Danone's Q2 Sales Accelerate As Chinese Baby Food Arm Improves
French food group Danone said sales growth accelerated in the second quarter in all its business lines, beating expectations, and baby food products sales in China were back into positive territory after three quarters of decline.
Danone, which is the world's largest yoghurt maker and has brands such as Actimel and Activia, reiterated it was confident of delivering its financial targets for 2019 and 2020.
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First-half operating profit reached €1.858 billion, marking a like-for-like rise of 6.4%, which was slightly above a company-compiled median of analyst estimates for €1.847 billion in profit.
Second-quarter like-for-like sales, rose 2.5% – above analysts' expectations for 2.2% growth.
This marked an acceleration from 0.8% growth in the first quarter when sales were hit by weaker demand for infant formula products in China and a consumer boycott in Morocco.
The company is targeting group like-for-like sales growth of around 3% and an operating margin above 15% for 2019.
That in turn would put Danone on track for its 2020 goals of an operating margin above 16% and like-for-like sales growth of 4-5%.
“Our first-half results demonstrate our continued focus on the combination of strong execution and progress in the transformation of Danone, in order to drive agility and resilience, and deliver consistent profitable growth,” commented Emmanuel Faber, Danone chairman and chief executive.
“I was pleased to see top-line accelerating in the second quarter, with growth across all our businesses. The innovation momentum remains strong, while we have addressed most of the underperformers in our portfolio.”
Faber added that the business is “well on track” to achieve its 2020 objectives, adding that he expects that “the improved fundamentals of our business will continue to drive top-line growth acceleration and margin expansion throughout rest of the year”.
Commenting on its performance, analysts Liberum Capital said that they expected “another year of solid progress toward the group’s trading margin and returns objectives despite the headwinds at Specialised Nutrition resulting from a contraction in China baby food”.