Danone shares rise despite earnings drop

Danone shares rise despite earnings drop

Danone has booked a drop in full-year earnings as profitability came under pressure from higher input costs and the infant formula recall associated with Fonterra's botulism scare.

The company said net income for fiscal 2013 fell to EUR1.64bn (US$2.25bn), down from EUR1.82bn in the comparable period of last year. Operating income dropped 1.1% to EUR2.8bn.

Trading operating profit was hit as the group's margin dropped 81 bps to 13.19% from 14.18%. Trading profit for fresh dairy products was impacted by rising raw materials costs. That issue was, Danone said, "compounded" by Fonterra's recall of concentrated whey powder supplied to the company. While the recall was a false alarm, Danone said it reduced trading profit by an estimated EUR105m.

The company did, however, book a 4.8% increase in organic sales, which rose to EUR21.3bn. The result was slightly above consensus expectations of 4.7%. Sales gains were driven by value and volume growth, Danone revealed.

Looking to 2014, Danone expects sales to grow by 4.5-5.5%. The group also said it would "stabilise" its operating margin, forecasting a range of a fall of 20 basis points and a rise of 20 basis points.

The market reacted positively to the outlook, with shares rising 2.61% at 10.16 GMT.

Click here to view the full earnings update. 

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