Danone reports 4% sales growth in first-half results despite Moroccan boycott

FRANCE – Danone, a French multinational food-products corporation, has reported 4% increase in sales growth in its first-half year results despite Morocco being excluded.

According to the company, the double-digit recurring EPS growth at constant exchange rate was up by 13.4% excluding Yakult transaction impact, with 4% increase in H1, 3.3% in Q2 on a like-for-like basis.

The company added that it reported entities growing and positive company volumes, excluding Morocco.

It added that improved recurring operating margin was at 14.27%, up 51bps on a like-for-like basis.

In the second quarter 2018, consolidated sales stood at US$7.45 billion, up 3.3% on a “like-for-like New Danone” basis.

The sales growth included a 3.8% rise in value, largely offsetting a 0.5% decline in volume.

Excluding the impact of the recent consumer boycott in Morocco, sales were up 4.3% and volumes rose 1.3%, demonstrating improving volume trends.

Essential Dairy & Plant-Based (EDP) International sales decreased in the second quarter by 2.4% on a “like-for-like New Danone” basis, including 8.0% decline in volumes and a 5.6% rise in value.

In Morocco, sales were down around 40% in the second quarter due to an on-going consumer boycott.

To regain consumer trust, Danone announced its commitment to bring changes to its economic model for fresh milk, including selling at cost.

Sales trends in Europe remained slightly negative, in line with the first quarter, with solid growth in some countries (UK, Nordics, Eastern Europe) while France and Spain remain challenging.

Activia and Danone brands pursued sequential stabilization and local brands (in particular Light & Free, Les 2 Vaches, Fantasia) kept growing strongly.

Alpro sales continued to grow at around 10%, driven by accelerated innovations, while first revenue synergies started in France and Spain, where Alpro is now the second largest player among plant-based alternatives to yogurt.

In the CIS region, sales continued to grow strongly reflecting successful valorization strategy.

In Russia, Danone continues to benefit from improving product mix and innovation in global brands (Activia, Danone) and local brands (Prostokvashino, Danissimo) with both segments contributing to strong growth.

Latin America registered strong growth in Mexico and Argentina. Sales continued to decline in Brazil, where the truckers’ strike exacerbated already difficult market conditions.

Waters continued to deliver consistent broad-based growth, with continuing momentum in all regions and categories.

Sales were up 4.8% on a “like-for-like New Danone” basis, including a 2.8% growth in volume and a 2.0% rise in value.

Europe posted solid growth, due to continued product innovations and weather-related demand in Northern Europe, although rail disruption in France impacted evian sales.

“In the first half of the year, Danone delivered another semester of strong results, combining sales growth momentum, strong margin improvement, and improved free cash flow.

This performance, achieved despite ongoing volatility and unexpected headwinds in some markets, reflects the underlying strengths of our business and our continued financial discipline.

The performance was underpinned by notable progress in rebalancing the growth profile of our portfolio and widening sources of growth, while delivering initial savings from our €1bn efficiency program Protein,” said Emmanuel Faber, Chairman and Chief Executive Officer.

Asia reported strong sales momentum across the region, driven by Indonesia, Turkey and a solid performance of Mizone in China, building on innovations and marketing activation.

North America posted another very good quarter, with high single-digit growth. In Latin America, growth remained soft, adversely impacted by weather conditions in Mexico.

“Excluding the exceptional situation in Morocco, all reporting entities delivered growth in the second quarter.

Demand remained strong for Specialized Nutrition in China, Waters achieved broad-based growth and Essential Dairy and Plant-Based returned to growth, reflecting benefits from the WhiteWave acquisition and organic improvements in fresh dairy in key regions.

This leads me to confirm our guidance for the year. Looking to the longer term, we have this summer started to work on the Danone 2030 Goals that were unveiled at our last annual shareholder meeting.

These goals reinforce the importance of our « One Planet. One Health » vision which has become a unique way to create and share sustainable value for all.”

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