Danone Revenue Beats Estimates on European Yogurt Improvement

October 19, 2015 06:22 AM
 
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Danone, the world’s biggest yogurt maker, reported third-quarter sales that beat analysts’ estimates and predicted the ailing European fresh-dairy business will continue to improve next year.

Revenue gained 4.6 percent on a like-for-like basis, the Paris-based company said in a statement on Monday. Analysts had expected growth of 4.3 percent, according to the median of 17 estimates.

Danone’s fresh-dairy unit, its biggest business, compensated for the seventh consecutive decline in shipments by raising prices. The maker of Activia yogurt is in the middle of an attempt to turn around its fresh-dairy business, which has been weighed down by years of rising milk prices and weak consumer demand in Europe. Lower milk costs are making yogurt production more profitable, and that may continue through 2016, according to Bloomberg Intelligence analysts Diana Gomes and Deborah Aitken.   “Danone is working hard to turn around its dairy business –- and while a slow process –- you can see a recovery,” said Jon Cox, an analyst at Kepler Cheuvreux in Zurich.

The stock rose 2.1 percent to 59.48 euros as of 11:31 a.m. in Paris trading, after earlier jumping as much as 2.9 percent. Total sales reached 5.64 billion euros ($6.4 billion) in the quarter.

Stabilizing Sales

Fresh-dairy sales rose 0.6 percent, the second gain in four quarters, while shipments declined 3.3 percent. Volume is improving in Europe, where the company expects to “stabilize” sales sometime in 2016, Chief Financial Officer Cecile Cabanis said.

 

Fresh-dairy shipments in the former Soviet states and in Brazil have been declining, she also said.

Infant nutrition sales rose 11 percent, beating analyst estimates for a 7.5 percent gain. Like Swiss rival Nestle SA, Danone has increasingly been selling baby formula to consumers in China via the Internet as they spurn locally produced brands. That boost will weaken as year-on-year comparisons become harder, Danone said. Cabanis forecast “flat to slightly positive” sales growth for the unit in the fourth quarter on a conference call.

Bottled water sales rose 6.8 percent, Danone said. The Chinese non-alcoholic beverage market is slowing and the French company said it’s preparing for lower growth of its flavored Mizone brand in that market.

The yogurt maker reiterated its forecast for a 2015 like- for-like revenue increase of 4 percent to 5 percent, combined with slight improvement in the operating margin. Last week, competitor Nestle lowered its sales outlook for 2015 amid weak demand in China, while Unilever said its full year-sales growth will be near the top end of its forecast.

 

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