FrieslandCampina Delivers Good Performance in Difficult Dairy Year

AMERSFOORT, The Netherlands - Diversity in Geographical Markets, Broad Range of Value-Added Products
and Brands Prove Added Value

Considering the market conditions, Royal FrieslandCampina N.V. delivered
a good performance in 2008. The new company, which ensued from the merger
between Friesland Foods and Campina, pays its member dairy farmers a milk
price of 36.37 euros per 100 kilograms of farm milk (exclusive of VAT) for
2008, up 4.4 percent on 2007. Revenue was up 446 million euros to 9.5 billion
euros. The profit for 2008 is 135 million euros. The diversity in
geographical markets, the broad range of value-added products and the brands
proved their added value. Conversely, commodities (milk powder, butter and
some of the cheese in our range) had it very difficult. The global recession
adversely affects price developments. Consequently, FrieslandCampina takes
additional measures in the fields of capital expenditure, cost control and
production efficiency.

Highlights 2008

- Milk price for member dairy farmers rises to 36.37 euros per 100
kilograms of farm milk (exclusive of VAT). Guaranteed price 35.89
euros, performance payment 0.48 euro (exclusive of VAT, at 4.41 percent
fat and 3.47 percent protein)

- Good financial performance of value-added products in the Consumer
Products Western Europe, Consumer Products International and
ingredients business groups

- Disappointing results for the Cheese & Butter business group due to
lower selling prices for commodities such as cheese and butter as a
consequence of imbalance between supply and demand

- Profit for the year 135 million euros, down by 121 million euros (the
profit figures for 2008 and 2007 are not fully comparable due to
divergent milk price calculation methods)

- Revenue up by 5 percent (446 million euros), rising to 9.5 billion
euros due to price increases and the effect of the acquisition of Satro

- Cash flows from operating activities reach 315 million euros (+81
million euros)

- Solvency ratio 30.0 percent (2007: 32.8 percent)

- 25 million euros (0.29 euro per 100 kilograms of milk) reserved in the
form of fixed member bonds registered in the names of member dairy
farmers

- 71 million euros added to the general reserve

Brands prove added value

Cees ‘t Hart, CEO of Royal FrieslandCampina N.V.: “The diversity in our
geographical markets, our broad range of value-added products and our brands
prove their added value, enabling us to pay our member dairy farmers a good
milk price in the difficult year 2008. The global economic recession is bound
to affect price developments in the market, our results and, hence, the milk
price for member dairy farmers in 2009. Accordingly, cost savings, capital
expenditure restrictions and production efficiency should be key this year.
The current economic situation also offers opportunities, specifically
because we just merged. Our pooled innovative power and our staff’s milk
expertise should enable us to properly meet customers’ and consumers’
requirements, both in the area of consumer products and that of dairy
ingredients.”

Financial performance

Market conditions - Consumer demand dropped in Asia and Africa, in
particular, in the first half of 2008 due to the high prices of dairy
products. In addition, demand decreased as a consequence of the use of
alternatives for basic dairy products by customers. In combination with a
gradually increasing global milk production, this resulted in imbalance
between production and demand, which, in turn, led to stocks building up
around the world. Consequently, prices for milk powder, whey powder, butter
and cheese were put under pressure. The weak US dollar also made competition
on the world market difficult for eurozone countries. During the year under
review, selling prices for cheese, butter and milk powder dived, resulting in
selling prices for fresh and long-life dairy also gradually being put under
pressure. In Asia and Africa, margins recovered in the second half of the
year, due to the decreasing purchasing costs of milk, milk powder and butter.

The credit crunch and, in its wake, the tanking economy only marginally
affected revenue growth and results in 2008. In the last months of the year,
trading parties evidently became more cautious when it came to placing
orders. In combination with the plentiful supply of dairy products due to the
increased global milk production, this led to pressure on prices.

Revenue - Revenue was up 446 million euros to 9.5 billion euros on 2007
(9.0 billion euros). All four business groups contributed to this. Revenue
growth was 9 percent for the Consumer Products International business group,
7 percent for Ingredients, 3 percent for Cheese & Butter and, for Consumer
Products Western Europe, revenue growth stopped at 1 percent.

Milk price - The milk price for 2008 is 36.37 euros (exclusive of VAT)
per 100 kilograms of milk (at 4.41 percent fat and 3.47 percent protein). The
guaranteed price for 2008 is 35.89 euros (exclusive of VAT). The performance
payment amounts to 0.48 euro per 100 kilograms of milk. In addition, 0.29
euro per 100 kilograms is reserved in members’ names. The milk price for 2007
amounted to 34.85 euros (exclusive of VAT). This milk price is based on the
average milk prices of Friesland Foods and Campina in 2007, which were
determined using divergent methods.

Profit - The profit for 2008 is 135 million euros. This is 121 million
euros short of the profit for 2007 (256 million euros). Not all profit
figures for 2008 and 2007 can be compared due to divergent milk price
calculation methods. The main cause of the decline in profit was the
substantial pressure on the margins of commodities such as cheese, butter and
milk powder. Value-added products performed better, as is evident from the
results of the Consumer Products Western Europe, Consumer Products
International and Ingredients business groups.

