Danone today (20 April) reported muted growth in its underlying sales in the first quarter of the year, a result described by the French giant as “in line with expectations” as the Activia maker upped its forecast for annual earnings.
The company behind brands including Actimel yogurt drinks and Aptamil infant formula saw its sales rise by 0.7% on an organic basis in the first quarter of 2017, down sharply from the 3.5% growth seen in the first three months of 2016 and the 2.9% reported for last year as a whole.
Danone it had seen “a low start to the year” but said its results were “in line with expectations”. Emmanuel Faber, Danone’s CEO, said: “Q1 has been an important time for all teams at Danone. As anticipated, sales are showing a slow start to the year. In a continued volatile environment, we have made progress on our key priorities across our categories.”
In a note to clients, Sanford Bernstein analyst Andrew Wood said: “We expected a soft start to 2017 for Danone and that was what it delivered, even if it slightly beat expectations on some measures. Specifically, like-for-like growth in Q1 was slightly ahead of consensus but below our expectations and was by far the lowest Q1 growth delivered by any of our food and home and personal care companies so far.”
On a reported basis, the three Danone divisions monitored by just-food – fresh daily, early life nutrition and medical nutrition – all reported higher sales in the first quarter.
However, like-for-like sales from Danone’s fresh dairy business fell 2.3% amid a 5.3% fall in volumes. Danone pointed to “difficult market conditions” in Europe and the performance of Activia, two factors that have been affecting its fresh dairy sales for a number of quarters. The company reported “stable growth” from its fresh dairy businesses in its combined CIS and North America division but said it saw “a slightly negative performance” from fresh dairy in its ALMA – Asia-Pacific, Latin America, Middle East and Africa – arm.
Like-for-like sales from Danone’s early life nutrition division rose 4.1%. Volumes inched up 0.1%. Danone cited “major gains” from its investment in developing a “direct” distribution model in China.
Danone revealed it would report its second-quarter performance differently in the wake of the acquisition of WhiteWave Foods.
The company’s new DanoneWave arm will include its fresh dairy products business in North America, as well as WhiteWave’s operations in the region.
A new fresh dairy products arm will comprise Danone’s fresh dairy products businesses in Europe, the CIS and ALMA, as well as WhiteWave’s business in Europe, Latin America and China.
The company’s early life nutrition and advanced medical nutrition businesses will report as a single category “to foster synergies and accelerate momentum for both businesses”. The second-quarter results will be based on two regions: one, comprising Europe, the US and Canada; and a second taking in the ALMA and CIS businesses.
Danone upped its forecast for recurring earnings per share at constant exchange rates. It is expecting “double-digit” growth, up from an earlier forecast of growth of “above 5%”.