New Delhi, July 28, 2018: Paris — Danone is counting on baby food sales in China to help power annual earnings higher despite setbacks in Morocco and Brazil that slowed second quarter sales, the French food group said on Friday.
“We are entering the second half with an operating model capable of offsetting these headwinds,” CFO Cecile Cabanis said on Friday, referring to a boycott in Morocco and a trucking strike in Brazil.
Danone “will progress towards its 2020 ambition through further sales growth and an improved recurring operating margin”, the group said in a statement.
Second-quarter like-for-like sales rose 3.3%, topping the 3.1% expected by analysts. This beat the 2.6% reported by rival Nestlé but marked a slowdown from 4.9% in the first quarter. Danone is targeting like-for-like sales growth of 4% to 5% by 2020 and an operating margin higher than 16%. It reported a margin of 14.27% for the first half.
Shares in the world’s largest yoghurt maker were up 1.9% in early trading. Brokerage Liberum described the results as “solid” and kept its “buy” rating on Danone. Operating profit rose 7.9% in the first half helped by cost controls and its takeover of US organic food maker White Wave last year according to businesslive.co.za
Chinese demand for baby food and sales at its water division remained solid while its dairy business in North America returned to growth in the second quarter.
The boycott in Morocco was launched earlier this year on social media against what protesters say are unfair prices set by large companies. Danone, which makes 6% of its group sales in Morocco, said last month its local dairy unit Centrale Danone had lost more than 50% of its fresh milk market share due to the boycott.
Cabanis said in a statement that Danone was looking to regain consumer trust. “Sales continued to decline in Brazil where the truckers’ strike exacerbated already difficult market conditions.”