Operating profit - FrieslandCampina’s operating profit for 2008 is 248
million euros (2007: 373 million euros). The cost of raw materials and
consumables, and goods for resale amounted to 6.4 billion euros in 2008
(2007: 6.0 billion euros). In 2008, approximately 11.4 billion kilograms of
milk were processed, 8.6 billion kilograms of which were supplied by member
dairy farmers in the Netherlands, Germany and Belgium. In 2007, 11.7 billion
kilograms were processed in total, 8.7 billion kilograms of which were
supplied by member dairy farmers. The employee benefits expense amounted to
796 million euros in 2008. In 2007 it was 776 million euros. The number of
employees was 20,568 in 2008 (2007: 20,774). The external costs of the merger
came to 28 million euros. These costs mainly pertained to the costs of legal
support in connection with the competition process of the European Commission
and advisory fees. The income tax expense plummeted to 15 million euros
(2007: 68 million euros). The main reasons for this are the lower results
realised in some countries and the utilisation of offsettable losses.

Cash flows - Cash flows from operating activities increased by 81 million
euros to 315 million euros (234 million euros in 2007) as a result of
improved working capital levels. In 2007, working capital increased. A great
deal of attention was paid to this undesirable development in 2008, which
clearly bore fruit. The special working capital reduction programmes resulted
in a decrease in inventory volumes. The value of the inventory dropped as a
consequence of decreasing prices. The decrease in amounts receivable also
resulted in an improvement of working capital. Investment in property, plant,
equipment and intangible assets amounted to 240 million euros (2007: 304
million euros).

Group equity - Group equity amounted to 1.5 billion euros at year-end
2008 (2007: 1.7 billion euros). In 2008, the depositary receipts for Class B
shares of Friesland Foods were cancelled. Seventy-one percent of those
depositary receipts for Class B shares were converted into free member bonds,
which form part of FrieslandCampina’s group equity. The remaining value of
the depositary receipts for Class B shares was paid in cash. In addition, an
amount of 78 million euros was paid in dividends for 2007 in 2008. Group
equity increased as a result of the addition to reserves of 71 million euros
from the profit for 2008. In addition, an amount of 25 million euros was
reserved in the form of fixed member bonds registered in the names of member
dairy farmers. The company also issued bonds worth 475 million euros to
Zuivelcooperatie FrieslandCampina U.A.

Solvency ratio - The solvency ratio (group equity as a percentage of
total assets) was 30.0 percent (2007: 32.8 percent). Net debt amounted to
1,494 million euros in 2008 (2007: 1,343 million euros). Net debt rose due
to, among other causes, the cash payments made as part of the cancellation of
the depositary receipts for Class B shares. The company meets the
requirements imposed by lenders, expressed as financial ratios.

Reserve - An amount of 71 million euros was added to the company’s
general reserve. An amount of 25 million euros is reserved in the form of
fixed member bonds registered in the names of member dairy farmers (0.29 euro
per 100 kilograms of milk). Hence, the total addition to equity is 96 million
euros.

Performance by business group

FrieslandCampina has concentrated its commercial activities in four
business groups: Consumer Products Western Europe, Consumer Products
International, Cheese & Butter and Ingredients. Its product range consists of
milk, baby and infant food, milk-based drinks, yoghurts, desserts, cheese,
butter, cream, milk powder, dairy-based ingredients, fruit juices and
fruit-based drinks.

Consumer Products Western Europe - The Consumer Products Western Europe
business group (2008 revenue: 3.0 billion euros) saw a sharp increase in its
financial performance compared with 2007. The business group’s operating
profit amounted to 181 million euros. An important angle for this business
group is the health and wellness segment. In the Netherlands, this angle
resulted in increasing sales for Campina Optimel, Campina Vifit and
Goedemorgen!. Fresh products such as milk, yoghurt and custards had it
difficult, because supermarkets increasingly focus on their private labels.
This did not stop Campina from becoming the largest brand in Dutch
supermarkets for the seventh time in a row in 2008. Appelsientje managed to
maintain its position as market leader, as did Chocomel/Cecemel.

Results in Germany improved considerably, due to the focus on value-added
dairy products. Landliebe was successfully repositioned. Campina Optiwell
Control had it rough, but the desserts sold under the Campina Puddis brand
had an excellent year. The professional market was characterised by
increasing competition, but the Debic brand reinforced its leading role as
the trust brand for the European foodservice market.

Revenue generated by Consumer Products International was 2.5 billion
euros in 2008. Its operating profit amounted to 166 million euros. The
business group underperformed compared with 2007. Developments in the first
half of 2008 were key causes for the underperformance. High raw material
prices could be reflected in selling prices gradually or in phases only. The
situation improved in the second half of 2008.

