Danone sales growth slows
DANONE, the world’s biggest yoghurt maker, reported the slowest third-quarter sales growth in more than a decade amid a slowdown in baby food, traditionally one of the company’s fastest-growing businesses.
Revenue increased 2.1 percent on a like-for-like basis, Danone said yesterday, missing analysts’ estimates for a 2.4 percent increase. The stock reversed early declines after chief financial officer Cécile Cabanis said full-year profitability would be at the high end of its target range, helped by price increases, efficiency measures and cost cuts.
Danone’s baby food production in Europe, which had benefited from demand in China for foreign infant formula, is now slowing as China tightens the rules to help local producers.
Food companies are caught in a bind in other emerging markets, where currency devaluations are making raw materials more expensive and consumers are paring spending on concern about economic growth. Danone said its shipments in Brazil and the former Soviet countries were dropping after recent price increases and a shift to highermargin products.
“We will deliver in a consistent manner despite the persistent volatile environment,” Cabanis said.
Total sales fell to 5.54 billion (R86.66bn) as volume dropped for the first time in six quarters. Nine-month like-forlike growth was 3.2 percent, and the company previously forecast a full-year increase of 3 percent to 5 percent. Danone rose 0.3 percent to 64.02 as of 11.27am in Paris yesterday, after dropping as much as 2.3 percent in early trading.
Sales at Danone’s infant formula unit rose 1.7 percent, stalling after 6 percent growth in the first half. China has raised taxes on foreign infant formula market sold online after concern over product safety created a boom in such purchases. The new regulations also include a stricter registration process.
“The big question mark is on China and baby food: is it something more structural, or is it a transition caused by regulatory changes?,” said Jon Cox at Kepler Cheuvreux. “I believe it is the latter, but there is a lot of uncertainty around that.”
The maker of Evian water in July agreed to buy WhiteWave Foods for $10 billion (R142bn), a move that would double the size of the company’s US business and make it the global leader in organic food and drinks. Danone said it aimed to conclude the transaction this year. – Bloomberg