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French dairy giant Danone has revealed that a boycott of its products in Morocco is continuing to have a marked impact on its performance there.

In a presentation this morning (17 October) following the release of its H1 2018 results, chief financial officer Cecile Cabanis said the boycott had meant that its Q2 sales in the country were down 40%, while H1 recurring operating income was down by EUR25m (US$28.9m).

The company also revealed it has a profit and loss operating charge of EUR661m, mostly from a goodwill impairment relating to the boycott.

Cabanis said the company is working hard to sort the issue out.

“This is an unforeseen event outside of normal volatility,” she said.

“The impact on our local business has been significant.”

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By GlobalData

The boycott of the company’s local subsidiary – Centrale Danone – and a number of other businesses started in April following a campaign on social media amidst anger about the cost of living in the North African country.

There was criticism of the price of Danone’s products and their quality.

Cabanis said that while the situation is on-going it is difficult to make “definitive predictions” about the outcome but added “it is clear that this unprecedented event will continue to weigh on our performance for the second half”.

Danone CEO Emmanuel Faber has visited Morocco to try and understand the situation on the ground and Cabanis said the company is “starting to make the relevant changes to our pasteurised milk model in a consumer environment where purchasing power is under pressure”.

She added that the company will also look to introduce “greater transparency” in a consumer dialogue which it hopes will “be an important first step to restore the situation”.

Danone also blamed reduced demand for baby food in China for results which showed third-quarter sales growth has slowed.

Third quarter sales – to 30 September – were EUR6.19bn, a like-for-like increase of 1.4%, a slowdown from 3.3% growth in the second quarter and 4.9% in the first quarter.