be measured reliably and
collection is probable. The transfer of control to customers
takes place according to trade agreement terms, i.e. Inco-
terms, and may vary depending on the customer or the spe-
cific trade.
Revenue comprises invoiced sales for the year less customer-
specific payments, such as sales rebates, cash discounts, list-
ing fees, promotions, VAT and duties. Contracts with custom-
ers may contain various types of discounts. Historical experi-
ence is used to estimate discounts in order to correctly recog-
nise revenue.
Furthermore, revenue is only recognised when it is highly
probable that a material reversal in the amount of revenue will
not occur. This is generally the case when control of the prod-
uct is transferred to the customer, also taking into considera-
tion the level of rebates.
The vast majority of all contracts have short payment terms.
Therefore, an adjustment of the transaction price with regard
to a financing component in the contracts with customers is
not required.
Uncertainties and estimates
Revenue, net of rebates, is recognised when the goods are
transferred to the customer. Estimates are applied when
measuring accruals for rebates and other sales incentives. The
majority of rebates are calculated based on terms agreed with
the customer. For some customer relationships, the final set-
tlement of the rebate depends on future sales volumes, prices
and other incentives. As a result, there is an element of esti-
mation and judgement in determining whether performance
obligations are achieved. Estimates are based on historical ex-
perience and forecasted future sales.
The increased selling prices in 2022 led to increased rebates.
Final settlement of these is not expected to be subject to
greater uncertainty than in previous years.
Since Arla's main line of business is the sale of fresh dairy prod-
ucts, returns are rare and therefore do not require specific
accounting disclosures.
Operational cost development
Operational costs amounted to EUR 13,355 million, up 19.0
per cent compared to last year. The increase was mainly driven
by higher milk prices paid to farmer owners and by inflation in
production costs and other operational costs.
Production costs increased by 26.3 per cent to EUR 11,145
million compared to EUR 8,822 million last year. Excluding
costs of raw milk, production costs increased to EUR 3,965
million compared to EUR 3,599 million last year, representing
an increase of 10.2 per cent. The increase was driven by higher
energy prices and inflation in other production materials such
as packaging, consumables and utilities.
Sales and distribution costs increased by 12.6 per cent to
EUR 1,771 million compared to EUR 1,573 million last year.
The increase was mainly driven by higher transport costs.
Research and development costs amounted to EUR 86 million
compared to EUR 89 million last year.
Administration costs rose by 2.8 per cent to EUR 439 million
compared to EUR 427 million last year.
The volatility of the external environment, especially the
swings in raw milk availability, put pressure on our transfor-
mation and efficiency programme, Fund our Future. However,
we reached the expected net savings target of EUR 101 mil-
lion, primarily delivered by overperformance in net revenue
management, International net productivity and a lower mar-
keting spend. EUR 26 million related to improved revenue and
EUR 75 million related to cost efficiencies.
Cost of raw milk
The cost of raw milk increased by 37.5 per cent to EUR 7,180
million compared to EUR 5,223 million last year.
Development in operational costs
(EURm)
Owner milk
Costs related to owner milk increased by EUR 1,899 million
due to a higher average pre-paid milk price. Arla's average pre-
paid milk price increased to 52.0 EUR-cent/kg in 2022 com-
pared to 37.0 EUR-cent/kg last year, which constitutes a 40.5
per cent increase.
Other milk
The cost of other milk increased by EUR 58 million due to
higher prices, partly offset by lower volumes in the UK and the
Netherlands. Other milk consists of speciality milk and other
contract milk acquired to meet local market demand.
Staff costs and number of FTEs
Staff costs increased by 4.9 per cent to EUR 1,427 million
compared to EUR 1,360 million last year. Staff costs increased
due to additional FTEs in Arla Foods Ingredients, continued in-
sourcing of IT activities and regular salary increases.
The total number of FTEs increased to 20,907 compared to
20,617 last year. Please refer to the ESG section, Note 1.2, for
further details.
Marketing spend
The marketing spend was consistent with last year and
amounted to EUR 240 million.
Depreciation, amortisation and impairment
Depreciation, amortisation and impairment were consistent
with last year and amounted to EUR 472 million.
2021
Milk cost
Inflation
Efficiency
cost impact
Other changes
including
volume/mix
Currency
2022
Cost split by type
Weighed-in raw milk 49% (48%)
Other production materials* 17% (18%)
Staff costs 13% (13%)
Transport costs 7% (7%)
Marketing costs 2% (2%)
Depreciation, amortisation and impairment 4% (4%)
Other costs** 8% (8%)
2022
2021
Table 1.2.a Operational costs split by function and type
(EURm)
Production costs
Sales and distribution costs
Administration costs
Total
Specification:
Weighed-in raw milk
Other production materials*
Staff costs
Transport costs
Marketing costs
Depreciation, amortisation and impairment
Other costs**
Total
2022
11,145
1,771
439
13,355
7,180
2,181
1,427
820
240
472
1,035
2021
8,822
1,573
427
10,822
5,223
1,959
1,360
718
238
480
844
13,355
10,822
13,355
(EURm)
*Other production materials include packaging, additives, consumables, variable energy and changes in inventory
**Other costs mainly include maintenance, utilities and IT
10,822
(EURm)
Table 1.2.b Weighed-in raw milk
Owner milk
Other milk
Total
2022
Mkg
12,494
961
13,455
EURm
6,661
519
7,180
2021
Mkg
12,518
1,128
13,646
EURm
4,762
461
5,223
Table 1.2.c Staff costs
(EURm)
Wages, salaries and remuneration
Pensions – defined contribution plans
Pensions – defined benefit plans
Other social security costs
Total
Staff costs relate to:
Production costs
Sales and distribution costs
Administration costs
Total
Average number of full-time employees
Table 1.2.d Depreciation, amortisation and impairment
(EURm)
Intangible assets, amortisation
Property, plant and equipment and RoU, depreciation
Total
Depreciation, amortisation and impairment relate to:
Production costs
Sales and distribution costs
Administration costs
Total
2022
1,239
90
1
97
1,427
800
412
215
2021
1,177
83
5
95
1,360
756
394
210
1,427
1,360
20,907
20,617
Accounting policies
Production costs
Production costs cover direct and indirect costs related to pro-
duction, including volume movements in inventories and
related inventory revaluation. Direct costs comprise purchase
of milk from owners, inbound transport costs, packaging,
additives, consumables, energy and variable salaries directly
related to production. Indirect costs comprise other costs
related to the production of goods, including depreciation and
impairment losses on production-related materials and other
supply chain-related costs. The purchase of milk from cooper-
ative owners is recognised at pre-paid prices for the account-
ing period and therefore does not include the supplementary
payment, which is classified as distributions to owners and rec-
ognised directly in equity.
Sales and distribution costs
Costs relating to sales staff, write-downs on receivables, spon-
sorships, research and development, depreciation and impair-
ment losses are recognised as sales and distribution costs.
Sales and distribution costs also include marketing
expenses relating to investments in the group's brands, such
as the development of marketing campaigns, advertising, ex-
hibits etc.
Administration costs
Administration costs relate to management and administra-
tion, including administrative staff, office premises and office
costs as well as depreciation and impairment.
2022
61
411
472
336
67
69
472
2021
74
406
480
329
75
76
480
Other income and costs
Other operating income and costs, net, amounted to EUR 31
million compared to EUR 35 million last year.
The net income of EUR 31 million was primarily attributable to
commodity hedging of EUR 72 million, sales of surplus elec-
tricity of EUR 26 million and positive currency hedging of EUR
8 million. This was offset by negative currency hedging of EUR
76 million and a loss due to the divestment of the Russian ac-
tivities of EUR 19 million.
Accounting policies
Other operating income and costs consist of items outside the
regular course of dairy business activities, including items
such as gains and losses relating to the settlement of disputes,
revaluation gains from the step acquisition of entities, the net
result of financial hedging activities and the net result of the
production and sale of energy from our biogas plants. Further-
more, this item includes gains and losses from disposal of non-
current assets and divestment of entities.
Financial comments
Arla's performance price is a key measure of our overall perfor-
mance, expressing the value added to each kg of milk supplied
by our farmer owners. The performance price is calculated as
the standardised pre-paid milk price included in production
costs, plus Arla Foods amba's share of the profit attributable to
farmer owners, divided by the weighed-in milk volume in
2022. The performance price was 55.1 EUR-cent/kg of owner
milk compared to 39.7 EUR-cent/kg of owner milk last year.
The alternative performance measures disclosed in Note 1.4
are key performance indicators for the group. They are not an
IFRS requirement.
Table 1.3 Other operating income, net
(EURm)
Sale of electricity
Income from hedging instruments transferred from equity
Gains on disposal of intangible assets and PP&E
Other items
Other operating income
Costs related to sale of electricity
Costs of hedging instruments transferred from equity
Other items
Other operating costs
2022
2021
58
80
11
13
28
36
17
29
162
110
-32
-76
-23
-131
-24
-38
-13
-75
Table 1.4.1 Performance price
2022
2021
Owner milk
Adjustment to standard milk (4.2% fat, 3.4%
protein)
Arla Foods amba's share of profit for the year
Total
EURm
6,661
Mkg EUR-cent/kg
12,494
53.3
EURm
4,762
Mkg EUR-cent/kg
12,518
38.0
382
12,494
-1.3
3.1
55.1
332
12,518
-1.0
2.7
39.7
Financial comments
Volume-driven revenue growth (VDRG) is defined as revenue
growth derived from growth in volumes keeping prices
constant.
Accounting policies
Strategic branded volume-driven revenue growth (strategic
branded VDRG) is a measure of the share of revenue growth
relative to volumes.
Financial comments
Arla's profit share is targeted at 2.8-3.2 per cent of revenue,
calculated on the basis of the profit attributable to our farmer
owners.
Accounting policies
The profit share is a measure of profit relative to revenue,
calculated as Arla Foods amba's share of profit for the year
divided by total revenue.
VDRG of strategic brands is a performance measure applied to
support and understand the non-price revenue growth and
performance of our branded business.
Volume-driven revenue is calculated by keeping prices fixed
year on year.
Strategic branded VDRG decreased by 3.2 per cent in 2022 af-
ter significant increases in the last two years. Although the de-
mand for branded products remains high in the retail sector,
the inflationary price increases meant that some customers
turned to cheaper non-branded products.
Strategic branded VDRG is calculated as the volume growth of
EUR -176 million divided by total strategic branded revenue
last year of EUR 5,472 million and amounted to -3.2 per cent
in 2022.
In 2022, the profit attributable to our farmer owners
amounted to EUR 382 million compared to EUR 332 million
last year. This corresponded to 2.8 per cent of revenue, or
3.1 EUR-cent/kg of milk delivered, and was distributed to the
supplementary payment and retainment as disclosed in the
statement of profit appropriation.
The profit share is calculated as EUR 382 million divided by
EUR 13,793 million and came to 2.8 per cent in 2022.
Table 1.4.2 Strategic branded volume-driven revenue growth
(EURm)
Strategic branded revenue last year
Strategic branded VDRG
Price and exchange rate adjustments
Strategic branded revenue
Strategic branded volume-driven revenue growth, %
2022
5,472
-176
998
6,294
-3.2%
2021
5,156
230
86
Table 1.4.3 Profit share
(EURm)
Revenue
Profit for the year
Profit relating to non-controlling interests
5,472
Profit attributable to farmer owners
2022
13,793
400
-18
382
2021
11,202
346
-14
332
4.5%
Profit share
2.8%
3.0%
Managing credit risk exposure on trade receivables is guided
by group-wide policies. Credit limits are set based on the cus-
tomer's financial position and current market conditions. The
customer portfolio is diversified in terms of geography, indus-
try sector and customer size. In 2022, the group was not ex-
traordinarily exposed to credit risk related to significant indi-
vidual customers, but to the general credit risk in the retail
sector. Read more about credit risk in Note 4.1.5.
The liquidity risk for Arla on termination of the programmes is
limited. The payment terms for suppliers participating in the
programmes are no more than 180 days. Utilisation of supply
chain finance programmes was on the same level as last year.
Excluding currency effects, the carrying amount of trade paya-
bles and other payables including owner milk increased by
EUR 176 million.
Net working capital development
Net working capital increased by EUR 632 million to EUR
1,442 million compared to EUR 810 million last year, repre-
senting an increase of 78 per cent on last year. The increase
was driven by higher inventory and trade receivables positions
partly offset by trade payables and other payables.
Inventory
Inventory increased by 42 per cent to EUR 1,772 million com-
pared to EUR 1,248 million last year. The increase was driven
by higher milk prices to our farmer owners, higher energy
prices and inflation in other production materials such as
packaging, consumables and utilities. To a lesser extent, the
increase was due to higher stock volumes and a changed
composition of inventory compared to last year. Excluding cur-
rency effects, the carrying amount of inventory increased by
EUR 558 million.
Trade receivables
Trade receivables increased by 26 per cent to EUR 1,267 mil-
lion compared to EUR 1,007 million last year. The develop-
ment was driven by increased selling prices and partly offset
by higher utilisation of trade receivables finance programmes.
The group utilises these programmes to manage liquidity and
reduce credit risk on trade receivables.
Overdues above 30 days amounted to 8.8 per cent of the
trade receivables position compared to 6.5 per cent last year.
Provision for expected losses was EUR 19 million compared to
EUR 15 million last year.
Excluding currency effects, the carrying amount of trade
receivables increased by EUR 290 million.
Trade payables and other payables
Trade payables and other payables increased by 11 per cent to
EUR 1,597 million compared to EUR 1,445 million last year.
Inflation was the main reason for the development.
A number of Arla's strategic suppliers participate in supply
chain finance programmes, where the supply chain finance
provider and related financial institutions act as a funding part-
ner. When suppliers participate in these programmes, the sup-
plier has the option, at their own discretion and flexibility, to
receive early payment from the funding partner based on in-
voices sent to Arla. This is conditioned by Arla's recognition
and approval of received goods or services and an irrevocable
acceptance to pay the invoice at the due date via the funding
partner. The arrangement of early payment is an exclusive
transaction between the supplier and the supply chain finance
provider.
Extended payment terms are not embedded in the pro-
grammes themselves, but agreed with vendors directly.
Other receivables and other current liabilities
Other receivables increased by EUR 34 million to EUR 319 mil-
lion compared to EUR 285 million last year, and mainly consist
of VAT and duty receivables. Other current liabilities increased
by EUR 21 million to EUR 301 million compared to EUR 280
million last year. Other current liabilities mainly consist of
HR-related accruals.
Development in net working capital
(EURm)
1 January
2022
Inventory
Trade
receivables
Trade payables and
other payables
excluding owner milk
Owner milk
Currency
31 December
2022
Net working capital
(EURm)
1,103
894
2018
1,000
823
2019
867
679
2020
1,022
810
2021
Net working capital
Net working capital excluding owner milk
1,740
1,442
2022
Table 2.1.c Trade receivables
(EURm)
Trade receivables before provision for expected losses
Provision for expected losses
Total trade receivables
2022
1,286
-19
1,267
2021
1,022
-15
1,007
Table 2.1.d Trade receivables age profile
2022
2021
(EURm)
Not overdue
Overdue by less than 30 days
Overdue by between 30 and 89 days
Overdue by more than 90 days
Total trade receivables
Gross carrying
amount
Expected loss rate
Gross carrying
amount
Expected loss rate
1,013
160
72
41
1,286
0%
0%
1%
44%
837
119
38
28
1,022
0%
0%
3%
50%
Historically, experienced loss rates on balances not overdue or overdue by less than 30 days are below 1 per cent.
Table 2.1.a Net working capital
Cash flow
Non-cash flow
(EURm)
2022
Inventory
Trade receivables
Trade payables and other payables
Total net working capital
2021
Inventory
Trade receivables
Trade payables and other payables
Total net working capital
Table 2.1.b Inventory
(EURm)
Inventory before the write-downs
Write-downs
Total inventory
Raw materials and consumables
Work in progress
Finished goods and goods for resale
Total inventory
Included in
operating
cash flow
1 January
Write-
downs
Currency
31 December
1,248
1,007
-1,445
810
1,080
811
-1,212
679
569
318
-180
707
135
171
-216
90
-11
-4
-
-15
-3
-1
-
-4
-34
-54
28
-60
36
26
-17
45
2022
1,801
-29
1,772
401
622
749
1,772
1,267
-1,597
1,442
1,248
1,007
-1,445
810
2021
1,269
-21
1,248
274
382
592
1,772
1,248
Trade receivables
Trade receivables are recognised at the invoiced amount less
expected losses in accordance with the simplified approach
for amounts considered irrecoverable (amortised cost).
Expected losses are measured as the difference between
the carrying amount and the present value of anticipated
cash flows.
Expected losses are assessed for major individual receivables
or in groups at portfolio level based on the receivables' age
and maturity profile as well as historical records of losses. Cal-
culated expected losses are adjusted for specific significant
negative developments in geographical areas.
Trade receivables subject to trade receivables finance pro-
grammes are derecognised once the criteria for derecognition
have been met and all substantial risks and rewards have been
transferred.
Uncertainties and estimates
Inventory
The group uses monthly standard costs to calculate inventory
and revises all indirect production costs at least once a year.
Standard costs are also revised if they deviate materially from
the actual cost of the individual product. A key component in
the standard cost calculation is the cost of raw milk from farm-
ers. This is determined using the average pre-paid milk price
that matches the production date of inventory.
Due to the macroeconomic volatility and the related effect on
commodity prices, valuations of individual cost components,
such as milk-based components, energy, packaging, consuma-
bles and utilities etc. in our standard cost models were fre-
quently updated throughout 2022 and carefully assessed at
31 December 2022.
Trade payables and other payables
Trade payables are measured at amortised cost, which usually
corresponds to the invoiced amounts.
Conversion from standard cost to reflect cost at the time of
production for the individual inventory categories was corre-
spondingly carefully assessed.
The amounts payable to suppliers included in supply chain fi-
nance programmes are classified as trade payables in the bal-
ance sheet and in the cash flow statement as cash flow from
working capital.
Other receivables and other current liabilities
Other receivables and other current liabilities are measured at
amortised cost usually corresponding to the nominal amount.
Indirect production costs are calculated based on relevant as-
sumptions with respect to capacity utilisation, production time
and other factors characterising the individual product.
The assessment of the net realisable value requires judge-
ment, particularly in relation to the estimate of the selling
price of certain cheese stock with long maturities and bulk
products to be sold on European or global commodity mar-
kets.
Receivables
Expected losses are based on a calculation, including several
parameters, for example the number of days overdue adjusted
for significant negative developments in certain geographical
areas.
The financial uncertainty associated with the provision for
expected losses is usually considered to be limited. However, if
a customer's ability to pay were to deteriorate in the future,
further write-downs may be necessary.
Based on the macroeconomic volatility and the increased sell-
ing prices in 2022, expected losses were carefully assessed.
Customer-specific bonuses are calculated based on actual
agreements with retailers; however, some uncertainty exists
when estimating the exact amounts to be settled and the tim-
ing of these settlements.
Finance programmes
The classification of trade receivables finance programmes
and supply chain finance programmes is subject to judge-
ment. The utilisation of these programmes is recognised in
net working capital.
Accounting policies
Inventory
Inventories are measured at the lower of cost or net realisable
value, calculated on a first-in, first-out basis. The net realisable
value is established taking into account inventory marketabil-
ity and an estimate of the selling price, less completion costs
and costs incurred to execute the sale.
The cost of raw materials, consumables and commercial
goods includes the purchase price plus delivery costs. The pre-
paid milk price to Arla's owners is used as the purchase price
for owner milk.
The cost of work in progress and manufactured goods also
includes an appropriate share of production overheads, includ-
ing depreciation, based on the normal operating capacity of
the production facilities.
EUR 473 million related to activities in the UK compared to
EUR 498 million last year. Please refer to table 3.1.b for a spec-
ification of goodwill.
Licences and trademarks
The carrying amount of licences and trademarks amounted to
EUR 66 million compared to EUR 76 million last year. The car-
rying amount primarily related to the recognition of trade-
marks in connection with business combinations and includes
brands such as Yeo Valley® and Svensk Mjölk®. The decrease
in value compared to last year was due to amortisation.
The strategic brands, Arla®, Lurpak®, Castello® and Puck® are
internally generated trademarks and consequently no carrying
amounts are recognised for these. Arla has the licence to man-
ufacture, distribute and market StarbucksTM premium ready-
to-drink coffee beverages under a long-term strategic licence
agreement. Additionally, Arla holds a long-term licence agree-
ment to manufacture, distribute and market KraftTM branded
cheese products in the MENA region. No values are recog-
nised for these licence agreements.
IT and other development projects
The carrying amount of IT and other development projects
was EUR 186 million compared to EUR 160 million last year.
The group continued to invest in IT projects with an addition of
EUR 76 million. One of the key projects in 2022 was a general
upgrade of our SAP platform.
Table 3.1.a Intangible assets and goodwill
(EURm)
2022
Cost at 1 January
Exchange rate adjustments
Additions
Impairment
Disposals
Cost at 31 December
Amortisation and impairment at 1 January
Exchange rate adjustments
Amortisation and impairment for the year
Amortisation on disposals
Amortisation and impairment at 31 December
Carrying amount at 31 December
2021
Cost at 1 January
Exchange rate adjustments
Additions
Disposals
Cost at 31 December
Amortisation and impairment at 1 January
Exchange rate adjustments
Amortisation and impairment for the year
Amortisation on disposals
Amortisation and impairment at 31 December
Carrying amount at 31 December
Goodwill
Licences and
trademarks
IT and other
development
projects
710
-22
16
-2
-
702
-
-
-
-
-
702
667
43
-
-
710
-
-
-
-
-
710
166
-6
-
-
-
160
-90
3
-7
-
-94
66
163
3
-
-
166
-82
-1
-7
-
-90
76
558
-1
76
-
-2
631
-398
5
-54
2
-445
186
513
2
45
-2
558
-330
-3
-67
2
-398
160
Total
1,434
-29
92
-2
-2
1,493
-488
8
-61
2
-539
954
1,343
48
45
-2
1,434
-412
-4
-74
2
-488
946
Intangible assets and goodwill
Intangible assets and goodwill amounted to EUR 954 million,
unchanged from last year.
Goodwill
The carrying amount of goodwill amounted to EUR 702 mil-
lion compared to EUR 710 million last year. Addition for the
year amounting to EUR 16 million related to an acquisition in
our Chinese business unit. Of the carrying amount of goodwill,
Intangible assets and goodwill
Goodwill 74% (75%)
Licences and trademarks 7% (8%)
IT and other development
projects 19% (17%)
2022
2021
954
(EURm)
946
(EURm)
Licences and trademarks
Licences and trademarks are initially recognised at cost. The
cost is subsequently amortised on a straight-line basis over
their expected useful lives, with a maximum of 20 years.
IT and other development projects
Costs incurred during the research or exploration phase when
carrying out general assessments of requirements and availa-
ble technologies are expensed as incurred. Directly attributa-
ble costs incurred during the development stage for IT and
other development projects relating to the design, program-
ming, installation and testing of projects before they are ready
for commercial use are capitalised as intangible assets. Such
costs are only capitalised provided the expenditure can be
measured reliably, the project is technically and commercially
viable, future economic benefits are probable and the group
intends to and has sufficient resources to complete and use
the asset. IT and other development projects are amortised on
a straight-line basis over five to eight years.
Impairment test
Goodwill is allocated to relevant cash-generating units, primar-
ily to our activities in the UK within the commercial segment
Europe.
Basis for impairment test and applied estimates
Impairment tests are based on expected future cash flows de-
rived from forecasts and long-term strategic targets. Future
cash flows and earnings targets are projected for individual
cash-generating units based on expected developments iden-
tified in the Future26 strategy process as well as past experi-
ence. The impairment tests do not include revenue growth in
the terminal value.
