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Danone sales growth slows; plans €1 bln cost cuts

February 15, 2017
Consumer Packaged Goods

Danone SA unveiled a 1 billion euro ($1.06 billion) cost-cutting plan as the world’s largest yogurt maker said the turnaround of its fresh dairy unit is taking longer than expected and it continued to be pressured by its business in China.

On Wednesday, Danone said its like-for-like sales, a measure closely watched by analysts, rose 2.9% in 2016, a slowdown on the 4.4% growth it posted the previous year.

The company blamed the slowdown on problems in Europe, including the relaunch in Europe of its Activia yogurt product and weak sales in Spain. New regulation in China also weighed on baby food sales there.

Danone said it would continue to focus on improving margins in 2017 but didn’t provide a sales or profitability target for the year, adding that it would review its financial targets after it completes its $10.4 billion acquisition of U.S. organic-foods producer WhiteWave Foods Co., which it expects to happen in the first quarter.

The French food group said its 2016 net profit rose 34% to EUR1.72 billion, reflecting tight cost-control. Full-year sales fell to EUR21.94 billion, down 0.2% from EUR22.41 billion in 2015.

Sales for the most recent quarter ended Dec. 31 fell to EUR5.36 billion from EUR5.38 billion, pressured by unfavorable exchange rates.

The company increased its dividend to EUR1.70 a share, a rise of 6.3% on the previous year.

By Nick Kostov

Source: MarketWatch

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