Danone Raises Sales Goal for the First Time in Four Years

  • New CEO Emmanuel Faber presents strategy for 2016-2020
  • Profitability of main dairy unit set to improve, co. says

Danone gave a higher sales goal for the first time in four years as it pledged to boost profitability at its fresh-dairy business, which represents more than half of the French company’s revenue.

The company said sales growth should exceed 5 percent by 2020 on a like-for-like basis. Emmanuel Faber, who became chief executive officer a year ago, is unveiling his strategy in a three-day seminar that ends Wednesday in Evian, France.

The fresh-dairy unit, which makes Activia yogurt and Actimel fermented drinks, has been weighed down by years of rising milk prices and a consumer slump in western Europe as buyers opted for cheaper private labels. The world’s biggest yogurt maker also has struggled to turn around its baby-food business in China and this year agreed to sell its Dumex brand in that market to a partner. 

“We like the increased visibility,” Alain Oberhuber, an analyst at MainFirst Bank AG, wrote in a note to investors. “There may be earnings surprises by the end of 2016 as several European markets are starting to improve fresh-dairy profitability.”

The yogurt maker maintained its 2015 forecast for 4 percent to 5 percent sales growth. That outlook has come down since 2011, when Danone was forecasting expansion of 6 percent to 8 percent. The stock traded 1.1 percent lower at 63.95 euros as of 11:37 a.m. in Paris Wednesday, after gaining 2.3 percent Tuesday.

Widen Margin

The fresh-dairy unit aims to widen its profit margin more than 2 percentage points on a currency-neutral basis by 2020 as its sales will rise 3 percent to 5 percent, Danone said in a slide presentation. The company expects its water and infant-formula units to reach sales growth of 7 percent to 10 percent, while the medical-nutrition business aims for growth of 6 percent to 8 percent.

Like-for-like sales are adjusted for acquisitions, divestments and currency shifts.

(A previous version of this story corrected the timeframe of the company’s sales goal.)

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