A subsidiary of the Danish dairy conglomerate Arla Foods is making an investment in an established facility located in Argentina, with a focus on producing proteins and infant formula applications.
Arla Foods Ingredients intends to incorporate a new drying tower into its Porteña facility, characterizing it as a “substantial enhancement.” However, the company has not disclosed the exact amount of capital earmarked for this project.
The installation of a new tower, slated for completion in 2026, is expected to increase the production of permeate powder, a high-lactose ingredient derived by extracting proteins from milk for food manufacturers, more than twofold.
Arla Foods has stated that the expansion of the Porteña plant aims to meet the increasing demand for premium whey ingredients, both within Latin America and on a global scale. Additionally, the company has received approval to manufacture dairy proteins for infant formula products.
Despite Argentina’s struggle with hyperinflation, where prices are soaring at a rate exceeding 100% due to the devaluation of the local currency, the peso, it continues to attract investment.
In a statement made today, October 9th, Henrik Andersen, the CEO of Arla Foods Ingredients, made reference to the economic challenges while announcing the investment.
“We’ve had a presence in Argentina since 2000, and despite the country’s economic fluctuations, we’ve consistently delivered strong results. This positions us to invest in future growth,” stated Henrik Andersen, CEO of Arla Foods Ingredients.
In its 2022 annual report, Arla Foods did not disclose a detailed breakdown of its revenues and profits attributable to Argentina, neither for the entire group nor specifically for Arla Foods Ingredients.
When releasing its first-half results in August 2023, the parent company Arla Foods noted the presence of inflationary pressures and volume declines at the group level, resulting in a downward revision of its guidance for the year.
“As expected, the first half of 2023 was characterised by continued inflationary pressures, falling market prices for dairy products and a shift in consumer behaviour towards discount channels and private-label products,” the company said.
The full-year sales projection has been revised to a range of €13.2 billion (then $14.2 billion) to €13.7 billion, as opposed to the earlier forecast in February of €13.6 billion to €14.2 billion. Additionally, the expected profit as a percentage of revenue is now anticipated to be between 2.8% and 3%, down from the previous range of 2.8% to 3.2%.
In order to facilitate the manufacturing of infant formula ingredients at the Porteña facility, Arla Foods Ingredients stated that it has had to adhere to stringent global criteria regarding nutritional value and hygiene.
A permit was granted in June, with the business expecting that a “significant portion of the Porteña plant’s total production will go to infant-nutrition ingredients within the first year and grow further thereafter”.
Arla Foods Ingredients will source the base products locally after entering agreements with dairy suppliers and offered training to “ensure that the raw materials meet the required quality”.
Andersen added: “We are proud that we can now produce for the infant sector from Latin America. Getting here has required time, resources and a high degree of cooperation – not only between our Danish and Argentinian departments, but also with local dairies. Everyone has effectively contributed to us now being able to lift our business further.”
