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Danone profit bulks up on baby food growth

July 28, 2017
Consumer Packaged Goods

PARIS–France’s Danone SA BN on Thursday reported a rise in profit for the first half, as strong revenue growth in baby food and medical nutrition offset weakness in its core dairy activities, which include the U.S. WhiteWave business it bought last year.

The maker of Actimel and Activia said net profit for the six months ended June 30 grew to 977 million euros ($1.15 billion) from EUR880 million. Operating profit on a recurring basis–a closely watched indicator that excludes the impact of acquisitions and foreign exchange fluctuations–was EUR1.72 billion for the period. That was 16% higher than a year earlier and above market expectations of EUR1.65 billion.

Revenue for the first half rose 9.7% to EUR12.13 billion as the company received a bump from consolidating the operations of WhiteWave, the U.S. organic foods producer that it acquired for $10.4 billion earlier this year. On a like-for-like basis, revenue growth was only 0.4%.

In recent years, Chief Executive Emmanuel Faber has faced a slowdown in emerging markets and changing preferences in developed countries, where consumers are increasingly turning toward healthy and organic niche products rather than mainstream ones. In response, Mr. Faber has spent heavily to boost its upmarket product line as he attempts to return the company to “strong, profitable and sustainable growth,” by 2020.

“As expected, the slow start of the year is the result of specific emerging markets’ headwinds and challenges in Europe and in North America,” Mr. Faber said.

The group said like-for-like sales fell 2% in international dairy in the first half and declined 2.9% in North America. Baby and medical nutrition sales rose 5.4% to EUR3.45 billion.

Recurring operating margins during the first six months of 2017 reached 14.2%, an improvement of 0.91 percentage points like-for-like, Danone said.

Danone maintained its guidance for recurring earnings per share to rise at a double-digit pace at constant exchange rates this year. That guidance is based on “moderate” like-for-like sales growth and a “sustained improvement” in operating margin.

Source: MarketWatch

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