Procedure for impairment tests
Impairment tests of goodwill are based on an assessment of
their value in use. Milk costs in the forecast are recognised at a
milk price that corresponds to the price at the time the test
was performed and longer-term. The key operational
assumption is future profitability based on a combination of
the impact from moving milk intake into value-add products,
more profitable markets and operational efficiency initiatives.
Test results
An increased interest rate level led to a higher discount rate,
resulting in lower calculated headroom. With lower headroom,
our goodwill positions were carefully monitored and support-
ing business cases assessed throughout the year.
With the applied discount rates, sensitivity analyses showed
that margins in the UK could decline by 1 per centage point
without risk of impairment. For goodwill related to Finland, a
similar reduction in margins could lead to an impairment of
the carrying amount. Subsequently, after the detailed calcula-
tions were performed, the market situation in Finland im-
proved.
2022
473
40
20
60
593
83
16
99
10
10
2021
498
40
22
63
623
78
-
78
9
9
702
710
Table 3.1.1 Applied key assumptions
(EURm)
UK
Finland
Sweden
Europe, other
MENA
Arla Foods Ingredients
2022
2021
Discount
rate,
net of tax
Discount
rate,
before tax
Discount
rate,
net of tax
Discount
rate,
before tax
8.6%
7.6%
7.6%
7.4%
13.0%
8.1%
9.5%
8.2%
8.4%
8.3%
14.4%
9.1%
6.5%
5.6%
6.1%
5.7%
12.0%
6.3%
7.2%
6.0%
6.7%
6.3%
13.7%
7.0%
Accounting policies
Goodwill
Goodwill represents the premium paid by Arla above the fair
value of the net assets of an acquired company. On initial
recognition, goodwill is recognised at cost. Goodwill is not
amortised, but is subsequently measured at cost less any ac-
cumulated impairment. The carrying amount of goodwill is al-
located to the group's cash-generating units which follow the
management structure and internal financial reporting. Cash-
generating units are the smallest group of assets which can
generate independent cash inflows.
Table 3.1.b Goodwill split by commercial segment and country
(EURm)
UK
Finland
Sweden
Other
Europe total
MENA
China
International
Argentina
Arla Foods Ingredients
Total
Accounting policies
Impairment occurs when the carrying amount of an asset is
greater than its recoverable amount through either use or
sale. For impairment testing, assets are grouped together into
the smallest group of assets that generates cash inflows from
continuing use (a cash-generating unit) which are largely inde-
pendent of the cash inflows of other assets or cash-generating
units. For goodwill which does not generate largely independ-
ent cash inflows, impairment tests are prepared at the level
where cash flows are considered to be generated largely
independently.
The group of cash-generating units is determined based on
the management structure and internal financial reporting.
The structure and groups of cash-generating units are as-
sessed on an annual basis. The carrying amount of goodwill is
tested for impairment together with other non-current assets
in the cash-generating unit to which the goodwill is allocated.
The recoverable amount of goodwill is recognised as the pre-
sent value of the expected future net cash flows from the
group of cash-generating units to which the goodwill is allo-
cated, discounted using a pre-tax discount rate that reflects
the current market assessment of the time value of money
and risks specific to the asset or cash-generating unit.
The carrying amount of other non-current assets is assessed
annually against its recoverable amount to determine whether
there is any indication of impairment. Any impairment of
goodwill is recognised as a separate item in the income state-
ment and cannot be reversed.
The recoverable amount of other non-current assets is the
higher value of the asset's value in use and its market value, i.e.
fair value, less expected disposal costs. The value in use is cal-
culated as the present value of the estimated future net cash
flows from the use of the asset or the group of cash-generat-
ing units to which the asset belongs.
An impairment loss on other non-current assets is recognised
in the income statement under production costs, selling and
distribution costs or administration costs, respectively. Impair-
ment recognised can only be reversed to the extent that the
assumptions and estimates that led to the impairment have
changed. An impairment loss is reversed only to the extent
that the asset's carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation
or amortisation, had no impairment loss been recognised.
Uncertainties and estimates
Goodwill impairment tests are performed for the group of
cash-generating units to which goodwill is allocated. The
group of cash-generating units is defined based on the man-
agement structure for commercial segments and is linked to
individual markets. The structure and groups of cash-generat-
ing units are assessed on an annual basis.
The impairment test of goodwill is performed at least annually
for each group of cash-generating units to which goodwill is
allocated. In 2022, we assessed the validity of our 2026 tar-
gets in the light of both macroeconomic volatility and volatility
within the dairy sector, and we have more thoroughly analysed
and tested our goodwill positions compared to normal proce-
dures.
To determine the value in use, the expected cash flow ap-
proach is applied. The most important parameters in the im-
pairment test include anticipations of future free cash flows
and assumptions of discount rates.
Anticipated future free cash flows
The anticipated future free cash flows are based on current
forecasts and long-term 2026 targets derived from the
Future26 process. These are determined at cash-generating
unit level in the forecast and target planning process and are
based on external sources of information and industry-rele-
vant observations such as macroeconomic and market
conditions.
All applied assumptions are challenged through the forecast
and target planning process based on management's best
estimates and expectations, which are subject to judgement
by nature. They include expectations regarding revenue
growth, EBIT margins and capital expenditure. The assump-
tions include moving milk intake into value-add products and
more profitable markets and operational efficiency initiatives.
The growth rate beyond the strategy period has been set to
the expected inflation rate in the terminal period and assumes
no nominal growth.
Discount rates
A discount rate, namely weighted average cost of capital
(WACC), is applied for specific cash-generating units based on
assumptions regarding interest rates and risk premiums. The
WACC is recalculated to a before-tax rate. Changes in the
future cash flow or discount rate estimates used may result
in materially different values.
Additions amounted to EUR 429 million compared to EUR 521
million last year.
Table 3.2.a Property, plant and equipment
Land and
building
Plant and
machinery
Fixture and fit-
ting, tools and
equipment
Asset in
course of
construction
Additions included the finalisation of the powder tower in
Pronsfeld, Germany, investments in the production facilities
in Bahrain and expansion of the mozzarella production in
Denmark.
New projects included investments in a capacity increase for
milk-based beverages in Esbjerg, Denmark, a packaging equip-
ment upgrade in Oakthorpe, UK, and growth investments in
Arla Foods Ingredients.
Depreciation amounted to EUR 411 million, unchanged from
last year.
Property, plant and equipment
Arla's main property, plant and equipment are located in
Denmark, the UK, Germany and Sweden. The carrying amount
was EUR 3,031 million compared to EUR 3,072 million
last year.
Property, plant and equipment by country
Denmark 47% (45%)
Sweden 10% (10%)
UK 18% (19%)
Germany 14% (15%)
Other 11% (11%)
2022
2021
3,031
(EURm)
(EURm)
2022
Cost at 1 January
Exchange rate adjustments
Additions
Transferred from assets in the course of construction
Disposals
Cost at 31 December
Depreciation and impairment at 1 January
Exchange rate adjustments
Depreciation and impairment for the year
Depreciation on disposals
Depreciation and impairment at 31 December
Carrying amount at 31 December
1,987
-43
58
62
-17
3,800
-73
114
189
-46
2,047
3,984
-838
22
-86
14
-2,489
57
-247
38
-888
-2,641
1,159
1,343
Right-of-use assets in the carrying amount at 31 December
124
11
2021
Cost at 1 January
Exchange rate adjustments
Additions
Transferred from assets in the course of construction
Disposals
Reclassification
Cost at 31 December
Depreciation and impairment at 1 January
Exchange rate adjustments
Depreciation and impairment for the year
Depreciation on disposals
Reclassification
Depreciation and impairment at 31 December
Carrying amount at 31 December
1,770
38
104
100
-27
2
3,471
45
133
169
-46
28
1,987
3,800
-764
-9
-78
15
-2
-2,219
-29
-251
38
-28
-838
-2,489
1,149
1,311
Total
6,982
-138
429
-
-104
413
-3
199
-272
-4
333
7,169
-
-
-
-
-
-3,910
96
-411
87
-4,138
333
3,031
209
6,418
114
521
-
-106
35
453
11
231
-281
-1
-
413
6,982
-
-
-
-
-
-
-3,503
-49
-406
83
-35
-3,910
413
3,072
230
782
-19
58
21
-37
805
-583
17
-78
35
-609
196
74
724
20
53
12
-32
5
782
-520
-11
-77
30
-5
-583
199
81
3,072
(EURm)
Right-of-use assets in the carrying amount at 31 December
141
8
Investments in and depreciation of property, plant and equipment and right-of-use assets
(EURm)
506
81
425
367
70
297
580
102
478
381
67
314
521
69
452
406
74
332
429
56
373
411
74
340
383
306
600
400
200
0
2018
2019
2020
2021
2022
Right-of-use assets
Depreciation of property, plant and equipment
Investments in property, plant and equipment
Table 3.2.b Estimated useful life in years
(EURm)
Office buildings
Production buildings
Technical facilities
Other fixtures and fittings, tools and equipment
2022
50
20-30
5-20
3-7
2021
50
20-30
5-20
3-7
Accounting policies
Property, plant and equipment are measured at cost less
accumulated depreciation and accumulated impairment
losses. Assets under construction, land and decommissioned
plants are not depreciated.
Cost
Cost comprises the acquisition price as well as costs directly
associated with an asset until the asset is ready for its intended
use. For self-constructed assets, cost comprises direct and in-
direct costs relating to materials, components, payroll and the
borrowing costs from specific and general borrowing that di-
rectly concerns the construction of assets. If significant parts
of an item of property, plant and equipment have different
useful lives, they are recognised as separate items (major
components) and depreciated separately. When component
parts are replaced, any remaining carrying amount of replaced
parts is removed from the balance sheet and recognised as an
accelerated depreciation charge in the income statement.
Subsequent expenditures of property, plant and equipment
are only recognised as an addition to the carrying amount of
the item, when it is likely that incurring the cost will result in fi-
nancial benefits for the group. Other costs such as general re-
pair and maintenance are recognised in the income statement
when incurred.
Depreciation
Depreciation aims to allocate the cost of the asset, less any
amounts estimated to be recoverable at the end of its ex-
pected use, to the periods in which the group obtains benefits
from its use. Property, plant and equipment are depreciated
on a straight-line basis from the time of acquisition, or when
the asset is available for use based on an assessment of the es-
timated useful life.
The depreciation base is measured taking into account the re-
sidual value of the asset, being the estimated value the asset
can generate through sale or scrappage at the balance sheet
date if the asset was of the age and in the condition expected
at the end of its useful life, and reduced by any impairment
made. The residual value is determined at the date of acquisi-
tion and is reviewed annually. Depreciation ceases when the
carrying amount of an item is lower than the residual value, or
when an item is decommissioned. Changes during the depre-
ciation period or in the residual value are treated as changes
to accounting estimates, the effect of which is adjusted only in
current and future periods. Depreciation is recognised in the
income statement in production costs, sales and distribution
costs or administration costs.
Uncertainties and estimates
Estimates are made in assessing the useful lives of items of
property, plant and equipment that determine the period over
which the depreciable amount of the asset is expensed in the
income statement. The depreciable amount of an item of
property, plant and equipment is a function of the asset's cost
or carrying amount and its residual value. Estimates are made
in assessing the amount that the group can recover at the end
of the useful life of an asset. An annual review is performed
to assess the appropriateness of the depreciation method,
useful life and residual values of items of property, plant
and equipment.
As a consequence of climate-related risks, Arla could face
future impairment of its production capacity due to equip-
ment becoming outdated in the sustainability transformation
or from excess production capacity if milk volumes and opera-
tions decline.
Non-current assets in the balance sheet were not affected by
such impairment in 2022. Sustainability is now an integral part
of all CAPEX investments which ensures future investments to
address the risks identified.
Right-of-use assets
Arla leases various offices, warehouses, vehicles and other
equipment. Leases are typically agreed for a fixed duration,
but may include an extension option. Significant right-of-use
assets include office buildings and warehouses in Denmark,
Germany, Sweden and the UK with remaining useful lives be-
tween 10 and 20 years.
Filling machinery and other technical plants represent another
major right-of-use asset category. Filling machines typically
have useful lives of seven years, whereas other technical
plants are depreciated between one and seven years. Cars and
trucks have on average useful lives of four and five years, re-
spectively. In total, the group has approximately 4,000 leases.
Additions to right-of-use assets during the year amounted to
EUR 56 million compared to EUR 69 million last year. The total
carrying amount of right-of-use assets was EUR 209 million
compared to EUR 230 million last year as specified in table
3.2.1.a. Lease liabilities are specified in Note 4.3.
Accounting policies
All leases are recognised as a right-of-use asset and a corre-
sponding liability at the date at which the leased asset is avail-
able for use by the group. A lease liability is initially measured
on a present value basis, which comprises the net present
value of fixed lease payments less any lease incentives receiv-
able, variable lease payments based on an index or a rate and a
potential exercise price if a purchase option exists.
The lease payments are discounted using an incremental bor-
rowing rate.
The corresponding right-of-use asset is measured at cost com-
prising initial measurement of the lease liability, any lease pay-
ments made at or before the commencement date less any
lease incentives received and any initial direct costs, and
restoration costs.
The right-of-use asset is subsequently depreciated over the
shorter of the asset's useful life and the lease term on a
straight-line basis.
Each lease payment comprises a reduction of the lease liability
and a finance cost. The finance cost is charged to profit or loss
over the lease period as a constant periodic rate of interest on
the remaining balance of the liability.
Short-term leases and leases of low-value assets are recog-
nised as an expense in the income statement.
Uncertainties and estimates
The group has applied estimates and judgements with an
impact on the recognition and measurement of right-of-use
assets and lease liabilities. This includes an assessment of the
incremental borrowing rate, service components and facts
and circumstances that could create an economic incentive to
utilise the extension options of lease arrangements.
Table 3.2.1.a Right-of-use assets
(EURm)
2022
Carrying amount at 1 January
Additions
Disposals
Depreciation and impairment for the year
Depreciation on disposals
Exchange rate adjustments
Carrying amount at 31 December
2021
Carrying amount at 1 January
Additions
Disposals
Depreciation and impairment for the year
Depreciation on disposals
Exchange rate adjustments
Carrying amount at 31 December
Table 3.2.1.b Amounts recognised in the income statement
(EURm)
Expenses related to short-term and low-value leases
Interest expenses on lease liabilities
Total amounts recognised in the income statement
Payment of lease debt
Total cash outflow from right-of-use assets
RoU
land and
buildings
RoU
plant and
machinery
RoU
fixtures and
fittings, tools
and equipment
Total RoU
assets
141
17
-7
-30
7
-4
124
8
9
-12
-6
12
-
11
136
13
30
-5
-31
5
6
141
4
-7
-9
6
1
8
81
30
-32
-35
31
-1
74
80
35
-18
-34
16
2
81
230
56
-51
-71
50
-5
209
229
69
-30
-74
27
9
230
2022
2021
40
7
47
71
118
38
7
45
73
118
Through the investment in CDH, Arla holds a 5.3 per cent indi-
rect investment in Mengniu. See table 3.3.b for more details
on CDH.
The carrying amount of the investment concerning the mem-
bership of Lantbrukarnas Riksförbund in Sweden amounted to
EUR 93 million and was unchanged from last year.
Joint ventures
The carrying amount of joint ventures increased to EUR 24
million compared to EUR 20 million last year. The value pri-
marily related to the German joint venture ArNoCo.
Table 3.3.a Associates and joint ventures
(EURm)
Value of associates and joint ventures
Share of equity in COFCO Dairy Holdings Ltd. (Mengniu)
Goodwill in COFCO Dairy Holdings Ltd. (Mengniu)
Share of equity in immaterial associates
Recognised value of associates
Share of equity in immaterial joint ventures
Recognised value of associates and joint ventures
2022
2021
290
158
93
541
24
565
267
149
94
510
20
530
Table 3.3.b COFCO Dairy Holdings Ltd. Disclosures of financial information*
(EURm)
2022
2021
Revenue
Net profit
Non-current assets
Dividends received
Ownership share
Group share of net profit
Recognised value
44
44
742
12
30%
44
448
-
-
729
12
30%
36
416
COFCO Dairy Holdings Ltd. has no other significant assets or liabilities
*Based on the latest available financial reporting
Fair value based on listed share price
888
1,043
Table 3.3.c Transactions with associates and joint ventures
(EURm)
Sales of goods
Purchase of goods
Trade receivables*
Trade payables*
*Included in other receivables and other payables
2022
2021
31
48
3
-21
56
68
13
-5
Associates and joint ventures
The share of profit in associates and joint ventures increased
by 13 per cent to EUR 60 million compared to EUR 53 million
last year and related primarily to the profit from our invest-
ment in Mengniu.
COFCO Dairy Holdings Limited (CDH) and China Mengniu
Dairy Company Limited (Mengniu)
The group's proportionate share of the net asset value of CDH
including the investment in Mengniu was EUR 448 million
compared to EUR 416 million last year. The carrying amount
of the investment in CDH included goodwill amounting to
EUR 149 million compared to EUR 158 million last year driven
by currency adjustments.
The fair value of the indirect share in Mengniu amounted to
EUR 888 million compared to EUR 1,043 million last year,
based on the official listed share price at 31 December 2022.
Impairment risks include substantial and long-term reductions
in leading stock indexes in Asia or an adverse and permanent
reduction in the expected performance of Mengniu. As the fair
value exceeded the carrying amount of the investment, there
was no indication of impairment.
Mengniu reported group revenue of EUR 12,214 million and a
profit of EUR 696 million in 2021. Consolidated figures are not
available for the CDH group. CDH holds no other significant in-
vestment than the investment in Mengniu and reported reve-
nue relates to received dividend payments from Mengniu.
An impairment test is performed when there are indications of
impairment, such as significant adverse changes in the envi-
ronment in which the equity-accounted investee operates, or
a significant or prolonged decline in the fair value of the in-
vestment below its carrying amount.
Lantbrukarnas Riksforbund, Sweden (LRF)
Arla has an ownership interest of 24 per cent in LRF, which is
a politically independent professional organisation for
Swedish entrepreneurs involved in agriculture, forestry
and horticulture.
Based on this, it is our assessment that Arla exercises a signifi-
cant influence in LRF and the investment is therefore classi-
fied as an associate.
Where the equity-accounted investment is considered to be
an integral part of a cash-generating unit (CGU), the impair-
ment test is performed at the CGU level using the expected
future net cash flows of the CGU. An impairment loss is recog-
nised when the recoverable amount of the equity-accounted
investment (or CGU) becomes lower than the carrying amount.
The recoverable amount is defined as the higher of value in
use and fair value less costs to sell of the equity-accounted
investment (or CGU).
Based on a detailed analysis of the LRF arrangement, Arla's ac-
tive ownership interest constitutes a significant influence in
LRF. This includes, but is not limited to, owner representation
on the Board of Directors. Furthermore, Arla's owners have
represented the Swedish dairy industry on the Board of Direc-
tors of LRF, and both Arla and our Swedish owners are individ-
ual members of LRF.
Uncertainties and estimates
Significant influence is defined as the power to participate in
financial and operating policy decisions of the investee but
does not constitute control or joint control over those policies.
Judgement is necessary in determining when a significant in-
fluence exists. When determining significant influence, factors
such as representation on the Board of Directors, participation
in policymaking, material transactions between the entities
and interchange of managerial personnel are considered.
CDH and Mengniu
The group has a 30 per cent investment in CDH, which is
considered an associate based on a cooperation agreement
extending significant influence, including the right to repre-
sentation on the Board. The cooperation agreement with CDH
also entitles Arla to representation on the Board of Mengniu,
a Hong Kong-listed dairy company in which CDH is a signifi-
cant shareholder.
Based on these underlying agreements, it is our assessment
that Arla exercises a significant influence in Mengniu.
Recognised value of associates and joint ventures
Share of equity in COFCO Dairy Holdings Ltd. (Mengniu)
Goodwill in COFCO Dairy Holdings Ltd. (Mengniu)
Share of equity in immaterial associates
Share of equity in immaterial joint ventures
2022
2021
565
(EURm)
530
(EURm)
Accounting policies
Investments in which Arla has a significant but not controlling
influence are classified as associates. Investments in which
Arla has joint control are classified as joint ventures.
The proportionate share of the net profit or loss in associates
and joint ventures is recognised in the consolidated income
statement after elimination of the proportionate share of un-
realised intercompany profits or losses.
Investments in associates and joint ventures are recognised
according to the equity method and measured at the propor-
tionate share of the entities' net asset values, calculated in ac-
cordance with Arla's accounting policies. The proportionate
share of unrealised intercompany profits and the carrying
amount of goodwill is added, whereas the proportionate share
of unrealised intercompany losses is deducted. Dividends re-
ceived from associates and joint ventures reduce the value of
the investment.
For investments held in listed companies, computation of Ar-
la's share of profit and equity is based on the latest published
financial information of the company, other publicly available
information on the company's financial development and the
effect of revalued net assets.
Investments in associates and joint ventures with negative net
asset values are measured at zero. If Arla has a legal or con-
structive obligation to cover a loss in the associate or joint
venture, the loss is recognised under provisions. Any amounts
owed by associates and joint ventures are written down to the
extent that the amount owed is deemed irrecoverable.
Financial risk management
Financial risks are an inherent part of the group's operating
activities and as a result, the group's profit is impacted by the
development in currencies, interest rates and certain types of
commodities. The global financial markets are volatile and
thus it is critical for the group to have an appropriate financial
risk management approach in place to mitigate short-term
market volatility, while simultaneously achieving the highest
possible milk price.
The group's comprehensive financial risk management strat-
egy and system builds on a thorough understanding of the in-
teraction between the group's operating activities and under-
lying financial risks. The overall framework for managing finan-
cial risks, the treasury and funding policy, is approved by the
Board of Directors and managed centrally. The policy outlines
risk limits for each type of financial risk, permitted financial in-
struments and counterparties.
The Board of Directors receives a report on the group's finan-
cial risk exposure on a monthly basis. Hedging the volatility of
milk prices is not within the scope of financial risk manage-
ment but is an inherent component of the group's business
model.
Adequate liquidity reserves
Liquidity reserves increased by EUR 91 million to EUR 1,056
million in 2022. Looking at the maturity profile of the group's
debt and the forecasted cash flow, the liquidity reserves are
considered adequate and expected to be maintained at the
same level during 2023.
Ensuring the availability of sufficient operating liquidity and
credit facilities for operations is the primary goal of managing
liquidity risk. Based on the liquidity models suggested by the
rating agencies, Arla's liquidity reserves are assessed as ade-
quate for the coming 12 months.
Supply chain finance programmes and trade receivables
financing relating to customers form part of the group's
liquidity management. Selected suppliers have access to the
group's supply chain finance facilities, which allow those sup-
pliers to benefit from the group's credit profile.
More than 95 per cent of the day-to-day liquidity flow of the
group is managed via cash pooling arrangements. This secures
a scalable and efficient operating model. As a result, the group
is able to achieve a cost-efficient utilisation of credit facilities.
Arla operates in several countries where restrictions on the
transferability of cash exist. Cash and securities in Argentina of
54 million EUR generated from the local profit are assessed as
restricted and thus not included in the liquidity reserve. Other
balances of cash deemed to be restricted are insignificant.
