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Danone Third-Quarter Revenue Rises At Weakest Pace In Decade

Danone, the world’s biggest yogurt maker, reported the slowest third-quarter sales growth in more than a decade, missing analysts’ estimates, amid a slowdown in baby food, traditionally one of the company’s fastest-growing businesses.

Revenue increased 2.1 percent on a like-for-like basis, the Paris-based company said in a statement on Tuesday. Analysts had expected growth of 2.4 percent. Total sales fell to 5.54 billion euros ($6.1 billion) as volume dropped for the first time in six quarters.

China is revamping rules on the infant formula market after concern over product safety created a boom in online and foreign purchases of baby food. Danone’s baby food production in Europe, which had benefited from that demand, is now slowing as retailers try to sell off inventory in preparation for the new regulations. Danone’s Nutrilon and Aptamil are some of the most popular formula brands in China, the company’s fourth-largest market.

“China is transitioning, creating short-term volatility and negatively impacting our sales growth,” Chief Executive Officer Emmanuel Faber said in the statement. Danone said the effect will continue until the regulations are fully enforced.

Sales at Danone’s early life nutrition unit rose 1.7 percent, having gained 6 percent in the first half. Analysts had called for a 2.5 percent increase.

The maker of Evian water in July agreed to buy WhiteWave Foods Co. for $10 billion, a move that would double the size of the company’s U.S. business and make it the global leader in organic food and drinks. Danone said it aims to conclude the transaction this year, though it may face regulatory delays after the U.S. Department of Justice requested more information.

The maker of Activia yogurt reiterated its forecast for like-for-like sales growth of 3 percent to 5 percent this year. Danone said in June it expects its trading operating margin to widen by 50 to 60 basis points in 2016 on a like-for-like basis.

News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.

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