Danone sales slow as Russia, China bite

First quarter dented by price increases while firm tries to rebuild position after recall

PUBLISHED : Thursday, 17 April, 2014, 1:09am
UPDATED : Thursday, 17 April, 2014, 1:09am

Danone saw underlying group sales growth slow in the first quarter. Price increases in Russia dented sales volume, while in the core dairy division, sales of high-margin baby food fell, albeit less sharply than feared.

The world's largest yogurt maker, with brands including Actimel and Activia, is aiming to rebuild its position in China after an infant formula product recall in Asia last year.

Chief financial officer Pierre-Andre Terisse said actions to boost sales in China, such as the launch of new Dumex infant formula brands, were "going in the right direction" but he declined to provide more details.

Danone kept its full-year sales and profitability goals, saying it was targeting a return to "strong, sustainable, profitable growth" from the second half.

Like-for-like group sales adjusted for currency effects and acquisitions grew 2.2 per cent year on year in the quarter, a slowdown from the 2.9 per cent growth in the fourth quarter of last year, Danone said yesterday.

Total sales, which include the effects of foreign exchange fluctuations, reached US$7 billion. Excluding currency effects the decline was 5.2 per cent.

China contributes 6 per cent of group sales but the maker of Bledina baby food, Evian and Volvic water and Activia and Actimel yogurt faced a variety of problems there last year.

In August it had to recall infant formula products due to a health scare that began with concerns raised by New Zealand-based supplier Fonterra. A bacteria found by Fonterra turned out to be less harmful than feared. Danone is now suing the company for unspecified compensation.

Danone said baby food sales fell 7.7 per cent in the first quarter, an acceleration from a 6.9 per cent decline in the fourth quarter of last year. This, however, compared with a 9 per cent decline in a company-compiled consensus of analysts.

Elsewhere, dairy, which makes the bulk of Danone sales, posted year-on-year sales growth of 3.9 per cent against 4.9 per cent in the fourth quarter.

This reflected a 3.7 per cent fall in dairy volumes and a 7.6 per cent rise in prices. The volume decline came from price increases that started in the second-half of last year in response to higher milk prices, notably in Russia.