Table 4.1.1.a Liquidity reserves
(EURm)
Cash and cash equivalents
Securities (free cash flow)
Unutilised committed loan facilities > 1 year
Other unutilised loan facilities
Total
Interest-bearing debt maturing < 1 year
2022
106
28
475
447
1,056
401
2021
97
12
689
167
965
293
Liquidity reserves
Cash and cash equivalents 10% (9%)
Securities (free cash flow) 3% (1%)
Unutilised committed loan facilities 45% (64%)
Unutilised other loan facilities 42% (16%)
2022
2021
1,056
(EURm)
965
(EURm)
Table 4.1.1.b Expected non-discounted contractual cash flow on gross financial liabilities
(EURm)
2022
Issued bonds
Mortgage credit institutions
Credit institutions
Lease liabilities
Other non-current liabilities
Interest expense – interest-bearing debt
Trade payables and other payables
Derivative instruments
Total
2021
Issued bonds
Mortgage credit institutions
Credit institutions
Lease liabilities
Other non-current liabilities
Interest expense – interest-bearing debt
Trade payables and other payables
Derivative instruments
Total
Carrying amount
Total
2023
2024
2025
2026
2027
2028
2029
2030-2032
After 2032
Non-discounted contractual cash flow
490
1,221
1,424
214
18
-
1,597
36
5,000
493
1,229
1,425
218
18
359
1,597
36
134
11
507
59
18
53
1,597
30
5,375
2,409
135
11
517
47
-
41
-
5
756
-
86
47
38
-
38
-
1
210
179
50
1
25
-
30
-
-
285
-
54
251
17
-
22
-
-
344
45
61
1
23
-
17
-
-
147
-
68
101
1
-
17
-
-
187
-
273
-
4
-
51
-
-
328
-
615
-
4
-
90
-
-
709
Carrying amount
Total
2022
2023
2024
2025
2026
2027
2028
2029-2031
After 2031
Non-discounted contractual cash flow
440
1,033
1,036
233
15
-
1,445
86
4,288
444
1,040
1,038
233
15
65
1,445
86
-
11
599
60
15
14
1,445
47
4,366
2,191
149
11
194
50
-
11
-
13
428
149
12
243
35
-
6
-
7
452
-
87
1
27
-
5
-
5
125
146
50
1
19
-
3
-
2
221
-
55
-
16
-
3
-
1
75
-
61
-
7
-
2
-
1
71
-
249
-
14
-
7
-
4
274
-
504
-
5
-
14
-
6
529
Assumptions
The contractual cash flows are based on the following assumptions:
· The cash flows are based on the earliest possible date at which the group can be required to settle the financial liability.
· The forecasted interest expense cash flows are based on the contractual interest rate. Floating interest payments have been determined using the current floating rate for each item at the reporting date.
How we act and operate
In addition to the treasury and funding policy, the Board of
Directors has approved a long-term financing strategy, which
defines the direction for financing of the group. This includes
counterparties, instruments and risk appetite and describes
future funding opportunities to be explored and implemented.
The funding strategy is supported by farmer owners' long-term
commitment to investing in the business. It is the group's ob-
jective to maintain its credit quality at a robust
investment grade level.
Currency exposure
The group is exposed to both transaction and translation ef-
fects from foreign exchange rates.
Transaction effects are due to sales in currencies other than
the functional currencies of the individual entities. The group
is mainly exposed to USD and USD-pegged currencies as well
as GBP. Revenue increased by EUR 108 million compared to
last year due to positive transaction effects. Part of this expo-
sure was hedged by costs in the same currency. Financial
instruments such as trade receivables, trade payables and
other items denominated in currencies other than the individ-
ual entities' functional currencies are also exposed to currency
risks. The net effect from the revaluation of these financial in-
struments is recognised in financial income or financial costs.
A net loss of EUR 46 million was recognised in financial costs
compared to a loss of EUR 28 million last year. Exchange rate
losses related primarily to the devaluations of the Argentine,
Bangladeshi and Nigerian currencies and totalled EUR 38 mil-
lion.
Risk mitigation
Risk
Liquidity and funding are vital for the group to be able to pay
its financial liabilities as they become due. Risk management
impacts our ability to attract new funding in the longer term
and is crucial to fulfilling the group's strategic ambitions.
Policy
The treasury and funding policy states the minimum average
maturity threshold for net interest-bearing debt and sets limi-
tations on debt maturing within the next 12- and 24-month
periods. Unused committed facilities are taken into account
when calculating average maturity.
Average maturity
Average maturity, gross debt
Maturity < 1 year, net debt
Maturity > 2 year, net debt
2022
5.2 years
0%
78%
2021
5.8 years
0%
100%
Policy
Minimum
Maximum
2 years
-
50%
-
25%
-
Revenue split by currency
EUR 32% (31%)
GBP 25% (25%)
SEK 12% (13%)
DKK 10% (11%)
USD 11% (10%)
SAR 3% (3%)
Other 7% (8%)
2022
2021
13,793
(EURm)
11,202
(EURm)
respectively. A net loss of EUR 68 million was recognised in
other costs compared to a loss of EUR 31 million last year. A
loss from hedges should be expected in years where export
currencies strengthen during the year and vice versa.
To manage short-term volatility from currency fluctuations,
derivatives are used to hedge the currency exposure. When
settling the hedging instrument, a positive or negative amount
is recognised in other income or other costs,
The group is exposed to translation effects from entities
reporting in currencies other than EUR. The group is mainly ex-
posed to translation of entities reporting in GBP, DKK, SEK, and
USD. Due to translation effects, revenue increased by EUR 51
million compared to the revenue reported last year.
Table 4.1.2.a Exchange rates
EUR/GBP
EUR/SEK
EUR/DKK
EUR/USD
EUR/SAR
Table 4.1.2.b Currency exposure
Closing rate
Average rate
2022
0.884
11.156
7.436
1.066
3.982
2021
Change
0.839
10.241
7.437
1.133
4.253
-5.1%
-8.2%
0.0%
6.2%
6.8%
2022
0.852
10.629
7.439
1.051
3.947
2021
Change
0.860
10.145
7.437
1.182
4.434
0.8%
-4.5%
0.0%
12.5%
12.4%
Balance sheet exposure
Potential accounting impact
Open positions
Hedging of fu-
ture cash flows
External
exposure
Sensitivity
Income
statement
Other
comprehensive
income
270
-62
10
45
47
-86
44
25
12
9
11
-544
-345
-65
-103
278
-252
-418
-49
-176
281
-606
-335
-20
-56
192
-207
-393
-37
-167
1.0%
5.0%
5.0%
5.0%
5.0%
1.0%
5.0%
5.0%
5.0%
5.0%
3
-3
-
2
2
-1
2
1
1
-
-
-27
-17
-3
-5
3
-13
-21
-2
-9
(EURm)
2022
EUR/DKK
USD/DKK*
GBP/DKK
SEK/DKK
SAR/DKK
2021
EUR/DKK
USD/DKK*
GBP/DKK
SEK/DKK
SAR/DKK
*Incl. AED
Simultaneously, costs increased by EUR 69 million compared
to last year's reported costs. The group's financial position is
similarly exposed, impacting the value of assets and liabilities
reported in currencies other than EUR. The translation effect
on net assets is recognised in other comprehensive
income as foreign currency translation adjustments. In 2022, a
net loss of EUR 46 million was recognised in other compre-
hensive income compared to a net gain of EUR 127 million
last year.
Indirectly the pre-paid milk price absorbs both transaction and
translation effects, and the net profit or loss therefore has lim-
ited exposure to currency risks. The pre-paid milk price is set
based on achieving an annual profit of 2.8 to 3.2 per cent. The
pre-paid milk price is initially measured and paid out based on
an EUR amount and is consequently exposed to EUR fluctua-
tions against GBP, SEK and DKK.
Compared to last year, the average rate of the USD strength-
ened by 12 per cent, GBP strengthened by 1 per cent whereas
the SEK weakened by 5 per cent.
The group is increasingly involved in emerging markets where
efficient hedging is often not feasible due to currency regula-
tions, illiquid financial markets or expensive hedging costs.
Among the most important markets are Nigeria, the Domini-
can Republic, Bangladesh, Lebanon and Argentina. Countries
with less efficient currency markets represented 4 per cent of
the group's revenue in 2022.
Risk mitigation
The group's external exposure is calculated as external finan-
cial assets and liabilities denominated in currencies other than
the functional currency of each legal entity, plus any external
derivatives converted at group level into currency risk against
DKK, i.e. EUR/DKK, USD/ DKK etc. The same also applies to the
group's net internal exposure. The aggregate of the group's ex-
ternal and internal currency exposure is the net exposure,
which is outlined in Table 4.1.2.b.
Net foreign currency investments in subsidiaries, as well as in-
struments hedging those investments, are excluded.
Risk
According to the treasury and funding policy, the Treasury de-
partment can hedge:
· Up to 15 months of the net forecasted cash receipts and
payables
· Up to 100 per cent of net recognised trade receivables and
trade payables.
The currency exposure is continuously managed by the Treas-
ury department. Individual currency exposures are hedged in
accordance with the treasury and funding policy.
Financial instruments used to hedge the currency exposure do
not necessarily need to qualify for hedge accounting, and
hence some of the applied financial instruments, i.e. some op-
tion strategies, are accounted for as fair value through the in-
come statement.
Arla Foods amba's functional currency is DKK. However, the
risk in relation to the EUR currency is assessed in the same
manner as for DKK. The Executive Management Team has the
discretion to decide if and when investments in foreign opera-
tions should be hedged (translation risks) with an obligation to
inform the Board of Directors at the next meeting.
Interest rate risk
The average duration of the group's interest hedging of inter-
est-bearing debt, including derivatives but excluding pension
liabilities, has decreased by 0.5 to 3.1.
The duration decreased due to higher net interest-bearing
debt, a reduction in time to maturity which was only partly off-
set by new interest rate hedges.
The value of hedged future interest cash flows amounted to
EUR 132 million. See more in Note 4.4.
Table 4.1.3 Interest rate risk
(EURm)
2022
Financial assets
Derivatives
Financial liabilities
Net interest-bearing debt excluding pension liabilities
2021
Financial assets
Derivatives
Financial liabilities
Net interest-bearing debt excluding pension liabilities
Risk mitigation
Risk
The group is exposed to interest rate risk on interest-bearing
borrowings, pension liabilities, interest-bearing assets and on
the value of non-current assets where an impairment test is
performed. The risk is divided between profit exposure and
exposure in other comprehensive income. Profit exposure re-
lates to net potential impairment of non-current assets. Other
comprehensive income exposure relates to revaluation of net
pension liabilities and interest hedging of future cash flows.
Potential accounting impact
Carrying
amount
Sensitivity
Income
statement
Other compre-
hensive in-
come
-542
-
3,367
2,825
-536
-
2,757
2,221
1.0%
1.0%
1.0%
1.0%
1.0%
1.0%
5
6
-19
-8
5
6
-12
-1
-1
42
-
41
-1
56
-
55
The group actively uses derivatives to reduce risks related to
fluctuations in the interest rate, and to manage the interest
profile of the interest-bearing debt. By having a portfolio ap-
proach and using derivatives, the group can independently
manage and optimise interest rate risk, as the interest rate
profile can be changed without having to change the funding
itself. This allows the group to operate in a fast, flexible and
cost-efficient manner without changing underlying loan
agreements.
The mandate from the Board of Directors provides the group
with the opportunity to use derivatives, such as interest rate
swaps and options, in addition to interest conditions embed-
ded in the loan agreements.
Fair value sensitivity
A change in interest rates will impact the fair value of the
group's interest-bearing assets, interest rate derivative instru-
ments and debt instruments measured on a 1 per cent in-
crease in interest rates. A decrease in the interest rate would
have the opposite effect.
Cash flow sensitivity
A change in interest rates will impact interest rate payments
on the group's unhedged floating rate debt. Table 4.1.3 shows
the one-year cash flow sensitivity, depicting a 1 per cent in-
crease in interest rates at 31 December 2022. A decrease in
the interest rate would have the opposite effect.
Policy
Interest rate risk must be managed according to the treasury
and funding policy. Interest rate risk is measured as the dura-
tion of the debt portfolio, including hedging instruments, but
excluding pension liabilities.
How we act and operate
The purpose of interest rate hedging is to mitigate risk and se-
cure relatively stable and predictable financing costs. The in-
terest rate risk from net borrowing is managed by having an
appropriate split between fixed and floating interest rates.
Table 4.1.4 Duration
Duration
2022
3.1
2021
Minimum
Maximum
3.6
1
7
Policy
Commodity price risk
Supply contracts are predominately related to a floating offi-
cial price index. The Treasury department uses financial deriva-
tives to hedge commodity price risk. This secures full flexibility
to change suppliers without having to take future hedging into
consideration.
Hedging activities focus on the most significant risks, includ-
ing electricity, natural gas and diesel. The total forecasted
energy commodity spend, excluding taxes and distribution
costs, amounted to EUR 250 million with the prices at
31 December 2022.
The purpose of hedging is to reduce volatility in energy-
related costs. In 2022, hedging activities resulted in a gain of
EUR 72 million compared to a gain of EUR 29 million last year.
However, the gain in 2022 was more than offset by signifi-
cantly higher physical energy costs. The result of hedging
activities, classified as hedge accounting, is recognised in
other income and costs.
At the end of 2022, 81 per cent of the forecasted energy
spend for 2023 was hedged. A 50 per cent increase in com-
modity prices would negatively impact the forecasted un-
hedged energy spend by approximately EUR 24 million.
If the forecasted energy prices were 50 per cent higher at
31 December 2022, a gain of EUR 109 million would positively
impact other comprehensive income.
Table 4.1.5 Hedged commodities
2022
Diesel/natural gas
Electricity
2021
Diesel/natural gas
Electricity
Potential accounting impact
Sensitivity
Carrying
amount
Income
statement
Other
comprehensive
income
50%
50%
50%
50%
6
31
37
15
12
27
-10
-14
-24
-85
-46
-131
80
29
109
14
14
28
How we act and operate
Energy commodity price risks are managed by the Treasury
department. Commodity price risks are mainly hedged by en-
tering into financial derivative contracts, which are independ-
ent of the physical supplier contracts. Arla is also exploring
other commodities relevant for financial risk management.
Arla's energy exposure and hedging are managed as a portfo-
lio across energy type and country. Not all energy commodi-
ties can be effectively hedged by matching the underlying
costs, but Arla aims to minimise the basic risk.
Dairy derivative markets in the EU, the US and New Zealand
remain small, but are evolving. The group has engaged in
hedging activities for a small part of the group's dairy com-
modity trading volume. As the dairy derivative market devel-
ops, we expect this to play a role in managing fixed price
contracts with customers in the coming years.
Risk mitigation
Risk
The group is exposed to commodity risks related to the pro-
duction and distribution of dairy products. Increased commod-
ity prices negatively impact production and distribution costs.
Fair value sensitivity
A change in commodity prices will impact the fair value of the
group's hedged commodity derivative instruments, measured
through other comprehensive income and the unhedged
energy consumption through the income statement. The
table shows the sensitivity of a 50 per cent increase in com-
modity prices for both hedged and unhedged commodity
purchases. A decrease in commodity prices would have the
opposite effect.
Policy
According to the treasury and funding policy, the forecasted
consumption of electricity, natural gas and diesel can be
hedged for up to 36 months, of which 100 per cent can be
hedged for the first 18 months, with a limited proportion
thereafter.
Risk mitigation
Risk
Credit risks arise from operating activities and engagement
with financial counterparties. Furthermore, a weak counter-
party credit quality can reduce their ability to support the
group going forward, thereby jeopardising the fulfilment of
our group strategy.
Policy
Counterparties are selected based on a relationship bank
strategy. Financial counterparties must be approved by the
Executive Board and the CFO upon recommendation from the
Treasury team. A counterparty (or its parent) to financial con-
tracts and deposits must as a minimum have a long-term rat-
ing corresponding to A3 from Moody's, A- from S&P or A- from
Fitch. If the group has only obtained credit from the counter-
party, no rating is required. If the counterparty is rated by sev-
eral credit rating agencies, an average is used, rounded up to
the nearest notch.
In geographies which are not properly served by our relation-
ship banks, the Treasury team may deviate from the counter-
party requirement in this section.
How we act and operate
The group has an extensive credit risk policy and uses credit
insurance and other trade financing products extensively in
connection with exports. In certain emerging markets, it is not
always possible to obtain credit coverage with the required
rating; however, the group then seeks the best coverage avail-
able. The group has determined that this is an acceptable risk
given the levels of investment in emerging markets.
Credit risk
In 2022, the group continued to experience very limited losses
from defaulting counterparties such as customers, suppliers
and financial counterparties.
All major financial counterparties had satisfactory credit rat-
ings at year-end. The Arla requirement is a credit rating of at
least A-/A-/A3 from either S&P, Fitch or Moody's either for the
financial counterparty or its parent company. In a small num-
ber of geographical locations which are not served by our rela-
tionship banks and where financial counterparties with a satis-
fying credit rating do not operate, the group deviated from the
rating requirement.
Further information on trade receivables is provided in
Table 2.1.c.
The maximum exposure to credit risk is approximately equal to
the carrying amount.
As in previous years, the group continuously worked with
credit exposure and experienced a very low level of losses aris-
ing from customers.
To manage the financial counterparty risk, the group uses
master netting agreements when entering into derivative con-
tracts. Table 4.1.6 shows the counterparty exposure for those
agreements covered by entering into netting agreements that
qualify for netting in case of default.
If a customer payment is late, internal procedures are followed
to mitigate losses. The group uses a limited number of finan-
cial counterparties where credit ratings are monitored on an
ongoing basis.
External rating of financial counterparties
AAA 49% (67%)
AA- 4% (3%)
A+ 25% (8%)
A 8% (7%)
BBB+ 3% (4%)
Stronger speculative grade 4% (5%)
Weaker speculative grade 7% (6%)
2022
2021
777
(EURm)
605
(EURm)
Table 4.1.6 External rating of financial counterparties
(EURm)
Counterparty rating
2022
Securities
Cash
Derivatives
Total
2021
Securities
Cash
Derivatives
Total
AAA
AA-
A+
A
BBB+
Stronger
specula-
tive grade*
Weaker
specula-
tive grade*
383
-
-
383
402
5
-
407
-
15
13
28
-
17
1
18
-
5
189
194
-
9
39
48
-
33
33
66
-
7
33
40
-
20
4
24
-
24
-
24
-
28
-
28
-
29
1
30
49
5
-
54
32
6
-
38
Total
432
106
239
777
434
97
74
605
*Definition based on S&P rating scale. Stronger speculative grade: BB+ to B- and weaker speculative grade: CCC+ to D.
Average interest expenses, excluding interest related to pen-
sion assets and liabilities, were 2.3 per cent compared to 1.8
per cent last year. Interest cover decreased to 19.6 compared
to 23.7 last year.
Exchange rate losses relate primarily to the devaluation of the
Argentine, Bangladeshi and Nigerian currencies and
amounted to EUR 39 million, of which EUR 19 million was off-
set by interest income on the restricted cash and securities.
Accounting policies
Financial income and financial costs as well as capital gains
and losses are recognised in the income statement at
amounts that can be attributed to the year. Financial items
comprise realised and unrealised value adjustments of securi-
ties and currency adjustments of financial assets and financial
liabilities as well as the interest portion of financial lease pay-
ments. Additionally, realised and unrealised gains and losses
on derivatives not classified as hedging contracts are included.
Borrowing costs from general borrowing, or loans that directly
relate to the acquisition, construction or development of qual-
ified assets are attributed to the costs of such assets and are
therefore not included in financial costs.
Capitalisation of interest was performed by using an interest
rate matching the group's average external interest rate in
2022. Financial income and financial costs relating to financial
assets and financial liabilities were recognised using the effec-
tive interest method.
2022
2021
22
15
37
-71
-46
-2
7
-5
-117
-80
7
7
14
-45
-28
-2
7
-7
-75
-61
Financial income and financial cost
Net financial costs increased by EUR 19 million to EUR 80 mil-
lion, mainly due to higher exchange rate losses.
Net interest expenses amounted to EUR 51 million, represent-
ing an increase of EUR 11 million compared to last year due to
higher interest-bearing debt and interest rates compared to
last year.
Table 4.2 Financial income and financial costs
(EURm)
Financial income:
Interest securities, cash and cash equivalents
Fair value adjustments and other financial income
Total financial income
Financial costs:
Interest on financial instruments measured at amortised cost
Net exchange rate losses
Interest on pension liabilities
Interest transferred to property, plant and equipment
Fair value adjustments and other financial costs
Total financial costs
Net financial costs
Increased net interest-bearing debt
Net interest-bearing debt, excluding pension liabilities, in-
creased to EUR 2,825 million compared to EUR 2,221 million
last year. The increase in net interest-bearing debt was mainly
driven by the increase in net working capital.
Pension liabilities decreased by EUR 84 million to EUR 161
million. Net interest-bearing debt, including pension liabilities,
amounted to EUR 2,986 million compared to EUR 2,466 mil-
lion last year. The UK pension scheme net assets were EUR 16
million compared to EUR 69 million last year. These assets are
excluded from the calculation of pension liabilities, net inter-
est-bearing debt and leverage.
Arla's leverage ratio was 3.0, an increase of 0.4 compared to
last year. This is within the long-term target range of 2.8 to 3.4.
The average maturity of interest-bearing borrowings
decreased by 0.6 years to 5.2 years. Average maturity is
impacted by new facilities and offset by a lapse of time to
maturity and the level of net interest-bearing debt.
independent of one single funding partner or one single mar-
ket. All funding opportunities are benchmarked against the
three-month EURIBOR rate, and derivatives are applied to
match the currency of our funding needs. The interest profile
is managed with interest rate swaps independently of the indi-
vidual loans.
The credit facilities contain financial covenants on equity/total
assets and minimum equity as well as standard non-financial
covenants. The group did not default on or fail to fulfil any loan
agreements in 2022.
During 2022, the group's most significant funding activities
were:
· Extension of a EUR 400 million ESG-linked revolving credit
multi-bank facility to 2028
· Five-year bond issue of SEK 1,000 million
· 20-year EUR 200 million mortgage
· Two-year bridge loan, EUR 200 million
The equity ratio decreased to 35 per cent compared to 37 per
cent last year.
· Arla has a commercial paper programme in Sweden denomi-
nated in SEK and EUR. The average utilisation in 2022 was
EUR 139 million
Funding
The group applies a diversified funding strategy to balance the
liquidity and refinancing risk with the aim of achieving low fi-
nancing costs. Major acquisitions or investments are funded
separately.
· During the year, Arla entered into sale and repurchase
arrangements based on its holdings in listed AAA-rated Dan-
ish mortgage bonds. Refer to Note 4.6 for more
details.
A diverse funding strategy includes diversification of markets,
currencies, instruments, banks, lenders and maturities to
secure broad access to funding and to ensure that the group is
Leverage
3.0
(2021:2.6)
Net interest-bearing debt consists of current and non-current liabilities, less
interest-bearing assets. The definition of leverage is the ratio between net
interest-bearing debt including pension liabilities and EBITDA and expresses
the group's capacity to service its debt. The group's long-term target range
for leverage is between 2.8 and 3.4.
Net interest-bearing debt
(EURm)
3,500
3,000
2,500
2,000
1,500
1,000
500
0
220
1,647
2018
249
247
245
161
2,113
2019
2,180
2020
2,221
2021
2,825
2022
Target range leverage 2.8 - 3.4
Pension liabilities
Net interests-bearing debt excluding pension liabilities
Leverage
4
3
2
1
0
Table 4.3.a Net interest-bearing debt
(EURm)
Long-term borrowings
Short-term borrowings
Securities, cash and cash equivalents
Other interest-bearing assets
Net interest-bearing debt excluding pension liabilities
Pension liabilities
Net interest-bearing debt including pension liabilities
2022
2,640
727
-538
-4
2,825
161
2,986
2021
2,113
644
-531
-5
2,221
245
2,466
Table 4.3.c Cash flow, net interest-bearing debt
(EURm)
2022
Pension liabilities
Long-term borrowings
Short-term borrowings
Total interest-bearing debt
1 January
245
2,113
644
3,002
-22
696
-100
574
Cash flow
Included
in financing
activities
Additions
Non-cash changes
Reclassi-
fications
Foreign
exchange
movements
Fair value
changes
31 Decem-
ber
-
49
-
49
-
-
-
-190
190
-
-
-
-
-
-14
-32
-7
-53
-
-
-
-48
4
-
161
2,640
727
-44
3,528
-
2
-
-
-436
-106
-53
-42
2,986
2022
2021
Pension assets
Securities and other interest-bearing
assets
Cash
-
-
-439
-97
1
-9
Net interest-bearing debt
2,466
566
49
Long- and short-term borrowings payments of EUR 596 million (EUR 696 million and EUR -100 million, respectively)
can be reconciled to the cash flow statement as new loans obtained (EUR 810 million), other changes in loans (EUR -143 million) and
lease payments (EUR -71 million).
