Danone revealed that it is eyeing expansion in developing countries yesterday (17 October) as it posted an increase in like-for-like sales of 9.5% in the third quarter, driven by the performance of its fresh dairy and beverage businesses and an increased presence in non-European markets.
Revenue in the quarter advanced to EUR3.55bn (US$4.45bn) from EUR3.41bn a year earlier, deriving from a 6.6% rise in sales volume and a 2.9% rise in sales value.
Comparable sales for the third quarter in fresh dairy were up 9.2%, while the company’s beverage unit posted strong sales growth of 13.1%. Sales in Asia increased by 20.1% during the period and sales for the rest of the world, excluding Europe, were up 14.9%. The company posted modest sales increases in Europe, where Danone said performance had been “satisfactory”.
Highlighting the importance Danone places on expanding in developing markets, CEO Franck Riboud told a press conference following the fiscal release that the company anticipates making acquisitions in India and other developing countries in the coming years, adding that the company has identified several Indian targets for 2007.
On a reported basis, third quarter sales increased by 4.1%. Changes in exchange rates had a negative impact of 2% and changes in the scope of consolidation a negative impact of 3.4%, which mainly arose from the exclusion of Britannia’s sales due to regulatory requirements in India where Britannia’s stock is listed.
The company said that, based on sales performance to date and the outlook for the fourth quarter, Danone expects organic sales growth for the full year to exceed 8%. Trading and operating margin should be within a +20 bp to +40 bp range, most probably coming on at the low end of the range, the group added.
The growth in underlying EPS from continuing activities should be above 15% for the full year, Danone said.
Although Danone shares closed marginally lower after the release of the results yesterday they regained strength in morning trade today, increasing by 1.85% to EUR115.40 at 11.30am (GMT).