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First half of fiscal 2014 was eventful to say the least, with new products, consolidations, closures and pricey raw materials.
July 27, 2014
3 Min Read
H1 2014 was penalized by high bases for year-on-year comparisons linked to Fonterra's false safety alert, record inflation in milk prices, and weak currency trends in emerging markets:
Sales up +2.2 percent like-for-like and down -5.3 percent as reported
Trading operating margin at 11.27 percent, down -159 basis points like-for-like
Underlying fully diluted earnings per shareat €1.16, down -11.1 percent like-for-like and down -21.5 percent as reported
Free cash-flow excluding exceptional items at €286 million
Performance is in line with the Group roadmap and confirms that Danone’s business is solid: sales have stabilized in Europe, where the Group continues to adapt its business portfolio and structures; emerging markets continue to report strong growth; and Early Life Nutrition sales in China are moving ahead.
2014 targets confirmed: sales growth of between +4.5 percent and +5.5 percent, trading operating margin stable within a range of -20 bps and +20 bps, free cash-flow of around €1.5 billion excluding exceptional items
Chairman’s comment
“The first half of the year was particularly eventful, and had all of our teams 100 percent mobilized. First, 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. And these efforts paid off. We also continued to roll out products with high added-value in all our regional markets and continued to build our strategic business platforms, finalizing our partnership with Mengniu and continuing to grow in Africa, most recently through our tie-up with Brookside. As a result, the first half of 2014 saw a host of achievements, and Danone’s results at the end of June are right where we expected—at a necessary transition point on our way to meeting our targets for the year.
“We operate in a global environment that is still subject to risks and upheavals, and it presents us with challenges every day. But it holds an equal number of hidden opportunities. This is the mindset that has guided us so far, and it will continue to inspire us. Our agenda for the second half of the year is exactly the same: we will stay focused on reaching our 2014 targets and continue to build strong, profitable, sustainable growth.”
Overview of sales performance H1 2014
Consolidated sales fell back -5.3 percent in the first half of 2014 to €10,467 million. Excluding the impact of changes in the basis for comparison, which include exchange rates and scope of consolidation, sales were up +2.2 percent. This organic growth reflects a -3.0 percent decline in sales volume and a +5.2 percent increase due to the price/mix effect.
The -8.3 percent exchange-rate effect reflects unfavorable trends in currencies including the Argentine peso, the Russian ruble and the Indonesian rupiah. The +0.8 percent impact of the change in scope of consolidation results in large part from full consolidation of Centrale Laitière (Morocco) starting in March 2013.
Overview of sales performance Q2 2014
Consolidated sales declined -5.5 percent to total €5,406 million in the second quarter of 2014. Excluding the impact of changes in the basis for comparison, which include exchange rates and scope of consolidation, sales were up +2.3 percent. This organic growth reflects a -3.9 percent decrease in sales volume and a +6.2 percent rise in value.
The -7.8 percent exchange-rate effect reflects unfavorable trends in currencies including the Argentine peso, the Russian ruble and the Indonesian rupiah.
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