Danone has today (27 July) confirmed higher raw material costs hit margins in the first half of 2012, six weeks after surprising the market with a profit warning.

The French food giant said trading operating margin fell 61 basis points to 13.85% amid costs of whey, milk proteins and fruit and sugar that were above the company’s expectations.

Danone reiterated its warning last month that its trading operating margin will be down 50 basis points in 2012. Earlier in the year, it had forecast flat margins.

Challenges in southern Europe has had an effect on Danone’s business so far this year. “The consumer environment definitely got tougher in Europe, particularly southern Europe, in the first half of this year,” Danone said today.

In Spain, an important market for Danone, the company this week upped its stake in its local subsidiary from 57.1% to 65.6%.

Underlying net income increased 2.1% in the first half of 2012. Sales were up 7.7%, even as like-for-like sales decelerated in the second quarter.

Volume growth was strongest in Danone’s baby food business.