Danone’s sales in China offset a weaker Europe

FRENCH food group Danone yesterday reported first-quarter sales up 5.6 per cent, surpassing analysts’ forecasted 4.2 per cent increase, despite weaker European dairy sales.

The group announced first-quarter sales of €5.34bn (£4.58bn), which it said were due to high demand for baby food in Asia that offset its weaker dairy division.

Like-for-like sales came in at 5.6 per cent, ahead of consensus forecasts of 4.2 per cent growth.

The group’s baby-food division, which accounts for 22 per cent of revenues, saw sales growth of 17.1 per cent during the first quarter.

Safety concerns over baby-food products in China have led consumers to turn to international brands such as Aptamil and Cow & Gate.

On the strong Chinese sales of the baby-food division Danone chief financial officer Pierre-Andre Terisse said: “Demand is strong. We have to address that demand and we need to build a portfolio as strong as possible.”

Danone’s dairy sales in Europe declined 5.1 per cent and the company cautioned that these sales are expected to remain weak. Danone has said it will cut around 900 jobs in response to the downturn in the southern European market.

The firm is launching new products in the second half of the year, and hopes to see the benefits of price cuts in countries such as Spain before the end of the year.

“As we expected, the first quarter of 2013 saw a solid performance that highlighted once again the contrast between robust growth in emerging markets and the sluggish economy in Europe,” said chairman and chief executive Franck Riboud in a statement.

“In Europe consumer spending is still lacklustre, especially in fresh dairy products,” he added.

The firm said it expects to meet its targets for the full year.

Investec analyst Martin Deboo advised that Danone’s current Chinese growth, on the back of consumer uncertainty in baby-food, would continue as regulators spend time trying to tackle the problem.

Danone, whose global brands also include Bledina baby food and Evian and Volvic waters, kicked off the reporting season for European food manufacturers, ahead of Nestle reporting tomorrow and Unilever on 25 April.

In Paris, shares in Danone were up 2.24 per cent today, closing at €55.68. The stock has climbed since sinking below €32 in the aftermath of the financial crisis in 2009.