Danone has raised its annual revenue growth forecast after its second-quarter like-for-like sales beat analysts' estimates on strong demand for baby food and bottled water, even as the company raised prices to mitigate higher costs.
The strong quarterly performance reflected good momentum across geographies and product categories and notably an 11.4% jump in sales of the Specialised Nutrition business, which includes infant milk formula and medical nutrition.
In the key Chinese market alone, infant milk formula posted mid-to-high single-digit growth with resilient market share in both domestic and international labels.
In North America, Danone also stepped up exports of Neocate specialised formula and Aptamil baby formula to help address shortages.
Danone, the world's largest yoghurt maker, said it now expects like-for-like sales to grow at 5%-6% in 2022 compared with 3%-5% forecast earlier.
The consumer goods company, whose brands include Evian and Badoit water, Activia yoghurt and Aptamil baby formula, reported quarterly like-for-like sales growth of 7.7% compared with analysts' estimates of a 5.6% growth.
'Unprecedented' External Environment
“This strong first half, with broad based progress despite an unprecedented external environment, is a testimony to the resilience, the focus and the engagement of all Danoners," commented Antoine de Saint-Affrique, Danone chief executive.
"While the quality of our first half delivery is encouraging and leads us to now expect a +5 to +6% like-for-like sales growth for the full year, this is only the start of our Renew journey: we believe there is still much we can do to bring Danone where we want it to be and deliver on both our purpose and our business ambition.”
The revival plan of Saint-Affrique, who took over as chief executive in September 2021, faces mounting input costs, coupled with further uncertainties caused by Russia's invasion of Ukraine that has forced Danone to suspend investments in the country.
The company said its first-half recurring operating margin declined to 12.1% from 13.1% in the first half of 2021 due to higher input costs. It reiterated its outlook for full-year recurring operating margin at above 12% compared with 13.7% in 2021.