357
1,210
918
155
2,640
133
88
11
418
59
18
727
440
1,021
478
174
2,113
-
102
11
456
59
16
2021
Pension liabilities
Long-term borrowings
Short-term borrowings
Total interest-bearing debt
Pension assets
Securities and other interest-bearing
assets
644
Cash
Net interest-bearing debt
247
1,964
766
2,977
-14
-
-48
-62
-
-17
-424
-126
2,427
-12
32
-59
-
46
-
46
-
-
-
46
62
-62
-
14
-
-
14
-4
24
-12
8
4
-3
-3
6
16
17
-
33
-1
-
-
245
2,113
644
3,002
-
-439
-97
33
2,466
Table 4.3.b Borrowings
(EURm)
Long-term borrowings:
Issued bonds
Mortgage credit institutions
Bank borrowings
Lease liabilities
Total long-term borrowings
Short-term borrowings:
Issued bonds
Commercial papers
Mortgage credit institutions
Bank borrowings
Lease liabilities
Other current liabilities
Total short-term borrowings
Total interest-bearing borrowings
3,367
2,757
Long- and short-term borrowings payments of EUR -48 million (EUR 0 million and EUR -48 million, respectively)
can be reconciled to the cash flow statement as loans obtained, net, (EUR 172 million), other changes in loans (EUR -147 million) and
lease payments (EUR -73 million).
Maturity of net interest-bearing debt excluding pension
liabilities, 31 December 2022
(EURm)
Maturity of net interest-bearing debt excluding pension
liabilities, 31 December 2021
(EURm)
Interest profile for net interest-bearing debt excluding
pension liabilities at 31 December 2022
(EURm)
Interest profile for net interest-bearing debt excluding
pension liabilities at 31 December 2021
(EURm)
1,000
800
600
400
200
0
1,000
800
600
400
200
0
3,000
2,500
2,000
1,500
1,000
500
0
3,000
2,500
2,000
1,500
1,000
500
0
0-1Y 1-2Y 2-3Y 3-4Y 4-5Y 5-6Y 6-7Y 7-10Y >10Y
0-1Y 1-2Y 2-3Y 3-4Y 4-5Y 5-6Y 6-7Y 7-10Y >10Y
1Y
2Y
3Y
4Y
5Y
6Y
7Y
10Y
1Y
2Y
3Y
4Y
5Y
6Y
7Y
10Y
Debt
Unused committed facilities
Debt
Unused committed facilities
Fixed debt
Fixed via swap
Floating
Fixed debt
Fixed via swap
Floating
Table 4.3.d Net interest-bearing debt excluding pension liabilities and the effect of hedging, maturity
(EURm)
Total
2023
2024
2025
2026
2027
2028
2029
2030-
2032
After
2032
Table 4.3.e Currency profile of net interest-bearing debt excluding pension liabilities
(EURm)
Currency profile of net interest-bearing debt excluding pension liabilities before
and after derivative financial instruments
Original
principal
Effect
of swap
After swap
2022
DKK
SEK
EUR
GBP
Other
Total
2021
DKK
SEK
EUR
GBP
Other
Total
1,046
606
1,014
39
120
2,825
30
228
-10
8
-71
185
36
139
390
7
135
707
97
5
163
6
6
277
57
183
5
5
46
296
58
3
105
5
1
172
61
48
7
8
3
127
67
-
102
-
-
169
201
-
76
-
-
277
439
-
176
-
-
615
Total
2022
2023
2024
2025
2026
2027
2028
2029-
2031
After
2031
873
572
592
43
141
2,221
20
109
5
7
-37
104
26
153
207
8
48
442
55
152
108
6
116
437
94
4
4
5
7
114
56
150
3
4
3
216
55
4
4
4
4
71
61
-
4
3
-
68
202
-
55
4
-
261
304
-
202
2
-
508
2022
DKK
SEK
EUR
GBP
Other
Total
2021
DKK
SEK
EUR
GBP
Other
Total
1,046
606
1,014
39
120
2,825
873
572
592
43
141
2,221
-
-538
183
355
-
-
-
-586
64
522
-
-
1,046
68
1,197
394
120
2,825
873
-14
656
565
141
2,221
Table 4.3.f Interest rate risk excluding effect of hedging
(EURm)
2022
Issued bonds:
Commercial papers
SEK 750m maturing 03.07.2023
SEK 750m maturing 03.07.2023
SEK 750m maturing 03.04.2024
SEK 750m maturing 03.04.2024
SEK 500m maturing 14.01.2026
SEK 1,500m maturing 17.07.2026
SEK 500m maturing 14.01.2028
Total issued bonds
Mortgage credit institutions:
Fixed-rate
Floating-rate
Total mortgage credit institutions
Bank borrowings:
Fixed-rate
Floating-rate
Total bank borrowings
Other borrowings:
Finance leases
Other borrowings
Total other borrowings
Interest
rate
Average
interest rate
Fixed for
Carrying
amount
Interest
rate risk
Interest
rate
Average
interest rate
Fixed for
Carrying
amount
Interest
rate risk
Fixed
Floating
Fixed
Fixed
Floating
Floating
Floating
Floating
Fixed
Floating
Fixed
Floating
Fixed
Floating
0-1 year
0-1 year
0-1 year
2-3 years
2-3 years
3-4 years
3-4 years
5-6 years
1-2 years
0-1 year
0-1 year
0-1 year
0-20 years
0-1 year
2.5%
3.7%
1.5%
1.6%
3.9%
4.0%
2.4%
4.2%
2.8%
1.9%
3.0%
2.9%
1.9%
2.9%
2.6%
3.1%
3.7%
3.2%
88
67
66
66
67
45
134
45
578
125
1,096
1,221
377
959
1,336
214
18
232
2021
Issued bonds:
Commercial papers
SEK 750m maturing 03.07.2023
SEK 750m maturing 03.07.2023
SEK 750m maturing 03.04.2024
SEK 750m maturing 03.04.2024
SEK 1,500m maturing 17.07.2026
Total issued bonds
Mortgage credit institutions:
Fixed-rate
Floating-rate
Total mortgage credit institutions
Bank borrowings:
Fixed-rate
Floating-rate
Total bank borrowings
Other borrowings:
Finance leases
Other borrowings
Total other borrowings
Fair value
Cash flow
Fair value
Fair value
Cash flow
Cash flow
Cash flow
Cash flow
Fair value
Cash flow
Fair value
Cash flow
Cash flow
Cash flow
Fixed
Floating
Fixed
Fixed
Floating
Floating
Fixed
Floating
Fixed
Floating
Fixed
Floating
0-1 year
1-2 years
1-2 years
2-3 years
2-3 years
4-5 years
1-2 years
0-1 year
0-1 year
0-1 year
0-20 years
0-1 year
0.2%
1.1%
1.5%
1.6%
0.9%
0.6%
0.9%
0.2%
0.3%
0.3%
0.0%
0.6%
0.4%
3.2%
3.4%
3.2%
102
74
73
73
74
146
542
97
935
1,032
390
544
934
233
16
249
Fair value
Cash flow
Fair value
Fair value
Cash flow
Cash flow
Fair value
Cash flow
Fair value
Cash flow
Cash flow
Cash flow
Accounting policies
Financial instruments
Financial instruments are recognised at the date of trade. The
group ceases to recognise financial assets when the contrac-
tual rights to the underlying cash flows either cease to exist or
are transferred to the purchaser of the financial asset, and sub-
stantially all risks and rewards related to ownership are also
transferred to the purchaser.
Financial assets and liabilities are offset, and the net amount is
presented in the balance sheet when, and only when, the
group has a legal right of offsetting and either intends to offset
or settle the financial asset and the liability simultaneously.
Financial assets
Financial assets are classified on initial recognition and subse-
quently measured at amortised cost, fair value through other
comprehensive income or fair value through the income
statement.
The classification of financial assets on initial recognition de-
pends on the financial asset's contractual cash flow character-
istics and how these are managed.
Financial assets where the group intends to collect the con-
tractual cash flow are classified and measured at amortised
cost.
Financial assets that are part of liquidity management are clas-
sified and measured at fair value through other comprehen-
sive income. All other financial assets are classified and meas-
ured at fair value through the income statement.
Financial assets measured at amortised cost
Financial assets measured at amortised cost consist of readily
available cash at bank and deposits, together with exchange-
listed debt securities with an original maturity of three months
or less, which have an insignificant risk of change in value and
can be readily converted to cash or cash equivalents.
Financial assets measured at fair value
through other comprehensive income
Financial assets measured at fair value through other compre-
hensive income consist of mortgage credit bonds, which cor-
respond in part to raised mortgage debt.
Financial assets are measured on initial recognition at fair
value plus transaction costs. The financial assets are subse-
quently measured at fair value with adjustments made in other
comprehensive income and accumulated in the fair value
reserve in equity.
Interest income, impairment and foreign currency translation
adjustments of debt instruments are recognised in the income
statement on a continuous basis under financial income and
financial costs. In connection with the sale of financial assets
classified at fair value through other comprehensive income,
accumulated gains or losses, previously recognised in the fair
value reserve, are recycled to financial income and financial
costs.
Financial assets measured at fair
value through profit or loss
Securities classified at fair value through the income state-
ment consist primarily of listed securities which are moni-
tored, measured and reported continuously in accordance
with the group's treasury and funding policy. Changes in fair
value are recognised in the income statement under financial
income and financial costs.
Liabilities
Debt to mortgage credit and credit institutions as well as is-
sued bonds are measured at the trade date on first recognition
at fair value plus transaction costs. Subsequently, liabilities are
measured at amortised cost with the difference between the
loan proceeds and the nominal value recognised in the in-
come statement over the expected life of the loan.
Capitalised residual lease obligations related to leases are rec-
ognised under liabilities and measured at amortised cost.
Other financial liabilities are measured at amortised cost.
Please refer to Note 4.7 for details on pension liabilities.
Derivatives
The group has entered into derivative contracts to secure a
stable cash flow in future years. The total value increased by
EUR 225 million to EUR 211 million. The increase was driven
by higher interest rates in 2022 which increase the future
gains on interest rate swaps. Additionally, currency sales in
2023 were hedged at a higher rate than the market rate at the
end of 2022.
Hedging of future cash flows
The group uses currency forwards to hedge currency risks on
expected future net revenue and costs. Interest rate swaps are
used to hedge risks against movements in expected future in-
terest payments, and commodity swaps are used for energy
hedging.
Fair value of hedging instruments not qualifying for
hedge accounting (financial hedge)
The group uses currency options which hedge forecasted
sales and purchases. Some of these options do not qualify for
hedge accounting, and the fair value adjustment is therefore
recognised directly in the income statement.
Currency swaps are used as part of the daily liquidity manage-
ment. The objective of the currency swaps is to match the tim-
ing of in- and outflow of foreign currency cash flows.
Accounting policies
Derivatives are recognised from the trade date and measured
in the financial statements at fair value. Positive and negative
fair values of derivatives are recognised as separate items in
the balance sheet.
Fair value hedging
Changes in the fair value of derivatives which meet the criteria
for hedging of the fair value of recognised assets and liabilities
are recognised alongside changes in the value of the hedged
asset or the hedged liability for the portion that is hedged.
Cash flow hedging
Changes in the fair value of derivatives that are classified as
hedges of future cash flows and effectively hedge changes in
future cash flows are recognised in other comprehensive in-
come as a reserve for hedging transactions under equity until
the hedged cash flows impact the income statement. The re-
serve for hedging instruments is presented net of tax under
equity. The cumulative gains or losses from hedging transac-
tions recognised in equity are reclassified and recognised un-
der the same item as the basic adjustment for the hedged
item.
The accumulated change in value recognised in other com-
prehensive income is recycled to the income statement once
the hedged cash flows affect the income statement or are no
longer likely to be realised. For derivatives that do not meet
the criteria for classification as hedging instruments, changes
in fair value are recognised as they occur in the income state-
ment, under financial income and costs.
Table 4.4.a Hedging of future cash flows from highly probable forecast transactions
Expected recognition
(EURm)
2022
Currency contracts
Interest rate contracts
Commodity contracts
Hedging of future cash flows
(EURm)
2021
Currency contracts
Interest rate contracts
Commodity contracts
Hedging of future cash flows
Carrying
amount
Fair value
recognised
in OCI
2023
2024
2025
2026
After 2026
42
132
37
211
42
132
37
211
42
30
28
100
-
27
8
35
-
25
1
26
Expected recognition
-
15
-
15
-
35
-
35
Carrying
amount
Fair value
recognised
in OCI
2022
2023
2024
2025
After 2025
-17
-24
27
-14
-17
-24
27
-14
-17
-8
26
1
-
-6
1
-5
-
-
-
-
-
1
-
1
Table 4.4.b Value adjustment of hedging instruments
(EURm)
Deferred gains and losses on cash flow hedges arising during the year
Value adjustments of hedging instruments reclassified to other operating income and costs
Value adjustments of hedging instruments reclassified to financial items
Total value adjustment of hedging instruments recognised in other
comprehensive income during the year
2022
254
3
-32
225
-
-11
-
-11
2021
12
3
24
39
Table 4.5.a Categories of financial instruments
(EURm)
2022
2021
Table 4.5.b Fair value hierarchy – carrying amount
(EURm)
Level 1
Level 2
Level 3
Total
Derivatives
Shares
Financial assets measured at fair value through the income statement
Securities
Financial assets measured at fair value through other comprehensive income
Currency instruments
Interest rate instruments
Commodity instruments
Derivative assets used as hedging instruments
Trade receivables
Other receivables
Cash
Financial assets measured at amortised cost
Derivatives
Financial liabilities measured at fair value through the income statement
Currency instruments
Interest rate instruments
Commodity instruments
Derivative liabilities used as hedging instruments
Long-term borrowings
Short-term borrowings
Trade payables and other payables
Financial liabilities measured at amortised cost
47
7
54
432
432
43
96
53
192
1,267
319
106
1,692
19
19
1
-
16
17
2,640
727
1,597
4,964
2022
Financial assets:
Bonds
Shares
Derivatives
Total financial assets
Financial liabilities:
Issued bonds
Mortgage credit institutions
Derivatives
Total financial liabilities
2021
Financial assets:
Bonds
Shares
Derivatives
Total financial assets
Financial liabilities:
Issued bonds
Mortgage credit institutions
Derivatives
Total financial liabilities
22
9
31
434
434
2
22
28
52
1,007
285
97
1,389
44
44
19
22
1
42
2,113
644
1,445
4,202
432
7
-
439
-
1,221
-
1,221
434
9
-
443
-
1,032
-
1,032
-
-
239
239
490
-
36
526
-
-
74
74
440
-
86
526
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
432
7
239
678
490
1,221
36
1,747
434
9
74
517
440
1,032
86
1,558
Risk mitigation
Methods and assumptions applied when measuring fair values
of financial instruments:
Bonds and shares
The fair value is determined using the quoted prices in an ac-
tive market.
Non-option derivatives
The fair value is calculated using discounted cash flow models
and observable market data. The fair value is determined as a
termination price and, consequently, the value is not adjusted
for credit risks.
Option instruments
The fair value is calculated using option models and observa-
ble market data, such as option volatilities. The fair value is de-
termined as a termination price and, consequently, the value
is not adjusted for credit risks.
Fair value hierarchy
Level 1: Fair values measured using unadjusted quoted prices
in an active market.
Level 2: Fair values measured using valuation techniques and
observable market data.
Level 3: Fair values measured using valuation techniques and
observable as well as significant non-observable market data.
Sale and repurchase arrangements
The group has invested in listed Danish mortgage bonds un-
derlying its mortgage debt. By entering into a sale and repur-
chase arrangement on the mortgage bonds, the group is able
to achieve a lower interest rate compared to current market
interest rates on mortgage debt. The mortgage bonds are
measured at fair value through other comprehensive income.
The proceeds from these bonds create a repurchase obliga-
tion which is recognised in short-term borrowings.
In addition to mortgage bonds, the group holds other securi-
ties with a carrying amount of EUR 43 million.
Table 4.6 Transfer of financial assets
(EURm)
2022
Mortgage bonds
Repurchase liability
Net position
2021
Mortgage bonds
Repurchase liability
Net position
Carrying
value
Notional
amount
Fair value
379
-370
9
398
-385
13
377
-369
8
394
-387
7
379
-370
9
398
-385
13
Pension liabilities
The group's pension assets and liabilities consist primarily of
defined benefit plans in Sweden and the UK.
The group also operates defined contribution plans for em-
ployees. For these defined contribution plans, the group is not
subject to the same investment, interest rate, inflation or lon-
gevity risks as it is for the defined benefit plans. The benefits
that employees receive are dependent on the contribution
paid, investment returns and the form of benefit chosen at
retirement.
Pension plans in Sweden
The recognised net pension liability in Sweden was EUR 144
million at 31 December 2022, a decrease of EUR 81 million
(36.0 per cent) compared to the previous year. The decrease is
reflective of the current economic environment in Sweden
with the main driver being discount rates increasing signifi-
cantly over the past 12 months.
These pension plans are contribution-based plans, guarantee-
ing a defined benefit pension at retirement. The plan assets
are legally structured as a trust, and the group has control over
the operation of the plan and the associated investments.
These pension plans do not include a risk-sharing element be-
tween the group and the plan participants.
Pension plans in the UK
The recognised net pension asset in the UK was EUR 16 mil-
lion at 31 December 2022, a decrease of EUR 53 million (76.8
per cent) compared to the previous year.
Similarly to Sweden, the current economic environment in the
UK has significantly driven up discount rates which is the main
factor causing pension liabilities to fall by EUR 530 million
(36.0 per cent) from 31 December 2021 to 31 December
2022. Inflation assumptions remained steady despite develop-
ments over the past 12 months due to the longevity of the in-
flation assumptions and the subsequent impact that it has on
the present value of liabilities. The decrease in liabilities can
mainly be attributed to actuarial losses for the year of EUR 441
million as well as negative currency effects of EUR 61 million.
At the same time, difficult market conditions led to a decrease
in the fair value of plan assets of EUR 583 million (37.8 per
cent). The decrease can mainly be attributed to a negative re-
turn on plan assets for the year of EUR 503 million as well as
negative currency effects of EUR 65 million, marginally offset
by contributions to the plan of EUR 12 million.
Despite the volatile year, the UK managed to remain in a net
pension asset position due to the investment strategy
adopted by the trustees. The strategy aims to mitigate any ma-
jor fluctuations in asset values due to external factors by incor-
porating matching assets into the asset portfolio. This mini-
mises movements in the net pension asset position and in-
creases stability in the pension position. The higher interest
rate in 2022 led to a lower present value of gross pension lia-
bilities. Net pension liabilities were on a par with last year due
to a corresponding value adjustment of the pension asset
portfolio.
More details of the investment strategy can be found in the
Plan asset investment in the UK section.
The defined benefit plan in the UK is a defined benefit final sal-
ary scheme. The plan is closed to both new entrants and fu-
ture accruals. The plan is a registered pension scheme, and
Table 4.7.a Pension liabilities recognised in the balance sheet
(EURm)
Sweden
UK
Other
Total
2022
Present value of funded liabilities
Fair value of plan assets
Deficit of funded plans
Present value of unfunded liabilities
Net pension liabilities recognised in the balance sheet
Specification of total liabilities:
Present value of funded liabilities
Present value of unfunded liabilities
Total liabilities
Presented as:
Pension assets
Pension liabilities
Net pension liabilities
2021
Present value of funded liabilities
Fair value of plan assets
Deficit of funded plans
Present value of unfunded liabilities
Net pension liabilities recognised in the balance sheet
Specification of total liabilities:
Present value of funded liabilities
Present value of unfunded liabilities
Total liabilities
Presented as:
Pension assets
Pension liabilities
Net pension liabilities
153
-11
142
2
144
153
2
155
-
144
144
235
-13
222
3
225
235
3
238
-
225
225
943
-959
-16
-
-16
943
-
943
-16
-
-16
1,473
-1,542
-69
-
-69
1,473
-
1,473
-69
-
-69
35
-20
15
2
17
35
2
37
-
17
17
44
-26
18
2
20
44
2
46
-
20
20
1,131
-990
141
4
145
1,131
4
1,135
-16
161
145
1,752
-1,581
171
5
176
1,752
5
1,757
-69
245
176
the assets are held in legally separate, trustee-administered
funds. The trustees of the plan are required by law to act in the
best interests of the plan participants while at the same time
administering the plan in accordance with the purpose for
which the trust was created, and is responsible for drawing up
the investment, funding and governance policies. A repre-
sentative of the group attends trustee meetings to provide the
group's view on the investment strategy, but the ultimate
power lies with the trustees.
Employer contributions are determined based on the advice of
an independent qualified actuary on the basis of triennial valu-
ation negotiations between the plan and Arla and are ulti-
mately approved by HRM Pensions Regulator. The most recent
full actuarial valuation of the plan was carried out at 31 De-
cember 2019. The valuation indicated that, on the agreed
funding basis, the plan had a deficit of EUR 25 million.
The results of the 2019 actuarial valuation have been used
and updated for IAS19 "Employee benefits" purposes by a
qualified independent actuary. The plan exposes the group to
inflation risk, interest rate risk and market investment risk as
well as longevity risk.
Defined contribution plans are in place for other employees.
Contributions are made both by Arla and the employee at a
rate determined by Arla.
Table 4.7.b Development in pension liabilities
(EURm)
Present value of liabilities at 1 January
Current service costs
Interest costs
Actuarial gains and losses from changes in financial assumptions (OCI)
Actuarial gains and losses from changes in demographic assumptions (OCI)
Benefits paid
Exchange rate adjustment
Present value of pension liabilities at 31 December
Maturity of pension liabilities at 31 December 2022
(EURm)
600
500
400
300
200
100
0
Maturity of pension liabilities at 31 December 2021
(EURm)
600
500
400
300
200
100
0
Table 4.7.c Development in fair value of plan assets
(EURm)
Fair value of plan assets at 1 January
Reclassification
Interest income
Return on plan assets excluding amounts included in net interest on the net defined benefit liability
(OCI)
Contributions to plans
Benefits paid
Administration costs
Exchange rate adjustments
Fair value of plan assets at 31 December
Actual return on plan assets:
Calculated interest income
Return excluding calculated interest
Actual return
0-1Y
1-5Y
5-10Y
10-20Y 20-30Y 30-40Y
>40Y
0-1Y
1-5Y
5-10Y
10-20Y 20-30Y 30-40Y
>40Y
The group expects to contribute EUR 21 million to the plan assets in 2023 and EUR 78 million in 2024-2027.
UK 943
Sweden 155
Other 37
UK 1,473
Sweden 238
Other 46
2022
1,757
3
31
-505
-6
-64
-81
1,135
2022
1,581
-
29
-512
12
-54
-
-66
990
29
-512
-483
2021
1,745
5
23
-44
-
-74
102
1,757
2021
1,538
-
21
-47
17
-60
-
112
1,581
21
-47
-26
Table 4.7.d Specification of plan assets
(EURm)
Liability hedge portfolio
Annuity policies
Debt vehicles
Properties
Infrastructure
Other assets
Bonds
Equity instruments
Fair value of plan assets at 31 December
2022
269
221
216
117
81
75
9
1
989
%
27
22
22
12
8
8
1
0
2021
289
321
440
134
74
103
168
52
%
18
20
28
8
5
7
11
3
Discount rate assumptions
Discount rate, Sweden
Discount rate, UK
Inflation assumptions
Inflation (CPI), Sweden
Inflation (CPI), UK
100
1,581
100
Mortality assumptions
Life expectancy in years at age 65:
Males in the UK
Females in the UK
Males in Sweden
Females in Sweden
hedging that covers the majority of interest rate and inflation
movements, as measured based on the trustees' funding as-
sumptions which use a discount rate derived from gilt yields.
