Danone is becoming more pessimistic about sales - Third quarter below expectations

21-Oct-2019 - France

The French food group Danone is more pessimistic about the current financial year. Although growth picked up in the third quarter, the company is still lagging further behind its annual planning after the first nine months. Management is now forecasting comparable sales growth of 2.5 to 3 percent for 2019, as Danone announced in Paris on Friday. Previously, the Group had assumed a share of around 3 percent. The adjusted operating margin is expected to remain above 15 percent thanks to savings. Danone expects the cost of raw materials and packaging to continue rising. In pre-IPO trading, the share fell by more than 4.5 percent.

In the third quarter, growth accelerated compared to the previous quarters. On a comparable basis, sales increased by 3 percent to 6.4 billion euros. Danone excludes purchases and sales, currency fluctuations and possible accounting changes. However, growth fell short of analysts' expectations, who had forecast an average increase of 3.8 percent. Nominal sales rose by 3.7 percent. After nine months, comparable growth of 2.1 percent was recorded.

In the third quarter, growth in business with fresh dairy products was subdued and only slightly higher. The US yoghurt business was particularly disappointing. Another weak point was the water business, especially in Europe, where demand was depressed by a colder August. Analysts had anticipated weaker business here, but not a decline in the division's sales, which amounted to 0.9 percent on a comparable basis. On the other hand, business with special foods developed positively, increasing by almost 10 per cent. The growth driver was the baby food segment, particularly in China, where sales increased by more than 20 percent./nas/eas/fba (dpa)

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