French food group Danone keeps profit outlook despite weak Q1

PARIS – 17 April 2019: French food group Danone kept its forecasts for a further rise in sales and profits this year although weaker demand for infant formula products in China and a consumer boycott in Morocco weighed on first-quarter sales.

Danone, the world’s largest yoghurt maker, said first-quarter underlying sales had risen by a relatively modest 0.8 percent to $6.94 billion (€6.138 billion), marking a slowdown from 2.4 percent growth in the fourth quarter of 2018.

The company nevertheless expected sales growth to accelerate in the second half of the year.

“The first quarter showed a start of the year in line with expectations ... We are pleased with the momentum of the business which will become increasingly visible from the second quarter. This gives us every confidence that we will meet our full year guidance,” CEO Emmanuel Faber said in a statement.

Danone reiterated it was targeting group like-for-like sales growth of around 3 percent and an operating margin above 15 percent for 2019.

Danone added it was on track to deliver on its 2020 goals for an operating margin above 16 percent of its sales and like-for-like sales growth of 4-5 percent.

Danone’s waters division and its dairy business put in solid performances over the quarter, but sales of Danone’s Early Life Nutrition products in China fell around 15 percent in the quarter, partly due to a lower birth rate in China.

This compared with a 10 percent decline in the fourth quarter 2018 and a 20 percent decline in the third quarter, in that division.

China is an important source of growth for Danone, contributing about 30 percent of sales of the Early Life Nutrition business, which makes infant formula and general baby food products.

Danone said it still expected the business in China to return to growth in the second half of 2019.

Danone also said its sale of Earthbound Farm, announced last week, would improve its recurring operating margins in 2019.