LDI primarily involves the use of government bonds. Deriva-
tives such as interest rate and inflation swaps are also used.
There are no annuities or longevity swaps in the LDI portfolios.
The value of the LDI assets is determined based on the latest
market bid price for the underlying investments, which are
traded daily on liquid markets.
Plan asset investment
Plan assets generate returns that are used to satisfy the plan
liabilities. They are not necessarily intended to be realised in
the short term. The trustees invest in different categories of
assets and with different allocations among those categories
according to the plan investment principles.
Currently, the plan investment strategy is to maintain a bal-
ance of growth assets (property and infrastructure), income
assets (comprising credit investments and corporate bonds)
and matching assets (comprising a liability hedge portfolio and
a buy-in annuity policy), with a weighting towards matching as-
sets. There are no direct investments in the group.
Part of the investment objective is to minimise fluctuations in
the plan's funding levels due to changes in the value of the lia-
bilities. This is primarily achieved using a Liability Driven Invest-
ment (LDI) portfolio, the main goal of which is to align move-
ments in the value of the assets with movements in the liabili-
ties caused by changes in market conditions. The plan has
Table 4.7.e Assumptions for the actuarial calculations
%
2022
2021
4.0
4.9
2.0
2.6
21.0
23.0
22.0
24.0
1.7
1.9
2.1
2.7
21.0
23.0
22.0
24.0
Table 4.7.f Sensitivity of pension liabilities to key assumptions
(EURm)
Impact on pension liabilities at 31 December
Discount rate +/- 10 bps
Expected salary increases +/- 10 bps
Life expectancy +/- 1 year
Inflation +/- 10 bps
2022
2022
2021
2021
+
-14
1
36
8
-
14
-1
-36
-8
+
-26
2
82
16
-
26
-2
-82
-16
Table 4.7.g Recognised in the income statement
(EURm)
2022
2021
Current service costs
Administration costs
Curtailments and settlements
Recognised as staff costs
Interest costs on pension liabilities
Interest income on plan assets
Recognised as financial costs
Total amount recognised in the income statement
Table 4.7.h Recognised in other comprehensive income
(EURm)
Actuarial gains and losses on liabilities from changes in financial assumptions (OCI)
Actuarial gains and losses on liabilities from changes in demographic assumptions (OCI)
Return on plan assets excluding amounts included in net interest on the net defined benefit liability
Total amount recognised in other comprehensive income
3
-
-
3
31
-29
2
5
2022
505
6
-512
-1
5
-
-
5
23
-21
2
7
2021
44
-
-47
-3
The group uses qualified actuaries to annually calculate the
defined benefit liability using the projected unit credit
method.
The balance sheet amount of the net liability is impacted by
remeasurement, which includes the effect of changes in as-
sumptions used to calculate the future liability (actuarial gain
and losses) and the return generated on plan assets (excluding
interest). Remeasurements are recognised in other compre-
hensive income.
Interest costs for the period are calculated using the dis-
counted rate used to measure the defined benefit liability at
the start of the reporting period applied to the carrying
amount of the net liability, taking into account changes arising
from contributions and benefit payments. The net interest
costs and other costs relating to defined benefit plans are rec-
ognised in the income statement. The net liability primarily co-
vers defined benefit plans in the UK and Sweden.
Uncertainties and estimates
The defined benefit liability is assessed based on a number of
assumptions, including discount rates, inflation rates, salary
growth and mortality. A small difference in actual variables
compared to assumptions and any changes in assumptions
can have a significant impact on the net position.
Accounting policies
Pension liabilities and similar non-current liabilities
The group has post-employment pension plan arrangements
with a significant number of current and former employees.
The post-employment pension plan agreements take the form
of defined contribution plans and defined benefit plans.
Defined contribution plans
For defined contribution plans, the group pays fixed contribu-
tions to independent pension companies. The group has no
obligation to make supplementary payments beyond those
fixed payments, and the risk and reward of the value of the
pension plan therefore rests with plan members and not the
group. Contributions to defined contribution plans are
expensed in the income statement as incurred.
Defined benefit plans
Defined benefit plans are characterised by the group's obliga-
tion to make specific payments from the date the plan mem-
ber is retired, depending on, for example, the member's sen-
iority and final salary. The group is subject to the risks and re-
wards associated with the uncertainty of whether the return
generated by the assets will meet the pension liability, which is
affected by assumptions concerning mortality and inflation.
The group's net liability is the amount presented in the bal-
ance sheet as a pension liability.
The net liability is calculated separately for each defined bene-
fit plan. The net liability is the amount of future pension bene-
fits that employees have earned in current and prior periods
(i.e. the liability for pension payments for the portion of the
employee's estimated final salary earned at the balance sheet
date) discounted to a present value (the defined benefit liabil-
ity), less the fair value of assets held separately from the group
in a plan fund.
2022
2021
22.0%
-2.8%
-7.7%
-0.6%
0.0%
-0.8%
-1.0%
0.3%
1.5%
10.9%
449
99
-13
-34
-3
-
-4
-4
1
7
49
22.0%
-2.0%
-4.9%
-1.5%
2.7%
0.5%
0.0%
0.0%
-1.8%
15.0%
407
89
-8
-20
-6
11
2
-
-
-7
61
Current income tax
Costs related to current income taxes decreased to EUR 42
million compared to EUR 44 million last year, mainly due to
adjustments to current taxes of previous years, partially offset
by higher corporate income tax costs for the year.
Deferred tax
Costs recognised in the income statement related to adjust-
ments to deferred taxes amounting to EUR 7 million, repre-
senting a decrease of EUR 10 million compared to last year.
Last year was negatively impacted by an adjustment of the tax
rate in the UK.
Current and deferred tax
Tax in the income statement
Tax costs decreased to EUR 49 million compared to EUR 61
million last year, primarily due to a reduction in total deferred
tax costs.
The effective tax rate decreased to 10.9 per cent compared to
15.0 per cent last year, primarily due to a higher share of the
result realised by companies being subject to cooperative
taxation.
Net deferred tax liabilities amounted to EUR 64 million, repre-
senting an increase of EUR 21 million compared to last year.
The increase was mainly driven by deferred tax costs from
financial instruments recognised in other comprehensive
income.
Table 5.1.a Tax recognised in the income statement
(EURm)
Current income tax
Current income tax on profit for the year relating to:
Cooperative tax
Corporate income tax
Adjustments to current taxes of previous years
Total current income tax costs
Deferred tax
Change in deferred tax for the year
Adjustment to deferred taxes of previous years
Impact of changes in tax rates and laws
Total deferred tax costs
Total tax costs in the income statement
2022
2021
10
31
1
42
16
-9
-
7
49
10
28
6
44
10
-4
11
17
61
Table 5.1.b Calculation of effective tax rate
(EURm)
Profit before tax
Tax applying the statutory Danish corporate income tax rate
Effect of tax rates in other jurisdictions
Effect of companies subject to cooperative taxation
Tax-exempt income, less non-deductible expenses
Impact of changes in tax rates and laws
Adjustment for tax costs of previous years
Recognition of previously unrecognised tax losses
Current year losses for which no deferred tax asset is recognised
Other adjustments
Total
The gross deferred tax liabilities of EUR 86 million mainly
related to temporary differences in provisions, pension liabili-
ties and other liabilities, financial assets and other items.
These were in part offset by deferred tax assets relating to
property, plant and equipment and tax losses carried forward
of EUR 22 million.
The group recognises deferred tax assets, including the value
of tax losses carried forward, where management assesses
that the tax assets may be utilised in the foreseeable future by
offsetting against taxable income. The assessment is per-
formed on an ongoing basis and is based on the budgets and
business plans for future years.
The group recognised deferred tax assets in respect of
tax losses carried forward in the amount of EUR 9 million.
Deferred tax assets not recognised totalled EUR 32 million,
which is on a par with last year. Unrecognised deferred tax
assets related to tax losses carried forward.
Table 5.1.c. Deferred tax assets and liabilities
(EURm)
Net deferred tax liability at 1 January
Deferred tax recognised in the income statement
Deferred tax recognised in other comprehensive income
Impact of change in tax rates
Exchange rate adjustments
Net deferred tax liability at 31 December
Deferred tax, by gross temporary difference
Intangible assets
Property, plant and equipment
Provisions, pension liabilities and other assets
Tax losses carried forward
Other
Total deferred tax, by gross temporary difference
Recognised in the balance sheet as:
Deferred tax assets
Deferred tax liabilities
Total
2022
2021
-43
-7
-17
-
3
-64
-6
22
-51
9
-38
-64
22
-86
-64
-35
-6
9
-11
-
-43
-7
29
-33
7
-39
-43
21
-64
-43
Accounting policies
Tax in the income statement
Tax in the income statement comprises current tax and adjust-
ments to deferred tax. Tax is recognised in the income state-
ment, except to the extent that it relates to a business combi-
nation or items (income or costs) recognised directly in other
comprehensive income.
Current tax
Current tax is assessed based on tax legislation for entities in
the group subject to cooperative or corporate income taxa-
tion. Cooperative taxation is based on the capital of the coop-
erative, while corporate income tax is assessed based on the
company's taxable income for the year. Current tax liabilities
comprise the expected tax payable/receivable on the taxable
profit or loss for the year, any adjustments to the tax payable
or receivable in respect of previous years and tax paid on ac-
count. Current tax liabilities are disclosed as part of other cur-
rent liabilities.
Deferred tax
Deferred tax is measured in accordance with the balance
sheet liability method for all temporary differences between
the tax base of assets and liabilities and their carrying amounts
in the consolidated financial statements. However, deferred
tax is not recognised on temporary differences on initial
recognition of goodwill or arising at the acquisition date of an
asset or a liability without affecting either the profit or loss for
the year or taxable income, except for those arising from M&A
activities.
Deferred tax is determined by applying tax rates (and laws) that
have been enacted or substantially enacted by the end of the
reporting period and that are expected to apply when the re-
lated deferred tax asset is realised or the deferred tax liability is
settled. Changes in deferred tax assets and liabilities due to
changes in the tax rate are recognised in the income state-
ment except for items recognised in other comprehensive
income.
Deferred tax assets, including the value of tax losses carried
forward, are recognised under other non-current assets at the
value at which they are expected to be used, either by elimina-
tion in the tax of future earnings or by offsetting against
deferred tax payable in companies within the same legal tax
entity or jurisdiction.
Uncertainties and estimates
Deferred tax
Deferred tax reflects assessments of actual future tax due on
items in the financial statements, considering timing and
probability. These estimates also reflect expectations about
future taxable profits. Actual future taxes may deviate from
these estimates due to changes in expectations relating to
future taxable income, future statutory changes in income
taxation or the outcome of tax authorities' final review of the
group's tax returns. Recognition of a deferred tax asset also
depends on an assessment of the future use of the asset.
Fees paid to EY
Table 5.3 Fees to auditors appointed by the Board of Representatives
(EURm)
Statutory audit
Other assurance engagements
Tax assistance
Other services
Total fees to auditors
2022
2021
1.7
0.4
0.3
0.3
2.7
1.6
0.3
0.4
0.5
2.8
Provisions
Provisions amounted to EUR 48 million in 2022 compared to
EUR 42 million last year. Provisions primarily related to provi-
sions for insurance incidents that have occurred, but have not
yet been settled.
Uncertainties and estimates
Provisions are particularly associated with estimates of insur-
ance provisions. Insurance provisions are assessed based on
historical records of, among other things, the number of insur-
ance events and related costs considered. The scope and ex-
tent of onerous contracts are also estimated.
Table 5.2 Provisions
(EURm)
Provisions at 1 January
New provisions during the year
Reversals
Used during the year
Provisions at 31 December
Non-current provisions
Current provisions
Provisions at 31 December
Insurance
provisions
Restructuring
provisions
Other
provisions
Total
2022
Total
2021
14
7
-
-
21
7
14
21
3
1
-
-
4
-
4
4
25
-
-1
-1
23
21
2
23
42
8
-1
-1
48
28
20
48
46
10
-
-14
42
24
18
42
Remuneration paid to management
The remuneration to the 19 registered members of the Board
of Directors (BoD) is assessed and adjusted on a bi-annual
basis and approved by the Board of Representatives. The BoD's
remuneration was most recently adjusted in 2022. The princi-
ples applied to the remuneration of the BoD are described on
page 63. Members of the BoD are paid for their milk supplies
to Arla Foods amba on the same terms as apply to other own-
ers. Similarly, individual capital instruments are issued to the
BoD on the same terms as apply to other owners.
The Executive Board consists of Chief Executive Officer Peder
Tuborgh and Chief Commercial Officer, Europe, Peter Giørtz-
Carlsen. The principles applied to the remuneration of the
Executive Board are described on page 63.
Table 5.4.a Management remuneration
(EURm)
Board of Directors
Wages, salaries and remuneration
Total
Executive Board
Fixed compensation
Pension
Short-term variable incentives
Long-term variable incentives
Total
2022
2021
1.6
1.6
2.5
0.4
0.5
0.8
4.2
1.3
1.3
2.4
0.3
0.8
2.9
6.4
The above table includes accrued amounts related to the respective reporting period. The amounts are based on reported key
figures together with estimates of performance compared to peers and, consequently, the final future pay-out may differ.
Table 5.4.b Transactions with the Board of Directors
(EURm)
Purchase of raw milk
half-year supplementary payment
Supplementary payment regarding previous years
Total
Unsettled milk deliveries in trade payables and other payables
Individual capital instruments
Total
2022
36.2
0.3
1.1
37.6
1.4
2.6
4.0
2021
27.4
-
1.4
28.8
2.6
2.9
5.5
Contractual obligations and commitments
Arla's contractual obligations and commitments amounted to
EUR 293 million compared to EUR 370 million last year. The
development was due to reduced surety and guarantee obli-
gations and increased commitments relating to property,
plant and equipment purchase agreements.
Contractual obligations and commitments consisted of surety
and guarantee obligations, IT licences, short-term and low-
value leases and commitments relating to property, plant and
equipment purchase agreements.
The group provided security upon property for mortgage debt
based on the Danish Mortgage Act with a nominal value of
EUR 1,229 million compared to EUR 1,040 million last year.
The group is party to a small number of lawsuits, disputes and
other claims. The management assesses that the outcome of
these will not have a material impact on the group's financial
position beyond what has already been recognised in the fi-
nancial statements.
Subsequent events
No subsequent events with a material impact on the financial
statements have occurred after the balance sheet date.
Basis for preparation
The consolidated financial statements included in this annual
report are prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the EU and addi-
tional disclosure requirements in the Danish Financial State-
ments Act for large class C companies. Arla is not an EU public
interest entity as the group has no debt instruments traded in
a regulated EU market place. The consolidated financial state-
ments were authorised for issue by the company's Board of Di-
rectors on 8 February 2023 and presented for approval by the
Board of Representatives on 22 February 2023.
The functional currency of the parent company is DKK. The
presentation currency of the parent company and the group
is EUR.
considered to be joint ventures. Entities in which the group
exercises a significant but not a controlling influence are con-
sidered to be associates. A significant influence is typically
obtained by holding or having at the group's disposal, directly
or indirectly, more than 20 per cent, but less than 50 per cent,
of the voting rights in an entity.
Unrealised gains arising from transactions with joint ventures
and associates, i.e. profits from sales to joint ventures or asso-
ciates and whereby the customer pays with funds partly
owned by the group, are eliminated against the carrying
amount of the investment in proportion to the group's interest
in the company. Unrealised losses are eliminated in the same
manner, but only to the extent that there is no evidence of
impairment.
These financial statements are prepared in million EUR with
rounding.
Consolidated financial statements
The consolidated financial statements are prepared as a com-
pilation of the parent company's and the individual subsidiar-
ies' financial statements in line with the group's accounting
policies. Revenue, costs, assets and liabilities, along with items
included in the equity of subsidiaries, are aggregated and pre-
sented on a line-by-line basis. Inter-company shareholdings,
balances and transactions as well as unrealised income and
expenses arising from inter-company transactions are elimi-
nated.
The consolidated financial statements comprise Arla Foods
amba (parent company) and the subsidiaries in which the par-
ent company directly or indirectly holds more than 50 per
cent of the voting rights or otherwise maintains control to
obtain benefits from its activities. Entities in which the group
exercises joint control through a contractual arrangement are
The consolidated financial statements are prepared on a his-
torical cost basis, except for certain items with alternative
measurement bases, which are identified in these accounting
policies.
Translation of transactions and monetary
items in foreign currencies
For each reporting entity in the group, a functional currency is
determined, being the currency used in the primary economic
environment where the entity operates. Where a reporting
entity has transactions in a foreign currency, it will record the
transaction in its functional currency using the transaction
date rate. Monetary assets and liabilities denominated in for-
eign currencies are translated into the functional currency
using the exchange rate applicable at the reporting date. Ex-
change rate differences are recognised in the income state-
ment under financial items. Non-monetary items, for example
property, plant and equipment, which are measured based on
historical cost in a foreign currency, are translated into the
functional currency on initial recognition.
Translation of foreign operations
The assets and liabilities of consolidated entities, including the
share of net assets and goodwill of joint ventures and associ-
ates with a functional currency other than EUR, are translated
into EUR using the year-end exchange rate. The revenue, costs
and share of the net profit or loss for the year are translated
into EUR using the average monthly exchange rate if this does
not differ materially from the transaction date rate. Exchange
rate differences are recognised in other comprehensive
income and accumulated in the translation reserve.
On partial divestment of associates and joint ventures, the rel-
evant proportional amount of the cumulative foreign currency
translation adjustment reserve is transferred to the net profit
or loss for the year, along with any gains or losses related to
the divestment. Any repayment of outstanding balances con-
sidered part of the net investment is not in itself considered to
be a partial divestment of the subsidiary.
Adoption of new or amended IFRS
The group has implemented all new standards and interpreta-
tions effective in the EU from 2022.
Future implementations
The IASB has issued a number of new or amended and revised
accounting standards and interpretations which are not yet
applicable. Arla will adopt these new standards when they be-
come mandatory. No material impact is expected from that.
Arla Foods amba
Arla Foods Ingredients Group P/S
Arla Foods Ingredients Energy A/S
Arla Foods Ingredients Japan K.K.
Arla Foods Ingredients Inc.
Arla Foods Ingredients Korea, Co. Ltd.
Arla Foods Ingredients Trading (Beijing) Co. Ltd.
Arla Foods Ingredients S.A.
Arla Foods Ingredients Comércio de Produtos Alimentícios Ltda.
Arla Foods Ingredients Singapore Pte. Ltd.
Arla Foods Ingredients S.A. de C.V.
Arla Foods Holding A/S
Arla Foods W.L.L.
Arla Oy
Massby Facility & Services Ltd. Oy
Osuuskunta MS tuottajapalvelu**
Arla Foods Distribution A/S
Cocio Chokolademælk A/S
Arla Foods International A/S
Arla Foods UK Holding Limited
Arla Foods UK Farmers Joint Venture Co. Limited
Arla Foods UK plc
Arla Foods GP Limited
Arla Foods Limited Partnership
Country
Denmark
Denmark
Denmark
Japan
USA
Korea
China
Argentina
Brazil
Singapore
Mexico
Denmark
Bahrain
Finland
Finland
Finland
Denmark
Denmark
Denmark
UK
UK
UK
UK
UK
Currency
Group equity
interest
DKK
DKK
DKK
JPY
USD
KRW
CNY
USD
BRL
SGD
MXN
DKK
BHD
EUR
EUR
EUR
DKK
DKK
DKK
GBP
GBP
GBP
GBP
GBP
%
Arla Foods amba
100
100
100
100
100
100
100
100
100
100
100
100
100
60
37
100
50
100
100
100
100
100
100
Arla Foods Finance Limited
Arla Foods Limited
Arla Foods Hatfield Limited
Yeo Valley Dairies Limited
Arla Foods Cheese Company Limited
Arla Foods Ingredients UK Limited
MV Ingredients Limited*
Arla Foods UK Property Co. Limited
Arla Foods B.V.
Arla Foods Comércio, Importacâo e Exportacão
de Productos Alimenticios Ltda.
Arla Foods Ltd.
AF A/S
Arla Foods Finance A/S
Kingdom Food Products ApS
Ejendomsanpartsselskabet St. Ravnsbjerg
Arla Insurance Company (Guernsey) Limited
Arla Foods Energy A/S
Arla Foods Trading A/S
Arla DP Holding A/S
Arla Foods Investment A/S
Arla Senegal SA.
Tholstrup Cheese A/S
Arla Foods Belgien AG
Currency
Group equity
interest
Country
Denmark
UK
UK
UK
UK
UK
UK
UK
UK
Netherlands
Brazil
DKK
GBP
GBP
GBP
GBP
GBP
GBP
GBP
GBP
EUR
BRL
Kingdom of Saudi Arabia SAR
Denmark
Denmark
Denmark
Denmark
Guernsey
Denmark
Denmark
Denmark
Denmark
Senegal
Denmark
Belgium
DKK
DKK
DKK
DKK
EUR
DKK
DKK
DKK
DKK
XOF
DKK
EUR
%
33
100
100
100
100
100
50
100
100
100
75
100
100
100
100
100
100
100
100
100
100
100
100
Arla Foods amba
Arla Foods Ingredients (Deutschland) GmbH
Arla CoAr Holding GmbH
ArNoCo GmbH & Co. KG*
Arla Biolac Holding GmbH
Arla Foods Kuwait Company WLL
Arla Kallassi Foods Lebanon S.A.L.
Arla Foods Qatar WLL
Arla Foods Trading and Procurement Limited
Arla Foods Sdn. Bhd.
Arla Foods Corporation
Arla Foods Limited
Arla Global Dairy Products Ltd.
Arla Global Development Company Ltd.
TG Arla Dairy Products LFTZ Enterprise
TG Arla Dairy Products Ltd.
Arla For General Trading Ltd.
Arla Foods AB
Arla Gelfeortens AB
Årets Kock Aktiebolag
Arla Foods Russia Holding AB
Country
Denmark
Germany
Germany
Germany
Germany
Kuwait
Lebanon
Qatar
Hong Kong
Malaysia
Philippines
Ghana
Nigeria
Nigeria
Nigeria
Nigeria
Iraq
Sweden
Sweden
Sweden
Sweden
Currency
Group equity
interest
DKK
EUR
EUR
EUR
EUR
KWD
LBP
QAR
HKD
MYR
PHP
GHS
NGN
NGN
NGN
NGN
USD
SEK
SEK
SEK
SEK
%
Arla Foods amba
100
100
50
100
49
50
40
100
100
100
100
100
99
50
100
51
100
100
67
100
Arla Foods Inc.
Arla Foods Production LLC
Arla Foods Transport LLC
Arla Foods Deutschland GmbH
Arla Foods Verwaltungs GmbH
Dofo Cheese Eksport K/S°
Dofo Inc.
Aktieselskabet J. Hansen
J.P. Hansen USA Incorporated
AFI Partner ApS
Andelssmør A.m.b.a.
Arla Foods AS
Arla Foods Bangladesh Ltd.
Arla Foods Dairy Products Technical Service (Beijing) Co. Ltd.
Arla Foods FZE
Arla Foods Hellas S.A.
Arla Foods Inc.
Arla Foods Logistics GmbH
Arla Foods Mayer Australia Pty, Ltd.
Arla Foods Mexico S.A. de C.V.
Arla Foods S.A.
Country
Denmark
USA
USA
USA
Germany
Germany
Denmark
USA
Denmark
USA
Denmark
Denmark
Norway
Bangladesh
China
UAE
Greece
Canada
Germany
Australia
Mexico
Spain
Currency
Group equity
interest
DKK
USD
USD
USD
EUR
EUR
DKK
USD
DKK
USD
DKK
DKK
NOK
BDT
CNY
AED
EUR
CAD
EUR
AUD
MXN
EUR
%
100
100
100
100
100
100
100
100
100
100
98
100
51
100
100
100
100
100
51
100
100
Arla Foods amba
Arla Foods France S.a.r.l.
