So it is not an end in itself to increase this percentage in the years to come?
"No. Eventually this would cost the farmer money, wouldn't it? We have always done it this way. Your solvency percentage is not a written law, you can't find it anywhere. It is something we discussed with our farmers and it is a position we feel comfortable with."
Is Arla not taking too much risk?
"We may be slightly more aggressive concerning these critical performance indicators in comparison with FrieslandCampina, DMK or others. But we are not taking too many risks. I think, especially after the financial crisis, our gearing ratio – the level of long-term debt compared to the equity capital - is more relevant. After last year's takeovers our gearing ratio increased to a maximum of 4,5. Meanwhile it decreased to 3,4."
Do performance indicators make it easier to obtain credit?
"No, we currently hold good bank arrangements inside and outside Scandinavia, with very low interest rates. I see no issues there. Another, equally important aspect is: backing up your words by action. Surprises will not go down with banks."
How important are new members for Arla's capital
"They are important. With new members we found Arla on a broader basis, more equity and more milk. We are aware of the fact that the total number of dairy farmers in Europe will keep diminishing. What would have happened if dairy corporations decided not to engage new members twenty years ago? There must be a healthy balance between the number of farmer members and the total volume to process."
Arla has members in six countries and basically pays the same milk price in all of them. How do you keep all your members satisfied?
"That is difficult, during the past year we coped with strongly increasing milk prices. In some countries our competition performs slightly better, in others we do. We need to balance, but I am convinced our members are better off together than alone."
Is Arla's milk price system tenable with strongly fluctuating prices?
"We see that prices within Europe have the tendency to move closer towards each other, this development is also visible on a global scale. The world is globalising and the market's transparency is increasing.
I expect this process to continue. I am convinced this transparency, at least as far as commodity's are concerned, is and will be the driving force behind our business. Even the tough, divided German dairy market is about to change. You will see the German milk lake join the growing momentum of feeding the rest of the world."
In its annual report Arla states it wishes to optimally put its member's milk to value. Is Arla able to do so?
"I am in the business long enough to know this process always continues. Sometimes it succeeds, sometimes it doesn't. Our current milk price is slightly lower than FrieslandCampina's milk price and slightly above the milk price of other parties."
Is it an end it itself to pay the highest milk price in the EU?
"No. Our goal is to annually pay a milk price which is 3 to 5% higher than the average price of FrieslandCampina, Dairy Crest, DMK and the average German price. Milk prices get closer and closer to one another. That is why we think our strategy is the right one. Year after year, it becomes more difficult to keep performing 5% above the average."