By Johannes Birkebaek

COPENHAGEN Danish dairy firm Arla lowered its full-year sales forecast on Tuesday, saying inflation and the rising cost of living in Europe were prompting consumers to buy fewer or cheaper dairy products to cut costs.

The group reported a rise in sales by value in the first half of 2023 due to higher prices as its cost rose. However, it said volumes of Lurpak butter, a premium brand which is sold in 95 countries around the world, fell 6.6%, while the amount of Castello cheese it sold decreased by 4.4% from a year earlier.

Arla's earnings before interest and tax for the first half fell 36% from a year earlier to 161 million euros ($174.19 million).

"During the first half of 2023, we continued to see inflationary pressure resulting in consumers moving towards discount channels and private label products," Arla Chief Financial Officer Torben Dahl Nyholm said in a statement.

The group lowered its sales outlook for 2023 to between 13.2 billion euros and 13.7 billion euros from 13.6 billion-14.2 billion euros seen in February because of the continued uncertainty in the market.

Owned by some 8,400 dairy farmers in Denmark, Sweden, Germany, Britain, Luxembourg, the Netherlands and Belgium, Arla said revenue totalled 7.06 billion euros for January to June, up 10.7% from the same period last year.

The revenue growth of some 700 million euros was primarily driven by price increases, the dairy cooperative said.

($1 = 0.9240 euros)

(Reporting by Johannes Birkebaek, editing by Terje Solsvik, Essi Lehto and Susan Fenton)