Danone Revenue Beats Analysts’ Estimates on Water, Baby Food

Danone Revenue Beats Analysts’ Estimates on Water
Evian bottled water produced by Danone. Photographer: Balint Porneczi/Bloomberg

Danone, the world’s biggest yogurt maker, reported first-quarter revenue growth that beat analysts’ estimates as it sold more bottled water in Indonesia and China and baby food in Asia and the Middle East.

Like-for-like sales, which exclude divestments and currency changes, increased 6.9 percent, the Paris-based company said today in a statement. The average of six analysts’ estimates compiled by Bloomberg was 6.5 percent. Total revenue rose to 5.12 billion euros ($6.7 billion) from 4.76 billion euros a year earlier, surpassing the 5.05 billion-euro average estimate of 11 analysts surveyed by Bloomberg.

“It’s a good start to the year and they’re on track for a solid performance,” said Marco Gulpers, an analyst at ING Bank NV in Amsterdam.

Danone is benefiting from increased consumption of bottled water in emerging markets, which generate about two-thirds of its water sales. The maker of Activia and Actimel yogurts said it expects consumer spending to remain “under pressure” this year in western Europe, with no “significant” improvement or decline in the economic climate compared to the second half of last year.

Danone shares rose as much as 2.8 percent to 53 euros in Paris. The stock traded 2.4 percent higher at 9:15 a.m.

Forecast Stable

Danone reiterated its guidance for 2012, saying like-for-like sales will probably rise 5 percent to 7 percent, while the operating margin is expected to be stable, excluding certain items, after widening 0.2 percentage point last year.

Sales of baby-food products, which include the Bledina brand, increased 9 percent. Revenue from bottled water rose 16 percent with price increases contributing 8.7 percentage points to the growth. The company said in February it aims to offset higher costs partly through higher prices.

Danone’s water business continues to be led by emerging markets, especially Indonesia and China, Chief Financial Officer Pierre-Andre Terisse said on a conference call with journalists.

Danone said raw-material price increases are expected to remain “strong” in the first half and at a “mid-single-digit” level for the year.

Danone and Nestle SA, the world’s biggest food company, have submitted preliminary bids of about $10 billion for Pfizer Inc.’s infant-nutrition unit, according to two people with knowledge of the matter. Pfizer is in the process of exploring options for the unit, which include a sale, spinoff or other transaction.

Emerging Markets

The owner of the Evian and Volvic bottled-water brands gets about half its sales from emerging markets after buying a majority stake in Russia’s OAO Unimilk in 2010. The purchase made it Russia’s biggest dairy producer.

First-quarter revenue from dairy products including Actimel drinking yogurts rose 3.8 percent on a comparable basis, helped by increased demand in Latin America. The business generates more than half of Danone’s revenue. The volume of dairy sales in the Russia region has “stabilized” for the first time in a year, while the company’s Oikos brand is increasing its share of the Greek yogurt segment, according to Danone.

“They’re still talking about an acceleration in fresh dairy in the U.S. and Russia, which will be taken positively by the market,” Gulpers said.

Revenue from medical nutrition products increased 6.4 percent. Demand for products aimed at children and at people with gastrointestinal allergies helped fuel the growth.


Before it's here, it's on the Bloomberg Terminal. LEARN MORE