Food group Danone narrows sales growth goal despite strong quarter
French food group Danone said revenue growth accelerated in the third quarter as baby food products sales in China delivered another a strong rise in turnover, offsetting a weaker performance in other areas.
The third quarter performance lagged market expectations and Danone narrowed its sales growth outlook for the 2019 full year while keeping its margin outlook intact. Finance Chief Cecile Cabanis told reporters that in 2019, the group will continue to make progress toward meeting its 2020 financial goals, which she confirmed. Danone, which is the world’s largest yoghurt maker and has brands such as Actimel and Activia, said third-quarter sales reached €6.418 billion ($7.1 billion). This marked a like-for-like rise of 3 percent that was below analysts’ expectations for 3.8 percent growth, but was nevertheless an acceleration from 2.5 percent growth in the second quarter. Danone is now targeting 2019 group like-for-like sales growth of 2.5-3 percent against a previous forecast of around 3 percent.
It still expects an operating margin above 15 percent for 2019, putting it on track for its 2020 goals of an operating margin of above 16 percent and like-for-like sales growth of 4-5 percent.
China is an important region for Danone, contributing about 30 percent of sales to the ‘Early Life Nutrition’ (ELN) business, which makes infant formula and general baby food products.
Sales of Danone’s ELN business in China returned to growth in the second quarter, having suffered a slump in the first quarter partly due to lower birth rates.
They further accelerated to reach growth of over 20 percent in the third quarter, reaching their highest ever quarter in terms of net sales. Sales in China were helped by a focus on more premium products, an expansion toward cities where Danone has a bigger presence, and an increase of sales via E-commerce.
Danone’s ‘Essential Dairy & Plant’-based division reported sales growth of 0.7 percent, with Europe continuing to improve. In North America, coffee creamers and plant-based products posted solid growth although premium dairy product sales lagged. Revenues at Danone’s waters division dipped 0.9 percent as sales in Europe suffered from high comparisons with the year-ago quarter when sales had been boosted by particularly hot weather.