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Danone Q2 Sales Growth Slows As Morocco Boycott Weighs

By Steve Wynne-Jones
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Danone Q2 Sales Growth Slows As Morocco Boycott Weighs

French food group Danone said sales growth slowed in the second quarter, reflecting lost dairy sales stemming from a consumer boycott in Morocco and a truck strike in Brazil.

Chinese demand for baby food and sales from its water division, however, remained solid and Danone also posted a 7.9 rise in first-half operating profit, helped by cost control.

Danone, which is the world's largest yoghurt maker and has brands like Actimel and Activia, expected the boycott in Morocco to continue and to weigh on the second half performance.

"We are entering the second half with an operating model capable of offsetting these headwinds," Finance Chief Cecile Cabanis told a call with journalists.

First-Half Performance

First-half operating profit reached €1.784 billion, a like-for-like rise of 7.9%, which was in line with a company-compiled median of analyst estimates for €1.785 billion in profit.

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Second-quarter like-for-like sales, rose 3.3% - slightly above analysts' expectations for 3.1% growth.

This marked a slowdown from 4.9% growth in the first quarter but beat the 2.6% achieved by rival Nestle in the second quarter.

Underlying Strengths

“This performance, achieved despite ongoing volatility and unexpected headwinds in some markets, reflects the underlying strengths of our business and our continued financial discipline,” said Danone chairman and chief executive, Emmanuel Faber.

“The performance was underpinned by notable progress in rebalancing the growth profile of our portfolio and widening sources of growth, while delivering initial savings from our €1billion efficiency program Protein. Excluding the exceptional situation in Morocco, all reporting entities delivered growth in the second quarter.”

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Danone, which is targeting an operating margin above 16% and like-for-like sales growth of 4-5% by 2020, reiterated its expectation for a double-digit rise in 2018 underlying earnings per share (EPS), excluding the impact of the sale of a stake in Japan's Yakult. [Pic:©Moovstock/123RF.COM]

News by Reuters, edited by ESM. Additional reporting by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.

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