Arla Foods S.R.L.
Arla Foods SA
Arla Global Shared Services Sp. Z.o.o.
Arla Foods LLC
Arla National Food Products Company LLC
Cocio Chokolademælk A/S
Marygold Trading K/S°
Mejeriforeningen
COFCO Dairy Holdings Limited**
Svensk Mjölk Ekonomisk förening
Svensk Mjölk AB
Lantbrukarnas Riksförbund upa**
Jörd International A/S
Ejendomsselskabet Gjellerupvej 105 P/S
Svenska Ostklassiker AB
Komplementarselskabet Gjellerupvej 105 ApS
PT Arla Foods Indonesia
Arla Foods Arinco A/S
Green Fertilizer Denmark ApS**
Financial statements of the parent company
Under section 149 of the Danish Financial Statements Act,
these consolidated financial statements represent an extract
of Arla's complete annual report. In order to make this report
more manageable and user-friendly, we publish consolidated
financial statements that do not include the financial state-
ments of the parent company, Arla Foods amba. The annual
report of the parent company is an integral part of the full an-
nual report and is available at www.arlafoods.com. Profit shar-
ing and supplementary payments from the parent company
are set out in the equity section of the consolidated financial
statements. The full annual report contains the statement by
the Board of Directors and the Executive Board as well as the
independent auditor's report.
Country
Denmark
France
Dominican Republic
Poland
Poland
UAE
Oman
Denmark
Denmark
Denmark
British Virgin Islands
Sweden
Sweden
Sweden
Denmark
Denmark
Sweden
Denmark
Indonesia
Denmark
Denmark
Currency
Group equity
interest
DKK
EUR
DOP
PLN
PLN
AED
OMR
DKK
DKK
DKK
HKD
SEK
SEK
SEK
DKK
DKK
SEK
DKK
IDR
DKK
DKK
%
100
100
100
100
49
67
50
100
89
30
75
100
24
100
100
68
100
100
80
25
*Joint ventures
**Associates
°According to section 5 of the Danish Financial Statements Act, the company does not prepare a statutory report.
In addition, the group owns a number of entities without material commercial activities.
Today, the Board of Directors and the Executive Board have
discussed and approved the annual report of Arla Foods amba
for the financial year 2022. The annual report has been pre-
pared in accordance with International Financial Reporting
Standards as adopted by the EU and additional disclosure
requirements of the Danish Financial Statements Act.
It is our opinion that the consolidated financial statements and
the parent company financial statements give a true and fair
view of the group's and the parent company's financial posi-
tion at 31 December 2022 and of the results of the group's
and the parent company's activities and cash flows for the fi-
nancial year 1 January to 31 December 2022.
In our opinion, the management's review of the annual report
(pages 4-65) includes a true and fair view of the development
in the group's and the parent company's financial position,
activities, financial matters, results for the year and cash flows
as well as a description of the most significant risks and uncer-
tainties which may affect the group and the parent company.
Arla's consolidated environmental, social and governance
statements have been prepared in accordance with Arla's ESG
accounting principles. In our opinion, they give a true and fair
view and a balanced and reasonable presentation of the
groups environmental, social and governance performance
in accordance with these principles.
We hereby recommend the annual report for adoption by
the Board of Representatives.
Aarhus, 8 February 2023
Peder Tuborgh
CEO
Peter Giørtz-Carlsen
COO
Jan Toft Nørgaard
Chairman
Manfred Graff
Vice Chairman
Anders Olsson
Arthur Fearnall
Bjørn Jepsen
Daniel Halmsjö
Florence Rollet
Grant Cathcart
Gustav Kämpe
Ib Bjerglund Nielsen
Inger-Lise Sjöström
Johnnie Russell
Jørn Kjær Madsen
Marcel Goffinet
Marita Wolf
Nana Bule
René Lund Hansen
Simon Simonsen
Steen Nørgaard Madsen
Opinion
We have audited the consolidated financial statements and
the parent company financial statements of Arla Foods amba
for the financial year 1 January to 31 December 2022, which
comprise the income statement, statement of comprehensive
income, balance sheet, statement of changes in equity, cash
flow statement and notes, including accounting policies, for
the group and the parent company. The consolidated financial
statements and the parent company financial statements
have been prepared in accordance with International Financial
Reporting Standards as adopted by the EU and additional re-
quirements of the Danish Financial Statements Act.
In our opinion, the consolidated financial statements and the
parent company financial statements give a true and fair view
of the financial position of the group and the parent company
at 31 December 2022 and of the results of the group's and the
parent company's operations and cash flows for the financial
year 1 January to 31 December 2022 in accordance with Inter-
national Financial Reporting Standards as adopted by the EU
and additional requirements of the Danish Financial State-
ments Act.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (ISAs) and additional requirements ap-
plicable in Denmark. Our responsibilities under those stand-
ards and requirements are further described in the "Auditor's
responsibilities for the audit of the consolidated financial
statements and the parent company financial statements"
(hereinafter collectively referred to as "the financial state-
ments") section of our report. We believe that the audit evi-
dence we have obtained is sufficient and appropriate to pro-
vide a basis for our opinion.
Independence
We are independent of the group in accordance with the Inter-
national Ethics Standards Board for Accountants' International
Code of Ethics for Professional Accountants (IESBA Code) and
the additional ethical requirements applicable in Denmark,
and we have fulfilled our other ethical responsibilities in
accordance with these requirements and the IESBA Code.
Statement on the Management's review
Management is responsible for the Management's review.
Our opinion on the financial statements does not cover the
Management's review, and we do not express any assurance
conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the Management's review and, in doing
so, consider whether the Management's review is materially
inconsistent with the financial statements or our knowledge
obtained during the audit, or otherwise appears to be materi-
ally misstated.
Moreover, it is our responsibility to consider whether the Man-
agement's review provides the information required under the
Danish Financial Statements Act.
Based on our procedures, we conclude that the Manage-
ment's review is in accordance with the financial statements
and has been prepared in accordance with the requirements
of the Danish Financial Statements Act. We did not identify any
material misstatement of the Management's review.
Management's responsibilities for
the financial statements
Management is responsible for the preparation of consoli-
dated financial statements and parent company financial
statements that give a true and fair view in accordance with
International Financial Reporting Standards as adopted by the
EU and additional requirements of the Danish Financial State-
ments Act and for such internal control as Management deter-
mines is necessary to enable the preparation of financial state-
ments that are free from material misstatement, whether due
to fraud or error.
In preparing the financial statements, Management is respon-
sible for assessing the group's and the parent company's abil-
ity to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting in preparing the financial statements
unless Management either intends to liquidate the group or
the parent company or to cease operations, or has no realistic
alternative but to do so.
Auditor's responsibilities for the audit
of the financial statements
Our objectives are to obtain reasonable assurance as to
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditor's report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs and addi-
tional requirements applicable in Denmark will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to in-
fluence the economic decisions of users taken on the basis of
the financial statements.
As part of an audit conducted in accordance with ISAs and
additional requirements applicable in Denmark, we exercise
professional judgement and maintain professional scepticism
throughout the audit. We also:
· Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks and
obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, for-
gery, intentional omissions, misrepresentations or the over-
ride of internal control.
· Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropri-
ate in the circumstances, but not for the purpose of express-
ing an opinion on the effectiveness of the group's and the
parent company's internal control.
· Evaluate the appropriateness of accounting policies used
and the reasonableness of accounting estimates and related
disclosures made by Management.
· Conclude on the appropriateness of Management's use of
the going concern basis of accounting in preparing the finan-
cial statements and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the group's
and the parent company's ability to continue as a going con-
cern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor's report to the re-
lated disclosures in the financial statements or, if such dis-
closures are inadequate, to modify our opinion. Our conclu-
sions are based on the audit evidence obtained up to the
date of our auditor's report. However, future events or condi-
tions may cause the group and the parent company to cease
to continue as a going concern.
· Evaluate the overall presentation, structure and contents of
the financial statements, including the note disclosures, and
whether the financial statements represent the underlying
transactions and events in a manner that gives a true and
fair view.
· Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities
within the group to express an opinion on the consolidated
financial statements. We are responsible for the direction,
supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
We communicate with those charged with governance regard-
ing, among other matters, the planned scope and timing of
the audit and significant audit findings, including any signifi-
cant deficiencies in internal control that we identify during
our audit.
Aarhus, 8 February 2023
EY Godkendt Revisionspartnerselskab
CVR no. 30 70 02 28
Henrik Kronborg Iversen
State Authorised Public
Accountant
MNE no. 24687
Jes Lauritzen
State Authorised Public
Accountant
MNE no. 10121
Arla has been making infant formula for 30 years,
going the extra mile to provide the next genera-
tions with organic, natural goodness.
In Arla, we believe that being science-based and-data driven is
key to reducing our carbon footprint. Science is developing
rapidly and we strive to use best available data and methodol-
ogy at all times. The effects on updates in methodologies and
data sources are included in the reported numbers. We receive
reasonable assurance on our complete ESG data set, including
scope 1, 2, and 3 greenhouse gas emissions.
According to the 2022 quantification of Arla’s climate impact,
scope 1 and 2 emissions accounted for 3 and 1 per cent of to-
tal emissions, respectively. Scope 3 emissions accounted for
96 per cent of Arla’s climate impact. Milk production on farms
(including, among many other factors, methane emitted by
cows, and emissions related to feed and transport of feed)
accounted for 81 per cent of total emissions.
Farm emissions (81%)
Externally sourced whey (10%)
Packaging (2%)
Transport (service)
Waste and other (3%)
Purchased energy
Transport
(own fleet)
Production
changes to our production mix to more energy intensive prod-
ucts such as milk powder. You can read more about energy
optimisation activities in 2022 on page 36 and about our pro-
gress towards our renewable electricity target on page 41.
Scope 3 emissions per kg milk and whey were reduced 2 per
centage points in 2022, leading to a total decrease towards
our 2030 target of 9 per cent compared to the 2015 baseline.
Scope 3 emissions per kg milk and whey amounted to 1.18 kg.
Emissions specifically from Arla’s owners amounted to 1.12 kg
CO₂e per kg of owner milk. For more information on initiatives
to reach the target, refer to page 36.
Emissions related to packaging and transport increased due to
changes in emission factors, partly offset by lower packaging
volumes due to a shift in sales from retail to trading.
In 2022, total CO₂e emissions decreased to 19,102 million kg
compared to 19,783 million kg last year. The development is
explained by emission reduction on farm, lower milk volumes
and decreased scope 2 emissions, partly offset by increased
purchase of external whey for the Arla Foods Ingredients
business.
108
63
19,102
Greenhouse gas emission development
To follow up on the progress towards emission reduction tar-
gets, greenhouse gas emissions (expressed as CO₂ equiva-
lents, CO₂e) are reported annually. CO₂e is categorised into
three scopes according to the methodology of the Green-
house Gas Protocol Corporate Standard (GHG protocol). In line
with Arla’s Science Based Targets, the group does not reduce
the CO₂e emissions with carbon credits.
In 2022, our scope 1+2 CO₂e emissions decreased 4 percent-
age points, leading to a total reduction of 29 per cent com-
pared to 2015. The reduction was a result of energy optimisa-
tions at sites, slightly lower milk volumes, partly offset by
CO2e emission development
(MKG)
19,783
30
-68
-3.4%
-815
2021
Scope 1
Scope 2
Scope 3
Milk
Scope 3
Whey
Scope 3
Other
2022
ESG Table 1.1.a Greenhouse gas emissions
progress
(mkg)
CO₂e scope 1+2 market-based
CO₂e reduction scope 1+2 (baseline: 2015)
CO₂e scope 3 from owner milk (kg)
CO₂e scope 3 per kg of milk and whey (kg)
CO₂e reduction scope 3 per kg milk and whey
(baseline: 2015)¹
2022
695
-29%
1.12
1.18
-9%
2021
733
-25%
1.15
1.20
-7%
2020
751
-24%
1.15
1.21
-7%
2019
862
-12%
1.15
1.21
-7%
2018
946
-4%
1.14
1.20
-7%
¹ The calculation of CO₂e emissions in 2015 was based on national statistical data, the best available source at that time. In 2016, we
started to do climate measurements on Arla farms and gradually replaced the national statistical data with Arla-specific data in the CO₂e
calculation model. Read more on page 131.
ESG Table 1.1.b Greenhouse gas emissions
(mkg)
Production
Transport
CO₂e scope 1
CO₂e scope 2 – market-based
Milk
Externally sourced whey
Packaging
Purchased goods and services (category 1)
Fuel and energy-related activities (category 3)
Upstream transport and distribution (category 4)
Waste generated in operations (category 5)
CO₂e scope 3³
Total CO₂e
CO₂e Scope 2 – location-based
Total CO₂e – location-based
2022²
2021
2020
2019
2018
399
78
477
218
15,571
1,859
444
17,874
177
346
10
368
79
447
286
16,386
1,751
417
18,554
125
347
24
381
93
474
277
16,645
1,133
396
18,174
120
306
25
366
97
463
399
16,524
1,032
384
17,940
110
312
25
400
90
490
456
16,548
1,162
383
18,093
108
326
26
18,407
19,050
18,625
18,387
18,553
19,102
165
19,049
19,783
243
19,740
19,376
237
19,336
19,249
274
19,124
19,499
263
19,306
²In 2022, the supplier of Arla’s emission factors was changed from Sphera to Quantis due to a supplier-initiated termination of emission
factor services. Historical figures 2015-2021 were not adjusted. The impacts on CO₂e for 2021 using 2022 emission factors were: Pack-
aging (part of category 1): +43mkg, category 3: +16 mkg, category 4: +7mkg, category 5: -15mkg.
³ Scope 3 emissions from categories 2, 6, 7, 8, 9, 12, 13 and 15 are immaterial to Arla’s scope 3 emissions and are therefore not included
in the emission figures in ESG Table 1.1. The categories mentioned individually account for less than 0.6 per cent of the Arla’s scope 3
emissions. Categories 10, 11 and 14 are not applicable to Arla due to the nature of the products and the Arla business model.
Scope 1 – All direct emissions
Scope 1 emissions relate to activities under the group’s con-
trol. This includes transport using Arla’s vehicles and direct
emissions from Arla’s production facilities. Scope 1 emissions
are calculated in accordance with the methodology set out in
the GHG protocol by applying emission factors to Arla-specific
activity data.
Scope 2 – Indirect emissions
Scope 2 emissions relate to the indirect emissions caused by
Arla’s energy purchases, i.e. electricity or heat. Scope 2 emis-
sions are calculated in accordance with the methodology set
out in the GHG protocol by applying emission factors to Arla-
specific activity data.
In 2020, Arla switched from location-based scope 2 reporting
to market-based reporting and updated the 2015 baseline.
The market-based allocation approach reflects emissions from
the specific electricity and other contractual instruments that
Arla purchases, which may differ from the average electricity
and other energy sources generated in a specific country. This
gives Arla the chance to purchase electricity and other con-
tractual instruments that emit less greenhouse gases than the
country average. In accordance with the GHG protocol, Arla
discloses scope 2 emissions according to both the market and
location-based method (also known as dual reporting).
Scope 3 – Other indirect emissions
Scope 3 emissions relate to emissions from sources that Arla
does not directly own or control. They cover emissions from
purchased goods and services (e.g. raw milk purchased from
owners and contract farmers, whey, packaging and transport
purchased from suppliers), but also waste processing from
production sites. Scope 3 emissions are, in line with the GHG
protocol, calculated by applying emission factors to Arla-spe-
cific activity data.
Emissions from whey relates to externally purchased whey for
Arla Foods Ingredients. Included whey is standardised and re-
calculated based on the milk solid content to consider the dif-
ference in quality and fractions purchased at Arla. The emis-
sion factor related to externally purchased whey was un-
changed at 1.0, a conservative estimate (Flysjö, 2012).
Arla collects data from transport and packaging suppliers cov-
ering a minimum of 95 per cent of the spend, and based on
the collected data, emissions are scaled up to cover 100 per
cent. Biogenic emissions are not currently disclosed in the ESG
section, but will be disclosed from 2023. For transport, pro-
duction and packaging emission factors are provided by
Quantis, an industry-leading consultancy firm. The emission
factors are updated annually to the most recent. Farm-level
emission factors are obtained from 2.-0 LCA Consultants. For
non-owner milk, emission factors were unchanged at 2015
levels.
Accounting policies
Calculating CO₂ equivalents
Greenhouse gases are gases that contribute to the warming of
the climate by absorbing infrared radiation. Besides the widely
known carbon dioxide (CO₂), there are two other major green-
house gases associated with dairy production: Methane (CH₄)
and nitrous oxide (N₂O). In order to calculate Arla’s total green-
house gas emissions (the carbon footprint), different green-
house gas emissions are converted into carbon dioxide equiv-
alents (CO₂e). The conversion of different gases reflects their
global warming potential.
The potency of the different gases is taken into consideration
according to the following calculations (based on the IPCC1
Fifth Assessment Report, Climate Change 2013):
1 kg of carbon dioxide (CO₂) = 1 kg of CO₂e
1 kg of methane (CH₄) = 28 kg of CO₂e
1 kg of nitrous oxide (N₂O) = 265 kg of CO₂e
The majority of Arla’s emissions are methane from digestion
and manure storage, nitrous oxide from fertiliser and manure
usage. Greenhouse gas emissions are categorised into three
scopes according to where they appear across the value chain,
and what control the company has over them.
1 The IPCC (Intergovernmental Panel on Climate Change) is the United Nations’ body
for assessing the science related to climate change.
Scope 3 – Emissions on farm
Scope 3 emissions from raw milk are calculated in accordance
with the International Dairy Federation’s guideline for the car-
bon footprint of dairy products (IDF 2015). The tool used for
calculating the carbon footprint from milk is based on an at-
tributional life-cycle assessment (LCA) that has been devel-
oped during the last decade in collaboration with 2.-0 LCA
Consultants, a Danish consultancy firm formed by academics.
For detailed descriptions of methodology, please refer to
Schmidt and Dalgaard (2021). Farm-level emission factors are
also obtained from 2.-0 LCA Consultants. Non-owner milk
emissions are calculated by multiplying milk volume with
emission factors based on national inventory data and not Arla
specific data. The calculations are based on an earlier version
of the farm tool following IDF 2010 (Dalgaard R, Schmidt J, Ce-
nian K, 2016).
Emissions related to raw milk include emissions both on and
off farm. The emissions relate to the cow’s digestion, feed pro-
duction and purchase, manure storage, energy usage, capital
goods and peat soils. Emissions related to feed include ferti-
liser for home-grown feed and purchased feed, and transport
of purchased feed. Manure storage can result in methane and
nitrous oxide emissions. The amount of emissions varies de-
pending on how manure is covered and whether it is used for
biogas production. Peat soils are wetland with a high CO₂e
content. When soils are drained and used in crop production
CO₂ and N₂O are released. The emission figure related to raw
milk presented in this report is a weighted average emission
per kg of milk, calculated based on validated climate data from
farms where the data has been validated by external climate
experts, multiplied by the fat and protein-adjusted milk intake.
Farm data validated by external climate experts are statistically
representative of all Arla farms.
Uncertainties and estimates
In 2022, 95 per cent of Arla’s active farmer owners, covering
99 per cent of Arla’s owner milk volume, submitted a detailed
Climate Check questionnaire (farmers receive an incentive of
1.0 EUR-cent/kg of milk to complete the survey). Their an-
swers were validated by external climate experts. This report
includes only externally validated data which in 2022 covered
all farms who submitted a climate check.
Farmer owners complete the Climate Check once a year based
on data from their most recent financial year. This could vary
from farm to farm, as some have financial years running from
January to December, while others run from July to June.
Therefore, the figures presented are not necessarily based on
farm data covering the same period. The majority of data, 61
per cent, relates to the period 1 January 2021 to 31 December
2021 while 11 per cent relates to earlier periods.
An uncertainty analysis has been carried out to understand the
biggest areas of uncertainty related to self-reported farm
emission data. The analysis was centred around four key lev-
ers: herd, feed, crops and manure handling, and addressed the
parameters with the highest impact on the emissions on farm.
The analysis concluded that data could be misstated, in worst
case up to 10-12 per cent, but only if the farmer had a starting
point of high emissions and claimed to change from no biogas
treatment to full biogas treatment of slurry.
Smaller farmers and farmers using extensive grazing systems
are not always measuring the amount of feed that the cows
eat or the dry matter content of the grass on the fields. To en-
able these farmers to report, the system contains a model
which calculates feed consumption based on herd size and
milk yield.
Reporting on peat soils is a developing field and still subject to
higher uncertainty than other areas. Due to its relatively high
climate impact uncertainties related to peat soils could have
significant impact on the total reported greenhouse gas
figure. The risk of errors is minimised by external climate advi-
sors validating the data supported by automated statistical
outlier controls. All outliers are flagged and need to be
checked by the advisor before the result of the Climate Check
is available. Numbers are only released for reporting after thor-
ough investigation.
The methodology used to calculate emissions on farm is
developing over time. Currently, factors that potentially could
lower total net emissions, such as carbon sequestration on
farm and direct land use change, are not included. IDF 2015
suggests that direct land use change should be included in the
calculations.
The baseline year for our scope 3 Science Based Target is
2015. To calculate the baseline as well as follow up on the re-
duction target, the same method and tool were used, but the
type of data used differed. For the 2015 baseline, national sta-
tistical data for 2012 was used, which was the best available
data at the time. From 2016, national statistics were gradually
replaced by data from climate measurements at Arla farms.
The change happened for Denmark, the UK and Sweden in
2016, Germany in 2019 and the rest of the owner countries in
2020. The reporting year 2020 was the first time when most
Arla farms were included. The farm-specific data is always one
to two years behind, which is why the 2022 reporting was
based on farm data primarily from 2021.
Other uncertainty relates to data collection regarding packag-
ing and transport from suppliers. Each quarter, Arla sends its
suppliers detailed requests to provide the necessary data,
accompanied by a manual on how to complete the related
documentation. Manual data entries from different sources
are clear risks to data quality. To minimise the risk of reporting
errors, a rigorous two-step internal validation process is in
place.
Other emissions, 1%, include capital goods and destruction of animal remains.
ESG Table 1.2 Electricity consumption in Europe
(thousand MWh)
Non-renewable sources
Renewable sources
Total electricity consumed
Renewable electricity share
2022
401
638
1,039
61%
2021
613
416
1,029
40%
2020
605
428
1,033
41%
2019
2018
One way of securing green electricity for our operations is by
buying Guarantees of Origin (GoO) certificates directly from our
farmer owners. This will secure our farmers a better price for their
power and provide Arla access to additional certificates.
Accounting policies
Electricity used at Arla’s production sites and warehouses orig-
inates from different sources. At some sites, it is self-produced
from biogas, biomass or natural gas while the majority of sites
buy electricity from the grid.
The renewable electricity share is calculated as the share of
consumed electricity, both purchased and self-produced, that
originates from renewable energy sources or renewable elec-
tricity certificates.
The renewable electricity share follows the RE100 guidelines
2022. Arla follows market-based accounting and account for
the purchase of green electricity by contractual agreement,
i.e. certificates. The renewable mix in the electricity not cov-
ered by certificates is calculated using a residual mix factor
supplied by Quantis.
Some Arla sites produce and sell excess electricity. The elec-
tricity sold was excluded from the calculation. The data pre-
sented in ESG Table 1.2 is registered monthly and primarily
based on invoice information and automated meter readings
at each site, and therefore there is very little uncertainty asso-
ciated with these figures.
