French food group Danone has raised its 2022 revenue growth forecast after its third-quarter sales beat analysts' estimates as the firm was able to raise prices to counter soaring costs.
The consumer goods giant and owner of Evian and Badoit water and Activia yoghurt said it now expected like-for-like sales growth to reach 7-8% this year compared with the already raised forecast of 5-6% it gave in July.
It said it expects a recurring operating margin above 12%, down from 13.7% last year.
Third-Quarter Performance
Danone posted a 9.5% rise in third-quarter like-for-like sales to €7.3 billion ($7.35 billion), beating analysts' expectations for a 6.9% rise in a poll compiled by the company.
This also marked a sequential acceleration from 7.7% sales growth achieved in the second quarter and reflected strength in all the group's businesses, notably in baby food in China and in bottled waters.
CEO Antoine de Saint-Affrique, who took over in September 2021, must conduct a revival plan amid mounting input costs, coupled with further uncertainties caused by Russia's invasion of Ukraine, which led the group to unveil plans to shed control of its dairy food business in Russia.
Price increases contributed 10.9% to third-quarter revenue growth.
Finance chief Juergen Esser reiterated that cost inflation was expected to be in the "mid-teens" this year but said it was hard to make predictions for 2023.
While Danone was conscious that consumer wallets are tightening, Esser said, "If we need to do more on prices, we will do it in a responsible manner even if it costs us a little bit of volume".
Other Highlights
In the third quarter, the closely-watched Essential Dairy and Plant-based (EDP) business in Europe registered 2.2% sales growth with a contrasted performance by geography.
Sales and volumes were impacted by portfolio choices, namely the pruning of underperforming brands, and temporary delivery suspensions in some countries such as Germany and Belgium due to lengthy price negotiations with retailers, Esser said.
Other countries like France, benefited from the good momentum of key brands like Actimel, Danone, Yopro and Danette.
One positive was the Mizone water business in China which returned to growth in the quarter despite challenging operating conditions.
Rival Unilever Plc also raised its full-year sales forecast as it lifted prices to counter costs.
News by Reuters, edited by ESM. For more A-Brands news, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.
