Danone First-Quarter Sales Beat Estimates on Dairy Rebound

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Danone, the world’s biggest yogurt maker, kicked off the first-quarter reporting season for European food companies by reporting sales that exceeded analyst estimates, boosted by signs of a recovery in its core dairy business.

Revenue rose 4.8 percent from a year earlier on a like-for-like basis, Paris-based Danone said Wednesday in a statement. That beat the 4.6 percent median analyst estimate in a Bloomberg survey. Volume declined 0.2 percent, the fifth consecutive quarterly drop. Analysts had predicted no change.

Emmanuel Faber, Danone’s chief executive officer since October, has forecast profitable growth this year as Europe emerges from an economic slump. The maker of Activia yogurt has yet to turn around its fresh-dairy business, which has been weighed down by years of rising milk prices and weak consumer demand in Europe.

“Trends seemed to stabilize in dairy and the underlying trend points to a modest recovery,” said Patrik Lang, head of equity research at Julius Baer Group Ltd. in Zurich.

Fresh-Dairy Recovery

Danone fell 0.4 percent to 64.55 euros at 9:29 a.m. in Paris, trimming its gain this year to 18 percent.

Sales at the fresh-dairy unit, which accounts for more than half of total revenue, rose 0.2 percent on a like-for-like basis, reversing a 1 percent decline in the fourth quarter. The median analyst estimate was for no change. Sales in Europe fell around 4 percent, Danone said, with a decline in volume partly offset by higher prices. Russian sales were “solid,” it said.

“Fresh Dairy continued to be a drag, but first-quarter performance avoided a second quarter of negative growth,” Andrew Wood, an analyst at Sanford C. Bernstein, said in a note.

Fresh-dairy sales grew 1.5 percent last year, and Faber said in March that the Actimel fermented-milk drink and Activia yogurt brands grew in the fourth quarter.

Total quarterly sales amounted to 5.47 billion euros ($5.81 billion), exceeding the 5.4 billion-euro median analyst estimate.

Sales of infant formula and baby food jumped 12 percent, matching analysts’ predictions. The division has rebounded as China promotes e-commerce, driving sales of infant formula made in Europe as consumers in that market rely on foreign-made products after a series of safety scares.

Danone reiterated a forecast for a 2015 revenue increase of 4 percent to 5 percent on a like-for-like basis, combined with “slight growth” in the operating margin. Like-for-like sales exclude the impact of acquisitions, disposals and currency fluctuations.

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