Renewable electricity development
In 2022, Arla set a target of using 100 per cent green electric-
ity in Europe by the end of 2025. Switching from fossil-based
to renewable electricity is an important lever to fulfil Arla’s cli-
mate ambition and to reduce the carbon footprint from scope
1 and 2 emissions by 63 per cent before 2030.
A solid plan for reaching the 2025 target is in place. It includes
a number of already entered power purchase agreements re-
lated to electricity produced from solar and wind energy
across core markets in EU. Read more about the account
treatment of power purchase agreement on page 77.
The renewable electricity share increased to 62 per cent in
2022 compared to 42 per cent last year. The increase was a
result of a deliberate choice to purchase more renewable elec-
tricity certificates to cover negative CO₂ impact related to tem-
porary shift from natural gas to oil. The conversion from natu-
ral gas to oil was done as an emergency measure to ensure
food delivery continuity and to lower dependency on natural
gas in Europe. The company’s long-term ambition to transition
from fossil-based energy to renewable energy was unaffected
by the shift. Arla plans to revert back to using natural gas as
soon as the situation allows.
The renewable electricity included certificates related to self-
produced electricity from biogas, electricity certificates pur-
chased from farmer owners and open market certificates.
Solid waste development
Waste that cannot be recovered through recycling, reuse or
composting impacts the environment. Arla continuously seeks
to increase production efficiency at sites, reduce waste
throughout the production and transport process, as well as
working with waste management suppliers to reduce waste
and improve waste handling.
In 2022, solid waste decreased to 31,460 tonnes compared to
33,500 tonnes last year, mainly driven by lower volumes of
waste for recycling in our sites in Germany and UK partly offset
by increased waste for recycling and landfill at our production
facility in Bahrain. Hazardous waste decreased to pre-COVID-
19 pandemic levels.
Currently, Arla discloses only solid waste in ESG Table 1.3.
which is only a small part of Arla’s total waste. Other waste
types are product waste and sludge. Arla is working to further
improve the food waste reporting accuracy and efficiency with
the aim of including food waste in the ESG reporting.
Accounting policies
Solid waste is defined as materials from production which are
no longer intended for their original use and which must be re-
covered (e.g. recycled, reused or composted) or not recovered
(e.g. landfilled). This includes packaging waste, hazardous
waste and other non-hazardous waste.
Uncertainties and estimates
Solid waste information is retrieved from external waste han-
dlers monthly. For Denmark and Sweden data collection is au-
tomated. For the other countries data is based on manual en-
tries by sites which increases the risk of errors. Relevant con-
trols are in place to mitigate the risk of errors.
Water consumption development
Providing access to clean water is an important part of Arla’s
environmental ambition, and, as such, reducing water usage
and enhancing water cleansing technologies at production
sites is a key focus area.
In 2022, water consumption in Arla decreased by 1 per cent
compared to last year. The decreases were seen across the
majority European sites partly offset by increases among the
sites in International. The decrease can be explained partly by
slightly lower production and also a shift in production mix.
Accounting policies
The water consumption covers all water purchased from exter-
nal suppliers and water from internal boreholes at production
sites, warehouses and logistics terminals. External borehole
water includes water purchased from external suppliers before
internal treatment. Internal borehole water relates to bore-
holes on sites measured before internal treatment.
Uncertainties and estimates
Water consumption data is based on monthly manual input
from sites. The externally purchased water is checked against
supplier data, while internal borehole water is retrieved from
manual meter readings. To mitigate the risk of manual errors,
data goes through thorough internal validation at the site and
centrally.
ESG Table 1.3 Solid waste
(tonnes)
Recycled waste
Waste for incineration with energy recovery
Waste for landfill
Hazardous waste
Total
2022
2021
2020
2019
2018
19,442
8,358
2,616
1,034
31,450
21,640
8,679
1,921
1,260
33,500
21,402
8,991
1,204
1,378
32,975
21,651
10,011
988
1,063
33,713
20,233
12,546
933
888
ESG Table 1.4 water consumption
(thousand m³)
Water purchased externally
Water from internal boreholes
34,600
Total
2022
2021
2020
2019
2018
10,935
7,829
18,764
11,057
7,803
18,860
10,918
7,745
18,663
10,589
7,470
18,059
10,484
7,600
18,084
rare, extreme cases, terminates the membership. During
2020, the audit process was upgraded and harmonised across
all owner countries to ensure that auditors follow the same
procedures and standards everywhere. Therefore, only 2021-
2022 data is reported.
The average somatic cell count across Arla geographies fell by
4 per cent to 184 thousand cells/ml, the lowest level for more
than six years.
Accounting policies
Somatic cell count (average):
Somatic cells in milk are primarily white blood cells. An ele-
vated level of somatic cells can indicate inflammation (masti-
tis) of the cow’s udder, which causes the animal pain and
stress, and also lowers milk quality. Arla monitors the somatic
cell count (SCC) by analysing milk at bulk tank level each time
milk is collected from the farms. Levels are continuously re-
ported to safeguard milk quality. The figure reported is a
weighted average of Arla’s entire milk intake in a given year.
The SCC count is received from several laboratories across
owner countries. SCC above 300 reduces the milk price to the
farmer, while an addition is given for SCC below 300.
Animal welfare development
Animal welfare is a key priority for Arla’s farmer owners, and for
Arla as a company. Arla is committed to reporting on the most
important measures to describe and improve animal welfare.
The animal welfare KPIs include somatic cell count, which is a
good indicator of disease and stress in cows, and four indica-
tors associated with the physical appearance and well-being of
cows. The indicators are body condition, cleanliness, mobility
and injuries. These indicators were developed based on scien-
tific research into the most common dairy cattle issues.
Animal welfare on farm is externally audited at least once
every three years by a world-leading quality assurance and au-
dit firm, SGS, specialising in animal welfare. The percentage of
audited farms was 38 per cent in 2022, corresponding to
3,170 audits. The results of the audit can trigger a follow-up
audit either if there are major issues or if there are several mi-
nor issues. In case of repeated animal welfare breaches, Arla
stops milk collection from the non-compliant farm, and, in
ESG Table 1.5 Animal welfare indicators
Somatic cell count (thousand cells/ml)
Share of audited farmers with no major cleanliness issues
Share of audited farmers with no major mobility issues
Share of audited farmers with no major injury issues
Share of audited farmers with no major issues related to
body condition
2022
2021
2020
2019
2018
184
98.6%
99.8%
100.0%
191
98.4%
99.5%
100.0%
99.9%
99.8%
194
-
-
-
-
196
-
-
-
-
198
-
-
-
-
Ratios calculated based on 3,170 Arlagården® audits performed in 2022.
Audit on farms and animal-based indicators
Animal welfare conditions on all Arla farms are regularly au-
dited. An audit entails a thorough check-up of the herd and
the farm from all relevant animal welfare perspectives. Audits
include basic audits (performed every three years), spot
checks, start-up visits, attention and special attention audits.
Audited farmers are defined as the percentage of owners who
received at least one audit in 2022. One owner could poten-
tially receive more than one audit per year if the farmer owns
more than one farm or if the farmer receives both a basic audit
and a spot check audit. Follow-up audits are not included in
the figure.
Animal-based indicators evaluated by auditors
The KPIs reported in Table 1.5 relate to the share of audited
farmers with no major issues reported within each category.
When an auditor visits the farm, a sample of the herd is se-
lected. The sample size varies with the herd size. The auditor
scores the cows in the sample for the four core welfare indica-
tors on a scale of 0-2, where 0 means no issues identified, 1
means minor issues and 2 means major issues. The results are
reported to Arla. If the auditors find more than 5 per cent of
the sampled cows too thin, more than 25 per cent too dirty,
more than 15 per cent lame or more than 10 per cent injured,
they report it as a major animal welfare incident to Arla.
Uncertainties and estimates
The UK somatic cell count includes the somatic cell count for
contract farmers as well as owners, however this has no signifi-
cant impact on the total somatic cell count.
Farms are audited every three years. A year-on-year compari-
son may therefore be affected due to the fact that it is not the
same farms being audited every year.
We measure the general well-being of the cows using four in-
dicators developed based on scientific research into the most
common dairy cattle issues.
Clean cows
Clean cows have
a lower risk of
being infected
by disease.
Cows with good
body conditions
Fit cows have the
perfect amount of fat
reserve on their bod-
ies: not too little and
not too much
Cows without injuries
An injury on a cow
can be a lump, bump,
ulcer or sore.
Mobile cows
They walk
without any
problems and
have no pain
in their legs
and hooves.
European markets to Poland and international markets (in-
cluded in “other countries” in Table 2.1), especially to MENA.
This supports Arla’s strategic plan to expand the share of busi-
ness outside Europe, where the outlook for growth is more
promising.
The share of blue-collar FTEs amounted to 63 per cent of the
total FTEs as at 31 December 2022.
Accounting policies
FTEs are defined as the contractual working hours of an em-
ployee compared to a full-time contract in the same position
and country. The full-time equivalent figure is used to meas-
ure the active workforce counted in full-time positions. An FTE
of 1.0 is equivalent to a full-time worker, while an FTE of 0.5
equals half of the full workload.
The average FTE figure reported in Note 1.2 in the consoli-
dated financial statements, and in ESG Note 2.1 is calculated
as an average figure for each legal entity during the year based
on quarterly measurements taken at the end of each quarter.
All employees are included in the FTE figure, including em-
ployees who are on permanent and temporary contracts.
Employees on long-term leave, e.g. maternity leave or long-
term sick leave, are excluded.
The majority of employees in production and logistics are clas-
sified as blue-collar employees, while employees in sales and
administrative functions are classified as white-collar employ-
ees. The ratio of white-collar to blue-collar employees is calcu-
lated based on FTEs as at 31 December.
Employee data is handled centrally in accordance with GDPR.
The FTE figure is reported internally on a monthly basis. To
improve data quality, data is validated by each legal entity on
a quarterly basis.
FTE development
People are crucial to Arla’s success, so it is imperative to know
how the group deploys these resources across geographies
and time. The total number of full-time equivalents (FTEs) in-
creased by 1.4 per cent compared to last year. The increase
was due to investments in Arla Foods Ingredients, continued
insourcing of IT activities and ramp-up in the agriculture ser-
vice and sustainability area.
Over the last five years, the FTE level increased on average
2 per cent per year. The numbers show a shift from core
ESG Table 2.1 Full-time equivalents
Denmark
UK
Sweden
Germany
Saudi Arabia
Poland
North America
UAE
Finland
The Netherlands
Bahrain
Other countries¹
2022
7,763
3,605
3,038
1,570
975
617
536
437
373
370
315
1,308
2021
7,565
3,616
3,076
1,590
974
582
501
421
364
349
252
1,327
2020
7,350
3,761
3,114
1,632
970
529
479
300
336
351
126
1,072
2019
7,258
3,407
2,977
1,681
952
511
477
207
319
339
70
976
2018
7,264
3,387
3,001
1,759
965
463
502
192
325
327
-
1,005
Full-time equivalents
20,907
20,617
20,020
19,174
19,190
¹ Other countries include, among others, Belgium, Oman, Spain, Nigeria, France, Australia.
Arla. Read more about diversity and inclusion in Arla on
page 51.
compared to 2021. Read about gender diversity in Board of
Directors on page 140.
Gender diversity for the Board of Directors is disclosed in ESG
Note 3.1.
Gender diversity (all employees)
In 2022, the share of women among all FTEs remained un-
changed from last year at 27 per cent. Read more about how
Arla works with diversity on page 51.
Gender diversity
(Level below Executive Management Team)
In 2022, 28 per cent of positions at the level below the Execu-
tive Management Team were held by women. The number
increased slightly compared to 26 per cent in 2021, but more
significantly compared to 17 per cent in 2018.
Gender diversity (in Executive Management Team)
In 2022, 13 per cent of the Executive Management Team
members were women. The number of women remained
unchanged compared to last year, however an additional
member, Executive Vice president Marketing and Innovation,
was added to the EMT during 2022. Since the position was
filled by a man, the share of women was slightly lower in 2022
Accounting policies
Gender diversity (all employees)
Gender diversity is defined as the share of women compared
to total FTEs. Gender diversity is based on FTEs as at
31 December 2022. It covers all white-collar and blue-collar
employees.
Gender diversity
(Level below Executive Management Team)
Arla’s gender diversity in management is defined as the share
of women measured as FTEs in the level below the executive
management team at 31 December 2022.
Gender diversity (in Executive Management Team)
Gender diversity in management is defined as the share of
women in the Executive Management Team (EMT) as at
31 December 2022.
Gender diversity development
A diverse workforce is key to Arla’s success. Arla’s policies do
not distinguish between men and women when it comes to
promotion opportunities or remuneration, however women
are underrepresented in Arla’s blue-collar workforce and, to a
lesser extent, in the white-collar workforce as well.
Arla’s goal is to create a workplace with a diverse workforce in
all managerial levels promoting equal opportunities regardless
of background, culture, religion, gender etc. Diversity, inclu-
sion and anti-harassment policies are in place to handle issues
in a structured manner and a whistle-blower platform enables
employees to report any kind of harassment. Work councils at
both local and global levels also help to ensure that workplace
decisions are made in the best interests of all colleagues and
ESG Table 2.2.a Gender diversity for all employees
(All employees)
Total share of women
ESG Table 2.2.b Gender diversity in management
(Diversity in management)
Share of women at level below Executive Management Team
ESG Table 2.2.c Gender diversity in Executive Management Team
(Diversity in executive management)
Share of women in Executive Management Team (EMT)
2022
27%
2022
28%
2022
13%
2021
27%
2021
26%
2021
14%
2020
27%
2020
15%
2020
14%
2019
27%
2019
13%
2019
29%
2018
27%
2018
17%
2018
29%
Gender pay ratio development
Paying equal salaries for the same job regardless of gender is a
basic requirement for an ethical and responsible company. At
Arla, men and women in the same or equivalent jobs receive
the same level of pay. This is ensured through well-defined
and fixed salary bands across all job categories. Comparability
between salary levels for men and women are monitored
quarterly within the comparable job bands.
Gender pay ratio disclosed in Table 2.3 indicates where
women are placed in the company hierarchy. Arla targets com-
plete equitable treatment between genders, which would be
represented by a gender pay ratio of 1.0. In 2022, the median
salary for men at Arla was 3 per cent higher than the median
salary for women, unchanged compared to last year.
Accounting policies
The gender pay ratio is defined as the median salary for men
divided by the median salary for women. The salary used in the
calculation includes contractual base salaries, while pensions
and other benefits are not included.
Uncertainties and estimates
The ESG reporting guidelines issued by CFA Society Denmark
and Nasdaq recommend including the total workforce as well
as bonus and pension in the equation. However, due to data
limitations only, the gender pay ratio for the white-collar work-
force is included. It is estimated that including blue-collar em-
ployees in the gender pay ratio would reduce the gap, as
males are overrepresented in the blue-collar workforce. The
pay data used relates to contractual salary amounts end of
March 2022 after 2022 salary adjustment.
Employee turnover development
Attracting and retaining the right people is imperative to the
success of Arla’s business. Employee turnover shows the fluc-
tuation in the workforce. Arla aims for a stable turnover and
recognises that some turnover is needed to remain competi-
tive and innovative.
Employee turnover was largely unchanged compared to last
year with a total turnover of 14 per cent compared to 13 per
cent last year. The voluntary turnover was stable at 10 per
cent, while involuntary turnover was slightly up, ending at 4
per cent compared to 3 per cent last year. Looking at a five-
year period the levels in 2022 and 2021 was higher than prior
years, likely impacted by labour shortage in some areas of Eu-
rope.
Accounting policies
Turnover is broken down by voluntary turnover (i.e. the em-
ployee decides to leave the company) and involuntary turno-
ver (i.e. the employee is dismissed). With such differentiation,
turnover is an indicator of talent retention at Arla and also
indicates the efficiency of operations.
Employee turnover is calculated as the ratio of total employ-
ees leaving to the total number of employees in the same
period. The figure refers to the number of employees and
not to FTE.
Turnover is calculated for all employees on a permanent con-
tract and includes several reasons for their departure, such as
retirement, dismissal and resignation. Departures are only in-
cluded in the calculation from the month when remuneration
is no longer paid (e.g. some tenured employees may be enti-
tled to remuneration for a few months after their dismissal).
ESG Table 2.3 Gender pay ratio
Gender pay ratio (hierarchy variances)
2022
1.03
2021
1.03
2020
1.05
2019
1.05
Voluntary turnover
Involuntary turnover
2018
1.06
Total
2022
10%
4%
14%
2021
10%
3%
13%
2020
6%
4%
10%
2019
8%
4%
12%
2018
8%
4%
12%
ESG Table 2.4 Employee turnover
Accounting policies
In accordance with ESG reporting standards, product recalls
are defined as public recalls. A public recall is the action taken
when products pose a material food safety, legal or brand
integrity risk. Public recall is only relevant if products are avail-
able to the consumers in the marketplace.
Public recalls are reported as soon as they happen, and an
incident report must be completed about each incident within
two weekdays from the first notice of the problem.
The total number of public recalls is reported externally on
an annual basis.
Product recalls
As a global food company, food safety is key to Arla.
A core responsibility for Arla is to ensure that products are safe
for consumers to eat and drink, and that the content of the
product is clearly and appropriately labelled on the packaging.
Food safety is also one of the most important indicators to-
wards consumers, signalling that Arla’s products are produced
and labelled according to the highest quality standards.
In 2022, one public recall occurred. The recall related to qual-
ity and sensory issues in one batch of UHT baby milk. The issue
was assessed to not cause any food safety risk, however due to
the sensitivity of the consumer group, the batch was recalled.
Arla is dedicated to ensuring that its products are safe to con-
sume and works continuously across the value chain, includ-
ing with suppliers, to reduce the number of recalls to as close
to zero as possible. All product incidents must be dealt with in
a timely manner to ensure the safety of consumers as well as
the legality and quality of products. The handling of all public
recall incidents follows a detailed and standardised process.
Product incident management is also tested annually.
Accident frequency rate development
Arla has a comprehensive and complex value chain and offers
a large variety of jobs across geographies. Employees are key
to the success of Arla, and it is key to provide all employees
with safe and healthy working conditions. Arla is committed to
preventing accidents, injuries and work-related illnesses.
A systematic approach to target-setting and tracking is applied
to mitigate risks and reduce problems in an ongoing close col-
laboration with employees across the organisation. Accidents
resulting in injuries can be lost-time accidents (LTAs) as well as
non-lost-time accidents (minor). The number of LTAs per 1
million working hours increased slightly to 4.4 compared to
4.3 last year. An increase in the accident frequency rate is
seen across production sites in Denmark, UK and Germany off-
set by a decrease in the transport area in Germany and Swe-
den.
Sadly, one fatality occurred at one of our Danish transport cen-
tres in 2022. The incident was investigated by Arla and author-
ities, and measures were taken to prevent it from happening
again.
Accounting policies
An LTA is a workplace injury sustained by an employee while
completing work activities that result in the loss of one or
more days off from work on scheduled working days/shifts. An
accident is considered a lost-time accident only when the em-
ployee is unable to perform the regular duties of the job, takes
time off for recovery, or is assigned modified work duties for
the recovery period.
All employees – both Arla employees and external agency
workers undertaking an Arla job – sustaining injury or illness
related to the workplace are required to report it to their team
leader or manager as soon as reasonably practical, regardless
of severity. Accidents related to contractors, e.g., construction
workers are not included.
Most site employees have access to a mobile application
where they can quickly and easily report any accidents. Notifi-
cation must be done prior to the injured party leaving work.
Working hours, used to calculate the accident frequency ratio,
origin partly from payroll information and partly from esti-
mates using FTE numbers.
ESG Table 2.5 Recalls
Number of recalls
2022
1
2021
-
2020
1
2019
4
ESG Table 2.6 Accidents
2018
(Per 1 million working hours)
2
Accident frequency
2022
4.4
2021
4.3
2020
5.2
2019
6.0
2018
7.9
Accounting policies
The gender diversity ratio is calculated as the share of women
on the board as at 31 December. It includes only members of
the Board of Directors elected by the general meeting and
excludes employee representatives and advisors to the Board
of Directors.
Meeting attendance development
Attendance at the board meetings by the members of the
Board of Directors ensures that all Arla’s owners and employ-
ees are represented when important strategic decisions are
made. Arla’s board members are very dedicated, and as a gen-
eral rule all board members attend all meetings unless they
are prevented from doing so due to health reasons.
In 2022, there were 12 ordinary board meetings and four extra
ordinary meetings. The board attendance remained at the
same level as last year. Information on board members can be
found on page 59-60.
Accounting policies
The board meeting attendance ratio is calculated as the sum
of regular board meetings attended per board member and
the total possible attendance.
The current Board of Directors consists of 14 owners, three
employee representatives and two external members. When
calculating board meeting attendance, all 19 board members
are included.
BoD diversity development
Gender diversity on the Board of Directors is important, partly
to ensure that both genders are represented at a high level,
and partly to bring a variety of perspectives to the business.
Ensuring gender diversity on the Board of Directors is also a
legal requirement in Denmark. The current Board of Directors
consists of 19 members, including 14 farmer owners, three
employee representatives and two external members.
In accordance with section 99.b of the Danish Financial State-
ments Act, only members elected by the Board of Representa-
tives at the general assembly count in the Board of Directors
gender diversity figure. The members elected by the Board of
Representatives are the 14 owner representatives and two
external members. Four of these 16 Board of Representatives
elected board members are women, reflecting a ratio in
2022 of 25 per cent women and 75 per cent men. The ratio
changed significantly compared to last year as a result of the
external members becoming elected members during 2022
and also by reducing the number of owner representatives
from 15 to 14.
In 2022, Arla reached the target of achieving at least 20 per
cent women in the Board of Directors. A new target for the
2026 strategy will be set during 2023.
ESG Table 3.1 Gender diversity on Board of Directors
Share of women on the Board of Directors
2022
25%
2021
13%
2020
13%
2019
13%
2018
13%
Number of meetings
Attendance
2022
12
98%
2021
12
98%
2020
10
99%
2019
10
96%
2018
13
99%
ESG Table 3.2 Board meeting attendance
The 2021 update showed that food safety is still the top prior-
ity for both external and internal stakeholders. Other areas,
which are still highly prioritised are animal care and green-
house gas emissions.
The topics highlighted as material according to the materiality
assessments are widely addressed throughout the annual re-
port. The figures disclosed in the consolidated ESG data sec-
tion were chosen based on the materiality analysis, but also
consider the maturity of data to ensure high data quality on
each KPI. In some cases, it was concluded that current data
tracking or collection capabilities do not provide sufficient
data quality to satisfy disclosure to the highest standards, de-
spite the fact that the figures could be of material importance
to stakeholders. In these cases, e.g. recyclability in packaging,
the necessary steps to improve data tracking and collection
have been initiated. In the coming years, plans are to widen
the scope of reporting to fully comply with best practice in
ESG reporting.
Reporting scope
Environmental KPIs (Notes 1.1-1.4) included data from all pro-
duction and logistical sites. This, together with milk, external
waste handling, external transport and packaging cover all ma-
terial activities in Arla’s value chain. The environmental
impact related to offices, business travel and other less mate-
rial activities was not included in the total emission figure. This
scope also applies to the accident KPI, Note 2.6, however
accidents at head offices in Denmark, the UK, Sweden and
Germany were also included.
Restatement principles
In line with ESG reporting guidelines, environmental data is
presented in absolute figures to ensure comparability. Where
relevant, a measure for progress towards Arla’s previously
communicated internal targets is included. Baselines and
comparison figures are restated according to Arla’s restate-
ment policy. By default, Arla’s baseline emissions are reviewed
every five years from the target base year (2020, 2025, 2030),
if no significant structural or methodological changes trigger a
recalculation before. Every five years, Arla assesses if the
Basis for preparation
The environmental, social and governance (ESG) statement is
based on ongoing monthly and annual reporting procedures.
The consolidation principles are based on operational control
unless described separately in the definition section of each
ESG note. All reported data follows the same reporting period
as the consolidated financial statements.
