Danone First-half Earnings Decline; Backs Full-year View

French diary giant Danone SA (DANOY.PK) Friday said its first-half profit declined from last year, hurt by decreased sales in dairy and early-life nutrition businesses. The company, confirmed its annual outlook.

According to Danone, results for the period reflected high bases for year-on-year comparisons linked to Fonterra’s false safety alert, inflation in milk prices, and weak currency trends in emerging markets.

In August last year, New Zealand-based dairy exporter Fonterra warned that batches of ingredients supplied by the company to four Danone plants in Asia-Pacific might be contaminated with Clostridium botulinum bacteria.

The warning was lifted on August 28 when New Zealand’s Ministry for Primary Industries concluded that there was no Clostridium botulinum in any of the batches concerned. On January 8, 2014, Danone announced termination of its existing supply contract with Fonterra.

For the first half, net income attributable to the group was 608 million euros or 1.03 euros per share, down from 972 million euros or 1.64 euros per share a year earlier.

Adjusted net income totaled 683 million euros or 1.16 euros per share, compared with 873 million euros or 1.48 euros per share a year ago.

Half-yearly net sales declined 5.3 percent to 10.47 billion euros from 11.06 billion euros in the same period last year. Like-for-like sales, excluding currency fluctuations and scope of consolidation, rose by 2.2 percent.

According to the firm, the organic growth reflects a 3.0 percent decline in sales volume and a 5.2 percent increase due to the price/mix effect.

Fresh Dairy Products division sales declined 6.3 percent on a reported basis in the first half, while Waters division sales rose 4.1 percent from last year. Early Life Nutrition sales fell 13.1 percent, and Medical Nutrition division posted a sales growth of 3.1 percent.

For the second quarter, consolidated sales declined 5.5 percent to 5.41 billion euros. Excluding exchange rates and scope of consolidation, sales were up 2.3 percent.

The company confirmed its annual sales target of 4.5 to 5.5 percent growth, and said it expects a return to profitable growth in the second half.

Danone Chairman Franck Riboud said, “…we responded to record milk prices with key initiatives in various fields —pricing, mix, cost-cutting measures—, all designed to rebuild margins that had come under serious pressure in the first quarter.”

Looking ahead, the Group anticipates consumer demand to remain similar to 2013, with sluggish trends in Europe.

The firm also said it continues to grow in Africa, with a tie-up with Brookside recently.

In Paris, the shares are currently trading at 55.49, down 0.88 percent.

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by RTT Staff Writer

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