Danone says sales growth to miss tar­get on Spain, Ac­tivia

China Daily (Hong Kong) - - BUSINESS - By BLOOMBERG

Danone SA, the world’s big­gest yo­gurt maker, said sales growth will be slightly be­low its tar­get for 2016 as its fresh dairy busi­ness shrinks for a third year, hurt by weak de­mand in Spain and a slower-than-ex­pected re­vamp of the Ac­tivia yo­gurt brand across Europe.

Rev­enue growth will miss the 3 per­cent to 5 per­cent goal, Danone said in a state­ment on Mon­day. Sales in­creased 3.2 per­cent on that ba­sis in the first nine months. The stock fell as much as 3 per­cent in Paris.

Chief Ex­ec­u­tive Of­fi­cer Em­manuel Faber is strug­gling to de­liver on his pledge to halt a three-year drop in ship­ments of fresh-dairy prod­ucts. To mit­i­gate the sales slow­down, Faber has stepped up cost cuts and an ef­fi­ciency drive.

Danone said on Mon­day it ex­pects prof­itabil­ity to beat its tar­get for 2016, rais­ing the out­look for the sec­ond time this year.

“The re­launch of Ac­tivia doesn’t seem to be de­liv­er­ing on ex­pec­ta­tions,” James Ed­wardes Jones, an an­a­lyst at RBC Cap­i­tal Mar­kets, wrote in a note.

Danone’s full-year mar­gin will beat the tar­get by as much as 0.1 per­cent­age point, Chief Fi­nan­cial Of­fi­cer Ce­cile Ca­ba­nis said at a con­fer­ence call with an­a­lysts. The most re­cent prof­itabil­ity goal, set in June, was for like-for-like im­prove­ment in the re­cur­ring op­er­at­ing mar­gin of 0.5 per­cent­age points to 0.6 per­cent­age points.

Danone said it’s been re­work­ing lo­cal ex­e­cu­tion plans as it re­vamps the Ac­tivia brand, and it has started ad­just­ing them in some coun­tries.

In Oc­to­ber, the com­pany re­ported the slow­est thirdquar­ter sales growth in more than a decade amid a slow­down in baby food, tra­di­tion­ally one of Danone’s fastest­grow­ing busi­nesses.

VALENTYN OGIRENKO / REUTERS

An em­ployee sorts Danone dairy prod­ucts at a Metro cash and carry store in Kiev, Ukraine.

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