Materiality
When presenting the ESG report, management focuses
on presenting information that is considered of material
importance to Arla’s stakeholders, or which is recommended
to be reported by relevant professional groups or authorities.
Arla’s materiality assessment was last updated in 2021 and is
based on the concept of double materiality. This means that
both impact materiality and financial materiality is being evalu-
ated. The materiality assessment will be updated in the com-
ing years to comply with Corporate Sustainability Reporting Di-
rective (CSRD) in 2025.
Each topic in the materiality matrix (see graphic) represents a
wider agenda and underlying issues, which are identified from
relevant ESG/sustainability frameworks, and qualified through
insights from Arla’s strategy process. Based on input from dif-
ferent expert groups within the Arla value chain, a draft matrix
was prepared and sent out to a wider group of selected exter-
nal and internal stakeholders for further comments and dia-
logue. The external stakeholders include top 20 customers,
elected farmer owners, NGOs and financial institutions in
Denmark, Sweden, the UK and Central Europe.
structural changes (e.g. acquisitions or divestments) in the
past years reach the significance threshold when added to-
gether in a cumulative manner. Each year, Arla assesses if the
structural changes that year reach the significance threshold
(see below) by themselves or when added together.
A threshold is defined for each Science Based Target:
· Scope 1 and 2: 5 per cent change compared to the
base year
· Scope 3 per kg of raw milk: 3 per cent change compared to
the base year
When the baseline emissions are recalculated due to signifi-
cant structural changes in the company (as defined above),
historic figures are also recalculated and reported alongside
the non-recalculated (actual) historic emission figures. This
provides the reader with more clarity to understand Arla’s ac-
tual emissions each year. Other externally reported ESG KPIs
are only restated if material mistakes in the previous years’
reporting are discovered. The materiality of mistakes is deter-
mined on a case-by-case basis.
l
a
i
t
n
e
s
s
E
h
g
H
i
i
m
u
d
e
M
w
o
L
⚫ Animal Care
⚫ Greenhouse
gas emissions
⚫ Packaging
⚫ Biodiversity & nature
⚫ Food
Safety
⚫ Air pollution
⚫ Responsible sourcing
⚫ Healthy soils
⚫ Affordable
Food
⚫ Healthy Foods
⚫ Product
innovation
⚫ Transparent & accountable
business
⚫ Respect Human rights
⚫ Natural products
incl. organic
⚫ Farmer development
⚫ Safe & Healthy
work
⚫ Water availability
and quality on farms
⚫ Water availability and
quality on diary sites
⚫ Waste
⚫ Diversity
& Inclusion
⚫ Innovation
⚫ Local community
engagement
⚫ Product information
supp. Informed
choices
⚫ Supply chain efficiency
⚫ Digitalisation
⚫ Attractive employer
Low
Medium
High
Essential
ESG note
2022
2021
2020
2019
2018
ESG note
2022
2021
2020
2019
2018
Social data
Full-time equivalents (average)
Total share of women (%)
Share of women at level below Executive Man-
agement Team (%)
Share of women in Executive Management
Team (%)
Gender pay ratio (hierarchy variances)
Employee turnover (%)
Food safety – number of recalls
Accident frequency (per 1 million working hours)
Governance data
Share of women, Board of Directors (%)²
Board meeting attendance (%)
2.1
2.2
2.2
2.2
2.3
2.4
2.5
2.6
3.1
3.2
20,907
27%
20,617
27%
20,020
27%
19,174
27%
19,190
27%
28%
13%
1.03
14%
1
4.4
25%
98%
26%
14%
1.03
13%
-
4.3
13%
98%
15%
14%
1.05
10%
1
5.2
13%
99%
13%
29%
1.05
12%
4
6.0
13%
96%
17%
29%
1.06
12%
2
7.9
13%
99%
¹ The calculation of CO₂e emissions in 2015 was based on national statistical data, the best available source at that time. In 2016 we
started to do climate measurements on Arla farms and gradually replaced the national statistical data with Arla specific data in the CO₂e
calculation model. Read more on page 131.
Environmental data
CO₂e emissions
CO₂e scope 1 and 2 market-based
695
733
751
862
946
CO₂e reduction scope 1 and 2 (baseline:
2015)
CO₂e scope 3 owner milk (kg)
CO₂e scope 3 per kg of milk and whey (kg)
CO₂e reduction scope 3 per kg of milk and
whey (baseline: 2015)¹
CO₂e scope 1 (mkg)
CO₂e Scope 2 – market-based (mkg)
CO₂e scope 3 (mkg)
Total CO₂e (mkg)
CO₂e scope 2 – location-based (mkg)
Total CO₂e – location-based (mkg)
Energy mix
Renewable electricity share EU (%)
Waste and water
Solid waste (tonnes)
Water consumption (thousand m3)
Animal welfare
Somatic cell count (thousand cells/ml)
Share of audited farmers with no major cleanli-
ness issues
Share of audited farmers with no major mobility
issues
Share of audited farmers with no major
injury issues
Share of audited farmers with no major body
condition issues
-29%
1.12
1.18
-25%
1.15
1.20
-24%
1.15
1.21
-12%
1.15
1.21
-4%
1.14
1.20
-9%
-7%
-7%
-7%
-7%
477
218
18,407
19,102
165
19,049
447
286
19,050
19,783
243
19,740
474
277
18,625
19,376
237
19,336
463
399
18,387
19,249
274
19,124
490
456
18,553
19,499
263
19,306
61%
40%
41%
31,450
18,764
33,500
18,860
32,975
18,663
33,713
18,059
34,600
18,084
184
191
194
196
198
98.6%
98.4%
99.8%
99.5%
100.0%
100.0%
99.9%
99.8%
-
-
-
-
-
-
-
-
-
-
-
-
1.1
1.2
1.3
1.4
1.5
1.5
1.5
1.5
1.5
In 2022, Arla started to implement TCFD into its reporting and
risk assessment practices. In the first phase of implementation
Arla focused on integrating climate-related risk assessment
and management into the company’s existing enterprise risk
management framework, and report on the results of the risk
assessment. Arla also conducted a high-level analyses of the
potential financial impact of climate-related risks. Read more
in Introduction to notes on page 77.
Table TCFD overview
Governance - TCFD recommendations
Describe the organisation’s governance around climate-related
risks and opportunities
Describe management’s role in assessing and managing climate-
related risks and opportunities
Strategy - TCFD recommendations
Describe the climate-related risks and opportunities the organi-
sation has identified over the short, medium and long term
Describe the impact of climate-related risks and opportunities on
the organisation’s businesses, strategy and financial planning
Describe the resilience of the organisation’s strategy, taking into
consideration different climate-related scenarios, including a
2°C or lower scenario
Risk management - TCFD recommendations
Describe the organisation’s processes for identifying and as-
sessing climate-related risks
Describe the organisation’s processes for managing climate-re-
lated risks
Describe how processes for identifying, assessing, and managing
climate-related risks are integrated into the organisation’s over-
all risk management
Metrics and targets - TCFD recommendations
Disclose the metrics used by the organisation to assess climate-
related risks and opportunities in line with its strategy and risk
management process
Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 green-
house gas (GHG) emissions and related risks
Describe the targets used by the organisation to manage
climate-related risks and opportunities and performance against
targets
Section and page reference
Risks and Opportunities, page 27; Governance, page 56
Risks and Opportunities, page 27; Governance, page 56
Risks and Opportunities, page 27
Risks and Opportunities, Page 27; Financial Statements, page 77
Scenario analyses to be added in the next phase of TCFD
implementation.
Risks and Opportunities, page 27
Risks and Opportunities, page 27
Risks and Opportunities, page 27
ESG statements, page 130
ESG statements, page 130
ESG statements, page 129
Environmental data
CO₂e emissions
CO₂e reduction scope 1 and 2 (baseline: 2015)
CO₂e reduction scope 3 per kg of milk and whey (baseline: 2015)1
Total CO₂e (mkg)
Energy mix
Renewable electricity share EU (%)
Waste and water
Solid waste (tonnes)
Water consumption (thousand m3)
Animal welfare
Somatic cell count (thousand cells/ml)
Share of audited farmers with no major cleanliness issues
Share of audited farmers with no major mobility issues
Share of audited farmers with no major injury issues
Share of audited farmers with no major body condition issues
Reference
UN SDGs
Reference
UN SDGs
2.3, 2.4, 12.2, 12.3,
12.5, 13.1
7.2, 7.3
6.3, 6.4
Social data
Total share of women (%)
Share of women at level below Executive Management Team (%)
Share of women in Executive Management Team (%)
Gender pay ratio, white-collar (man to woman)
Employee turnover (%)
Food safety – number of recalls
Accident frequency (per 1 million working hours)
Governance data
Share of women, Board of Directors (%)*
15.1
Non-audited targets and ambitions
Nutrition and affordability
Supporting communities – International dairy development
Responsible sourcing
Anti-corruption and bribery
ESG note 1.1
ESG note 1.2
ESG note 1.3
ESG note 1.4
ESG note 1.5
ESG note 1.5
ESG note 1.5
ESG note 1.5
ESG note 1.5
ESG note 2.2
ESG note 2.2
ESG note 2.2
ESG note 2.3
ESG note 2.4
ESG note 2.5
ESG note 2.6
5.1, 5.5
5.1, 5.5
5.1, 5.5
5.1, 5.5, 8.5, 8.7
8.5, 8.7
2.1
8.8
ESG note 3.1
5.1, 5.5
Page 48
Page 55
Page 44
Page 65
2.1, 3.4
23., 2.A, 5A, 8.2, 8.3,
12.2, 17.B
2.3, 2.4, 6.3, 6.4, 8.7, 8.8,
12.2, 12.4, 13.1, 15.1, 15.2
16.5
Since 2008, Arla has been a participant of the Global Com-
pact’s Nordic Network. In May 2009, Arla signed up to Caring
for Climate, a voluntary and complementary action platform
seeking to demonstrate leadership around the issue of climate
change. In 2010, Arla’s CEO signed a CEO Statement of Sup-
port for the Women’s Empowerment Principles, an initiative
from the Global Compact and UNIFEM (the UN Development
Fund for Women). Read more about the Global Compact and
its principles at www.unglobalcompact.org and more about
Arla’s Code of Conduct at arla.com.
Human rights
1. Support and respect the protection of internationally proclaimed human rights
2. Make sure that they are not complicit in human rights abuses
Labour
3. Uphold the freedom of association and the effective recognition of the right to collective bargaining
4. The elimination of all forms of forced and compulsory labour
5. The effective abolition of child labour
6. The elimination of discrimination in respect of employment and occupation
Environment
7. Support a precautionary approach to environmental challenges
8. Undertake initiatives to promote greater environmental responsibility
9. Encourage the development and diffusion of environmentally friendly technologies
Anti-corruption
10. Work against corruption in all its forms, including extortion and bribery
Management’s responsibilities
Arla Foods Amba’s Management is responsible for selecting
the Accounting Policies, and for presenting the environmen-
tal, social and governance (ESG) data in accordance with the
Accounting Policies, in all material respects. This responsibility
includes establishing and maintaining internal controls, main-
taining adequate records and making estimates that are rele-
vant to the preparation of the environmental, social and gov-
ernance (ESG) data, such that it is free from material misstate-
ment, whether due to fraud or error.
Auditor’s responsibilities
Our responsibility is to express a conclusion based on our ex-
aminations on the presentation of the environmental, social
and governance (ESG) data in accordance with the scope de-
fined above.
As agreed, we have performed a reasonable assurance
engagement, as defined by the International Standards on
Assurance Engagements, on the environmental, social and
governance (ESG) data, contained in Arla Foods Amba’s Annual
Report on pages 128-145 for the period from 1 January 2022
to 31 December 2022.
We conducted our examinations in accordance with ISAE
3000 Assurance Engagements Other than Audits or Reviews
of Historical Financial Information and additional requirements
under Danish audit regulation to obtain reasonable assurance
for the purposes of our conclusion.
In preparing the environmental, social and governance (ESG)
data, Arla Foods Amba’s applied the Accounting Policies
described on pages 131-141. The environmental, social and
governance (ESG) data needs to be read and understood to-
gether with the Accounting Policies, which management is
solely responsible for selecting and applying. The absence of
an established practice on which to derive, evaluate and meas-
ure the environmental, social and governance (ESG) data al-
lows for different, but acceptable, measurement techniques
and can affect comparability between entities and over time.
Other than as described in the preceding paragraph, which
sets out the scope of our engagement, we did not perform as-
surance procedures on the remaining information included in
the Annual Report, and, accordingly, we do not express an
opinion on this information.
EY Godkendt Revisionspartnerselskab is subject to Interna-
tional Standard on Quality Control (ISQC) 1 and thus uses a
comprehensive quality control system, documented policies
and procedures regarding compliance with ethical require-
ments, professional standards, applicable requirements in
Danish law and other regulations.
We have complied with the independence and other ethical
requirements of the International Ethics Standards Board for
Accountants’ International Code of Ethics for Professional
Accountants issued by the International Ethics Standards
Board for Accountants (IESBA Code), which is founded on fun-
damental principles of integrity, objectivity, professional com-
petence and due care, confidentiality and professional behav-
iour as well as ethical requirements applicable in Denmark.
Description of procedures performed
In obtaining reasonable assurance over the environmental, so-
cial and governance (ESG) data identified on pages 128-145,
our objective was to perform such procedures as to obtain in-
formation and explanations which we consider necessary in
order to provide us with sufficient appropriate evidence to
express an opinion with reasonable assurance.
· In connection with our procedures, we read the other sus-
tainability information in the Annual Report of Arla Foods
Amba’s and, in doing so, considered whether the other sus-
tainability information is materially inconsistent with the
environmental, social and governance (ESG) or our
knowledge obtained in the review or otherwise appear to
be materially misstated.
In our opinion, the evidence and procedures performed pro-
vide a sufficient basis for our conclusion.
Conclusion
In our opinion the environmental, social and governance (ESG)
data, contained in Arla Foods Amba’s Annual Report on pages
128-145 for the period from 1 January 2022 to 31 December
2022 which has been subject to our reasonable assurance
procedures have, in all material respects, been prepared in
accordance with the Accounting Policies described on
pages 131-141.
Aarhus, 8 February 2023
EY Godkendt Revisionspartnerselskab
CVR no. 30 70 02 28
Henrik Kronborg Iversen
State Authorised Public
Accountant
MNE no. 24687
Carina Ohm
Partner
Head of Climate Change and
Sustainability Services
As part of our examination, we have performed the below pro-
cedures:
· Interviewed relevant personnel in relation to environmental,
social and governance (ESG) data to develop an understand-
ing of the process for the preparation of the environmental,
social and governance (ESG) data and for carrying out inter-
nal control procedures.
· Interviewed external specialists responsible for providing
input to the calculations of the animal welfare and farmer
climate data to evaluate the competence, capabilities and
objectivity and as well as evaluate whether the results of the
external specialists’ work are adequate for our purposes
· Performed analytical review of the data and trends to identify
areas of the environmental, social and governance (ESG)
data with a higher risk of misleading or unbalanced infor-
mation or material misstatements and obtained an under-
standing of any explanations provided for significant
variances.
· Based on inquiries, we evaluated the appropriateness of the
Accounting Policies used, their consistent application and
related disclosures in the environmental, social and govern-
ance (ESG) data. This includes the reasonableness of esti-
mates made by management.
· Designed and performed further procedures responsive to
those risks and obtained evidence that is sufficient and
appropriate to provide a basis for our conclusion.
· Site visits to conduct walkthroughs of data gathering, calcu-
lation and consolidation processes related to the reasonable
assurance of metrics.
· Agreed key items and representative samples based on gen-
erally accepted sampling methodology to source infor-
mation to check accuracy and completeness of the data.
Arlagården® is the name of our quality assurance pro-
gramme.
CPI is an abbreviation of Consumer Price Index.
Free cash flow is defined as cash flow from operating activi-
ties after deducting cash flow from investing activities.
managing emissions from private and public sector opera-
tions, value chains, products, cities and policies.
BEPS is an acronym referring to base erosion and profit shift-
ing. These are tax avoidance strategies that exploit gaps and
mismatches in tax rules to artificially shift profits to low or
no-tax locations.
Biogas is the mixture of gases produced by the breakdown of
organic matter in the absence of oxygen. primarily consisting
of methane and carbon dioxide. At Arla, biogas is primarily
produced from cow manure.
Biomass is plant or animal material used for energy produc-
tion. It can be purposely grown energy crops, wood or forest
residues, waste from food crops, Horticulture, food processing,
animal farming or human waste from sewage plants.
Brand share measures revenue from strategic brands as a
proportion of total revenue and is defined as the ratio of reve-
nue from strategic branded products to total revenue.
CAPEX is an abbreviation of capital expenditure.
Capacity cost is defined as the cost of running the general
business, and includes staff costs, maintenance, energy, clean-
ing, IT, travel and consultancy etc.
Carbon sequestration refers to a natural or artificial process
by which carbon dioxide is removed from the atmosphere and
held in solid or liquid form.
Digital engagement is defined as the number of interactions
consumers have across digital channels. The interaction is
measured in a number of different ways, for example by view-
ing a video on all media channels for more than 10 seconds,
visiting a webpage, Commenting, liking or sharing on our so-
cial media channels.
Digital reach is defined as engagement with Arla's digitil con-
tent, i.e. spending more than 2 minutes on our website, watch-
ing our videos to the end on YouTube and liking or comment-
ing on content on our social media platforms.
EBIT is an abbreviation of earnings before interest and tax. and
is a measure of earnings from operations.
EBITDA is an abbreviation of earnings before interest, Tax, de-
preciation and amortisation from ordinary operations.
EBIT margin measures EBIT as a percentage of total revenue.
EMEA is an acronym referring to Europe, the Middle East and
Africa.
Equity ratio is the ratio of equity, excluding minority interests,
to total assets, and is a measure of the financial strength
of Arla.
FMCG is an acronym for fast-moving consumer goods.
FTE is an acronym for full-time equivalents. FTEs are defined
as the contractual working hours of an employee compared to
a full-time contract in the same position and country. The FTE
figure is used to measure the active workforce counted in full-
time positions. An FTE of 1.0 is equivalent to a full-time worker,
while an FTE of 0.5 equals half of the full workload.
GDPR is an acronym for the General Data Protection Regula-
tion which regulates data protection and privacy in the Euro-
pean Union (EU) and the European Economic Area (EEA). It
also addresses the transfer of personal data outside the EU
and EEA areas. The GDPR aims primarily to give control to indi-
viduals over their personal data and to simplify the regulatory
environment for international business by unifying the regula-
tion within the EU.
Global industry share is a measure of the total milk con-
sumption for producing commodity products relative to the
total milk consumption, i.e. based on volumes. Commodity
products are sold with lower or no value added, typically via
business to-business sales for other companies to use in their
production as well as via industry sales of cheese, butter or
milk powder.
Greenhouse Gas Protocol (GHGP) provides accounting and
reporting standards, sector guidance, calculation tools to ac-
count for greenhouse gas emissions. It establishes a compre-
hensive, global, standardised framework for measuring and
lncoterms refer to International Commercial Terms. These
are a series of pre-defined commercial terms published by the
International Chamber of Commerce (ICC) relating to interna-
tional commercial law. They are widely used in international
commercial transactions or procurement processes and their
use is encouraged by trade councils, courts and international
lawyers.
Innovation pipeline is defined as the net incremental reve-
nue generated from innovation projects up to 36 months from
their launch.
Interest cover is the ratio of EBITDA to net interest costs.
International share of business is defined as the revenue
from the International zone as a percentage of revenue from
the International and Europe zones.
Lactalbumin, also known as ‘whey protein’, is the albumin
contained in milk and obtained from whey.
Leverage is the ratio of net interest-bearing debt, inclusive of
pension liabilities, to EBITDA. It enables evaluation of the abil-
ity to support future debt and obligations: the long-term target
range for leverage is between 2.8 and 3.4.
MENA is an acronym referring to the Middle East and
North Africa.
Meal kits are a subscription service-food business model
where a company sends customers pre-portioned and some-
times partially prepared food ingredients and recipes to pre-
pare homecooked meals.
Milk volume is defined as total intake of raw milk in kg from
owners and contractors.
M&A is an abbreviation of mergers and acquisitions.
Net interest-bearing debt is defined as current and non-cur-
rent interest-bearing liabilities less securities. cash and cash
equivalents. and other interest-bearing assets.
Net interest-bearing debt inclusive of pension liabilities is
defined as current and non-current interest-bearing liabilities
less securities, cash and cash equivalents, and other interest-
bearing assets plus pension liabilities.
Net working capital is the capital tied up in inventories.
receivables and payables including payables for owner milk.
Net working capital excluding owner milk is defined as cap-
ital that is tied up in inventories, receivables and payables ex-
cluding payables for owner milk.
Non-GMO means non-genetically modified organisms, for ex-
ample non-genetically modified feed crops for cows.
OCI is an acronym for other comprehensive income. OCI in-
cludes revenue, Expenses, gains and losses that have yet to be
realised.
Profit margin is a measure of profitability. It is the amount by
which revenue from sales exceeds costs in a business.
OECD refers to the Organisation for Economic Cooperation
and Development.
On-the-go refers to food consumed while on the go, and also
to packaging solutions supporting this food consumption
trend.
Other supported brands are brands other than Arla®.
Lurpak®. Puck®, Castello® and milk-based branded beverages
that contribute to strategic branded volume-driven revenue
growth.
Performance price for Arla Foods is defined as the prepaid
milk price plus net profit divided by total member milk volume
intake. It measures the value creation per kg of owner milk
including retained earnings and supplementary payments.
Prepaid milk price describes the cash payment farmers re-
ceive per kg of milk delivered during the settlement period.
Profit share is defined as the ratio of profit for the period allo-
cated to owners of Arla Foods. to total revenue.
QEHS stands for Quality, Environmental. Health. and Safety. It
is a department within Arla's supply chain safeguarding the
quality and safety of production.
SEA is an acronym referring to South-East Asia.
SMP is an abbreviation of skimmed milk powder.
Value-added protein segment contains products with spe-
cial functionality and compounds, compared to standard pro-
tein concentrates with a protein content of approximately
80 per cent.
Volume-driven revenue growth is defined as revenue
growth associated with growth in volumes while keeping
prices constant.
Whey protein hydrolysate is a concentrate or isolate
in which some of the amino bonds have been broken by
exposure of the proteins to heat, acids or enzymes. This pre-
digestion means that hydrolysed proteins are more rapidly
absorbed in the gut than either whey concentrates or isolates.
Strategic brands are defined as products sold under branded
products such as Arla®, Lurpak®, Castello® and Puck®.
WMP is an abbreviation referring to whole milk powder.
Strategic branded volume-driven revenue growth is
defined as revenue growth associated with growth in volumes
from strategic branded products while keeping prices con-
stant. It is also referred to in the report as branded volume
growth.
Private label refers to retail brands which are owned by retail-
ers, but produced by Arla based on contract manufacturing
agreements.
USD-related currencies are currencies which move in the
same direction as the USD (i.e. when the USD depreciates
against the EUR, it also depreciate against the EUR). Curren-
cies in the MENA region are typical examples.
22-23
February
Board of Representatives
meeting
23
February
Publication of the consolidated
annual report for 2022
17
May
Extraordinary Board of
Representatives meeting
29
August
Publication of the consolidated
half-year results for 2023
4-5
October
Board of Representatives
meeting
www.arla.com
Arla Foods amba Sønderhøj 14
DK-8260 Viby J.
Denmark
CVR no.: 25 31 37 63
Phone +45 89 38 10 00
E-mail arla@arlafoods.com
www.arla.com
Arla Foods UK plc
4 Savannah Way
Leeds Valley Park
Leeds, LS10 1 AB
England
Phone +44 113 382 7000
E-mail arla@arlafoods.com
www.arlafoods.co.uk