Danone shares tumble as profit suffers from low Spain revenue

City A.M. Reporter
SHARES in French food group Danone fell yesterday after it warned of a hit to profits as Spanish consumers switched to cheaper yoghurts and milk prices rose, causing growth at the Actimel maker to stall.

The world’s largest yoghurt maker said demand had fallen sharply in Spain and southern Europe as the Eurozone debt crisis deepened, and it is moving to cut prices to boost consumption in the Iberian nation where nearly one in four are unemployed.

Finance chief Pierre-Andre Terisse warned the continuing pain in Spain will cut the group’s 2012 operating profit margin by 0.5 points to 14.2 per cent after a previous stable forecast, and slow its underlying sales growth in the second quarter to around five per cent from the first quarter’s 6.9 per cent.

He added that Danone’s Spanish dairy sales had fallen since April-May, hit by rising unemployment and higher taxes in what is one of Danone’s top worldwide markets, accounting for seven per cent of sales and 12 per cent of profits.

“Consumers are looking for cheaper products,” Terisse said, adding Danone would respond with price cuts.

Shares in Danone fell as much as seven per cent before closing 3.13 per cent lower at €48.70.