Baby food boosts Danone sales

Baby food boosts Danone sales

Solid growth pushes sales up 6 percent in H1.

  • Solid growth in H1 2013 sales, up +6.0 percent like-for-like and +5.6 percent as reported
  • Second-quarter trends confirm a good start to the year, with sales up +6.5 percent like-for-like and reported sales up +6.7 percent, reflecting the strongest growth in volume in the past eight quarters
  • Sales growth held at over +10 percent in emerging markets/North America as a whole in Q2, while in Europe the decline was lower than in the previous quarter (-3.0 percent)
  • Trading operating margin of 13.34 percent in H1 2013, with a decline similar to that observed in 2012 (-49 bps), in line with targets
  • Underlying fully diluted earnings per share at €1.48, steady like-for-like and down -2.4 percent from 2012 as reported
  • Free cash-flow in H1 2013 at €714 million excluding exceptional items
  • Full-year 2013 targets confirmed: sales growth of at least +5 percent, trading operating margin down by between -50 and -30 bps, and free cash-flow of around €2 billion excluding exceptional items

Chairman’s comment
“With sales up 6 percent in the first half, Danone is off to a strong start in 2013 in an economic and consumption context that remains difficult in Europe and in some cases volatile in emerging countries. This performance demonstrates the relevance of our action plans, with our teams doing a good job of executing them around the globe.

“In Europe, simplifying our model and reducing costs remain a priority. Our organizational adaptation plan is now being deployed, right on schedule, with the first benefits expected from the second semester onwards. Meanwhile, adjustments to our product portfolio are beginning to pay off.

“In emerging markets and in North America, our profitable growth drivers are fully operational. In these markets, we are continuing to build our brands and our organizations, while at the same time laying the groundwork for future growth. This is the point of our various initiatives in the first half of 2013: the full integration of Central Laitière in Morocco, our partnerships with COFCO and Mengniu to expand the Fresh Dairy Product category in China, our move into the promising organic baby nutrition segment with the acquisition of Happy Family in the United States, as well as the strategic partnership we’ve just finalized with Starbucks.

“Our teams at Danone are tackling the second half of the year with the same energy, attitude and ambition, focusing on building a Group with strong, sustainable and profitable growth for 2014 and on meeting our 2013 targets.”

Overview of sales performance – Q2 2013
Consolidated sales increased +6.7 percent as reported to total €5,720 million in the second quarter of 2013. Excluding the impact of changes in the basis for comparison, which include exchange rates and scope of consolidation, sales were up +6.5 percent. This organic growth reflects a +4.1 percent increase in sales volume and a +2.4 percent increase due to the price/mix effect.

The -2.6 percent exchange-rate effect reflects unfavorable trends in currencies including the Argentine peso, the Brazilian real and the Indonesian rupee. Changes in the scope of consolidation led to a +3.0 percent rise in sales, primarily reflecting full consolidation of Centrale Laitière (Morocco) starting in March 2013.

Fresh Dairy Products
Fresh Dairy Products division sales were up +2.6 percent like-for-like in the second quarter of 2013,reflecting a +3.6 percent rise in volume and a negative price/mix effect of -1.0 percent.

With sales still declining, Europe benefited from a basis for comparison that started to become easier in the second quarter, and showed early signs of stabilization with market share steady since the beginning of the year.

The CIS and North America area reported an excellent quarter of double-digit growth, with each of these two regions performing better than in the previous quarter. The CIS reported strong volume growth driven by all of its own regional markets, while in the United States Danone continued to win market share in the Greek yogurt segment.

Markets in ALMA remained buoyant, with continued double-digit growth.

The negative price/mix effect results primarily from ongoing investments in pricing and promotions in European markets.

The Waters division maintained a solid growth trend and reported solid rise in sales, up +10.5 percentlike-for-like from Q2 2012, driven by volumes up +7.1 percent.

Vigorous growth in emerging countries, particularly in Asia, continued to drive the division. In Europe, sales remained down slightly, impacted—as in the second quarter of 2012—by adverse weather conditions.

The positive price/mix effect of growth in aquadrinks continued to be the main driver of value growth.

Baby Nutrition
The Baby Nutrition division reported excellent sales again this quarter, with a like-for-like rise of+13.5 percent from Q2 2012.

Momentum again came from strong sales in the Asia-Pacific region, particularly in China and Hong Kong, while Europe continued to benefit from indirect demand for international baby formula brands in some emerging countries. Growth continued in the rest of the world, with very strong trends in Latin America in particular.

As in the past, changes in the division’s product mix made a positive contribution to performance: the growing-up milk segment once again reported double-digit growth and weaning foods lost further ground in Europe.

Medical Nutrition
Medical Nutrition division sales rose +4.7 percent like-for-like in Q2 2013, with a volume rise of +3.6 percent.

The division’s performance is still impacted by overall pressure on healthcare spending.

China, Brazil, Turkey, the United States and the United Kingdom were the main contributors to growth, and the Pediatrics category continued to expand at a robust pace.



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