Reuters: Global Markets: Danone shares jump after sales growth tops forecasts

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Danone shares jump after sales growth tops forecasts Apr 16th 2013, 07:46 A general view with a giant jar of yogurt is seen outside the exhibition to mark the 90th anniversary of the French foods company Danone, in Paris April 2, 2009. Credit: Reuters/Jacky Naegelen By Dominique Vidalon PARIS | Tue Apr 16, 2013 3:46am EDT PARIS (Reuters) - Danone (DANO.PA) beat quarterly sales growth forecasts thanks to strong demand for baby food in Asia and improved business at its core dairy unit in the United States and Russia. The world's largest yoghurt maker, with brands including Actimel and Activia, said sales remained weak in austerity-hit southern Europe and cautioned consumer trends in Europe would stay negative this year. Danone, which competes with Nestle (NESN.VX) and Unilever (ULVR.L) (UNc.AS), is the most exposed among big food groups to the euro-zone debt crisis and is under pressure from U.S. activist shareholder Nelson Peltz to improve its performance. Like-for-like sales grew 5.6 percent in the quarter, beating company-compiled analysts' forecasts for 4.2 percent growth, also driven by robust demand for medical nutrition and water. By 3:04 a.m. ET Danone shares were up 3.4 percent, leading gainers on the CAC-40 index of French blue chips. The stock rose as high as 56.67 euros, its highest since early 2008. "5.6 percent organic growth is a high positive surprise due to the tough comparatives and the challenging environment in Europe," said Pierre Tegner, analyst at brokerage Natixis. Total sales, which include the effects of foreign exchange fluctuations, reached 5.34 billion euros ($7 billion), a reported rise of 4.3 percent. Danone kept its 2013 target of like-for-like sales growth of at least 5 percent and of a decline of between 30 and 50 basis points in operating margin. Danone has said it will cut around 900 jobs to cope with the downturn in southern Europe that is hurting its core dairy business. It is also focusing on product innovation to justify the premium its dairy products command over private labels. Danone said on Tuesday the first results from these initiatives were expected in the second half of 2013 and reiterated it aimed to return to "strong, profitable" organic growth next year. WEAK DAIRY The dairy division, which makes nearly 60 percent of Danone's revenue, posted a sales rise of 0.7 percent in the first quarter, a slowdown from 1.3 percent growth in the fourth quarter of 2012. This reflected a 0.5 rise in sales volume and one less day in the quarter when compared with the first quarter 2012. Business conditions in Europe, where sales fell 5.1 percent, remained difficult in the first quarter with trends similar to the fourth quarter, the company said. This included the effects of price cuts and promotions to cope with falling demand, notably in Spain. "Q1 sales remain fragile, particularly on dairy products. Baby food saved the quarter. We remain very cautious about the recovery expected by the management from H2 and particularly for 2014," CM-CIC Securities analyst Francis Pretre said in a research note. The baby food division, which makes 22 percent of group sales, achieved 17.1 percent sales growth, boosted by booming demand in Asia-Pacific and especially China, which benefited from New Year's celebrations which came later than in 2012. Bottled water, which accounts for 16.6 percent of sales, grew 8.6 percent, also lifted by emerging countries, while sales in Europe were hit by cold weather in March. Danone, whose global brands also include Bledina baby food and Evian and Volvic waters, kicks off the reporting season for European food manufacturers, with Nestle reporting on April 18 and Unilever on April 25. (Editing by Christian Plumb and David Holmes) Link this Share this Digg this Email Reprints

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