In Nigeria, FrieslandCampina achieved volume growth, as well as yet
another increase in Peak’s market share. In Vietnam, sales of the Dutch Lady
and Friso brands increased and market share grew. In Thailand, Foremost
managed to increase market share and Betagen’s market position improved. In
Malaysia, the dairy market shrank, but the company managed to increase its
market share. In Russia, both sales and volumes increased and the company’s
market share increased. The health and wellness segment is given increasing
attention in Russia as well. On the very competitive Greek market, sales
increased and market share grew.

The year 2008 was challenging for the Cheese & Butter business group.
Revenue amounted to 2.5 billion euros. Its operating profit was minus 77
million euros, an underperformance compared with 2007. The main cause for
this was diving selling prices of cheese and butter due to the large supply
in Europe throughout the year.

The naturally matured Gouda cheese performed well most of the year. Foil
cheeses clearly showed price decreases due to decreasing demand and
increasing supply. Although value-added products were also subject to the
trend of falling prices, Milner improved its sales as well as its market
position. The butter market was characterised by falling prices, in
particular in the second half of 2008.

Revenue generated by the Ingredients business group was 1.4 billion euros
in 2008. Its operating profit was 69 million euros. The business group
underperformed compared with 2007. This mainly has to do with low milk powder
selling prices.

FrieslandCampina Domo’s sales levels went up markedly. The improvement
was achieved thanks to the marketing of new products and concepts. The
specialties volume growth continued, as more and more functional products,
such as Vivinal GOS, are used in infant foods. Margins of standard products
were under pressure.

Despite rising purchase prices and stagnating sales, FrieslandCampina
Kievit, which specialises in encapsulation technology, succeeded in repeating
the sound result achieved in 2007. FrieslandCampina DMV had a difficult year.
Prices of basic dairy products were still high in the first half of 2008,
which caused a considerable drop in demand, as customers sought cheaper
alternatives. FrieslandCampina Dairy Feed, FrieslandCampina Creamy Creation
and joint venture DMV-Fonterra Excipients posted good results in 2008.

Outlook for 2009

The current economic developments create a high level of uncertainty in
the business community and among consumers. The lack of confidence, which has
ensued from the credit crunch, has led to a recession in many countries.
Selling prices of, in particular, standard dairy products (commodities) are
under pressure around the world, primarily due to reluctant demand among
customers. Short-term and medium-term developments are very difficult to
forecast. For 2009, additional measures have been taken in the fields of
capital expenditure restrictions, cost control and production efficiency. No
statement is being made on the expected result for 2009.

Headline figures(1)
In millions of euros, unless stated otherwise

2008 2007

Results
Revenue 9,454 9,008
Operating profit 248 373
Profit for the year 135 256
Milk price in euros per 100 kilograms
(excl. of VAT, at 4.41% fat and 3.47% protein) 36.37 34.85

Balance sheet
Total assets 4,930 5,128
Group equity 1,480 1,681
Equity attributable to
equity holders of the company
and other providers of capital 1,395 1,601
Net debt 1,494 1,343

Cash flows
Net cash flows from operating activities 315 234
Investment in property, plant, equipment and
intangible assets 240 304
Depreciation and amortisation 219 226

Other information
Group equity as a % of total assets 30.0 32.8

Employees (average number of FTEs) 20,568 20,774

Number of member dairy farms at year-end 15,837 16,977
Number of members at year-end 21,583 22,297

Total volume of milk processed
(in millions of kilograms) 11,446 11,700
Volume of milk supplied by members
(in millions of kilograms) 8,589 8,734

(1) The 2007 figures are pro-forma.

Royal FrieslandCampina is a multinational that produces and markets
natural, nutritious and high-quality dairy products and ingredients. Taste,
health, convenience and reliability are key characteristics. Based on the
figures of 2008 FrieslandCampina’s annual revenue will amount to 9.5 billion
euros. The company will employ 21,000 people and has about 100 production and
sales locations in 25 different countries. FrieslandCampina organised its
activities in a structure comprising four business groups: Consumer Products
Western Europe, Consumer Products International, Cheese & Butter and
Ingredients. The product range consists of consumer milk, milk in powder and
concentrated form, dairy drinks, yoghurts, desserts, cream, coffee creamers,
baby and infant food, cheese, butter and ingredients. Its most important
brands are Campina, Chocomel, Completa, Dutch Lady, Frisian Flag, Foremost,
Betagen, Friesche Vlag, Fruttis, Fristi, Vifit, Landliebe, Milli, Mona,
Optimel, Optiwell, Puddis, Pottyos, Fruttis, NoyNoy, Peak, Rainbow, Yazoo,
Appelsientje, DubbelFrisss, CoolBest, Debic, Frico, Milner, Buttergold,
Valess, DMV, Kievit, Domo, Creamy Creation and Nutrifeed. The business is
based on a cooperative model. The 17,000 member dairy farmers of
Zuivelcooperatie FrieslandCampina are the owners and the suppliers of the
milk.

www.frieslandcampina.com

Source: FrieslandCampina

For more information: FrieslandCampina, Corporate Communication, Rob van Dongen, T +31(0)522-276-334