French food group Danone kept its forecasts for a further rise in sales and profits this year, although weaker demand for infant formula products in China and a consumer boycott in Morocco weighed on first-quarter sales.
Danone, the world’s largest yoghurt-maker, reported that first-quarter underlying sales had risen by a relatively modest 0.8%, to €6.138 billion, marking a slowdown from 2.4% growth in the fourth quarter of 2018.
The company, nevertheless, expected sales growth to accelerate in the second half of the year.
Business Momentum
“The first quarter showed a start of the year in line with expectations. We are pleased with the momentum of the business, which will become increasingly visible from the second quarter. This gives us every confidence that we will meet our full-year guidance,” CEO Emmanuel Faber said in a statement.
Danone reiterated that it was targeting group like-for-like sales growth of around 3%, and an operating margin above 15%, for 2019.
Danone added that it was on track to deliver on its 2020 goals for an operating margin above 16% of its sales and like-for-like sales growth of 4-5%.
Danone’s waters division and its dairy business put in solid performances over the quarter, but sales of its Early Life Nutrition products in China fell by around 15% in the quarter, partly due to a lower birth rate in China.
This compared with a 10% decline in fourth-quarter 2018 and a 20% decline in the third quarter, in that division.
Chinese Opportunity
China is an important source of growth for Danone, contributing about 30% of sales of the Early Life Nutrition business, which makes infant formula and general baby food products.
Danone reported that it still expected the business in China to return to growth in the second half of 2019.
Danone also reported that its sale of Earthbound Farm, announced last week, will improve its recurring operating margins in 2019. [Pic:©Moovstock/123RF.COM]
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.
