French dairy giant Danone has posted a 35% drop in 2003 net profit, failing to meet market forecasts.

The company reported a net profit of €839m (US$1.06bn) for 2003, compared to €1.28bn in the previous year. Operating profit edged up to €1.60bn on sales of €13.13bn, reported Reuters. Sales in 2002 were €13.56bn.

Analysts polled by Reuters had been expecting, on average, net profit of €847.8m, operating profit of €1.62bn and sales of €13.29bn.

Danone said its underlying sales growth, which excludes the impact of currency fluctuations, acquisitions and divestments, was 7.2%, compared to its target of 5-7%, helped by increased sales of mineral water during last summer's heat wave in Europe.

The company again forecast a rise of 5-7% in underlying sales for 2004.

Danone's biscuit sales fell almost 5% to €3.07bn, while sales of dairy products were €6.19bn in 2003 compared to €6.28bn in 2002. On an underlying basis, the company's biscuit and cereal products division posted sales growth of 0.4%, while the dairy product division posted underlying sales growth of 9.6%.