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Danone Drops In Paris On Declining Fresh Dairy Shipments

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Danone Drops In Paris On Declining Fresh Dairy Shipments

Danone (BN) fell the most in six weeks in Paris after the French yogurt maker’s price increases weighed on the amount of dairy products sold in the first quarter.

The shares fell as much as 2.4%, the biggest intraday drop since March 3. They traded 1.3% lower at 52.57 euros as of 10:35 a.m. in the French capital. 

Fresh dairy volume fell 3.7% in the quarter as Danone raised prices and introduced more expensive products, partly because of inflationary pressure in Russia, the Paris-based company said today in a statement. Dairy volume will worsen in the second quarter before starting to improve in the third, said Chief Financial Officer Pierre-Andre Terisse. The company said it plans further hikes as dairy margins are under pressure.

“Danone appears intent to hit its margin guidance at any cost,” Jeff Stent, an analyst at Exane BNP, said in a note. That’s “not how we would personally choose to run the business.”

Like-for-like sales increased 2.2% in the first quarter, matching the median of 14 analysts’ estimates compiled by Bloomberg. Revenue at that level, which is adjusted for acquisitions, divestments and currency shifts, will rise 4.5% to 5.5% this year, Danone also said.

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Danone is seeking to rebuild its infant-nutrition unit in China after a product recall and bribery claims at its Dumex baby-milk business contributed to the first annual earnings decline in more than a decade. The maker of Evian bottled water also needs to stabilize its European business amid slow growth in the region.

Total sales in the three-month period amounted to €5.06 billion ($7 billion), trailing the €5.15 billion median of analysts’ estimates. Exchange-rate movements reduced revenue by 8.9%, the maker of Activia yogurt said. Volume fell 1.9%. Analysts predicted a 0.1% decline.

‘Sluggish’ Europe

“Demand will remain similar to 2013, with sluggish trends in Europe, significant carry-over of milk price inflation and persistently high exchange-rate volatility in emerging markets, resulting in higher inflation in those countries,” Danone said.

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Revenue growth and profitability will be stronger in the second half than the first, the company said. The full-year operating margin may widen or narrow as much as 0.2% point on a like-for-like basis, it said.

Price-Mix Effect

Like-for-like revenue in Europe outside the Commonwealth of Independent States increased 0.5%, Danone said. The gain was the first for the region since 2011, CFO Terisse told reporters on a conference call. The region now shows a stable price-mix effect, though Germany and Italy continue to face headwinds, Danone said.

Sales in Ukraine fell, Terisse also said, without specifying the decline.

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Danone is weighing the sale of its medical-nutrition unit in a deal that may fetch more than 3 billion euros, a person familiar with the situation told Bloomberg News in February. Fresenius SE, a German health-care company, and Nestle SA, (NESN) the world’s biggest foodmaker, are the two bidders left for the division, Reuters said this month.

Bloomberg

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