Danone sees sales growth in face of tough economy

French food group Danone forecast underlying sales growth of up to five percent this year despite deflation in Europe and difficulties in Russia, its top market.

The French company will be helped by a recovery in baby food in Asia after an infant formula recall hit sales and profits, while a recovery in European dairy products should also help. It said on Friday it expected underlying sales to rise by between 4 and 5 percent this year.

Nestle, the world's largest packaged foods maker, has also forecast sales growth of around 5 per cent this year in the face of a tough economic climate.

“Danone assumes that economic conditions will remain difficult and unstable overall, with fragile or even deflationary consumer trends in Europe, emerging markets undermined by volatile currencies, and difficulties specific to a few major markets, particularly CIS,” the company said.

The maker of Activia and Actimel yoghurt, Evian water and Bledina baby food said underlying sales in 2014 grew 4.7 per cent to €21.4 billion, just above estimates of 4.5 per cent growth.

It predicted that its 2015 operating margin would rise slightly, having fallen 60 basis points to 12.59 per cent in 2014, in line with a company-compiled consensus.

Danone, which competes with Nestle and Unilever , has been seeking to rebuild its position in China after an infant formula product recall in Asia in 2013.

Fourth quarter sales at its baby food division rose 28.1 per cent, helped by favourable year-ago comparisons. Sales in Asia were now back to pre-crisis levels, the statement said.

Danone makes 60 per cent of revenue from dairy products, a sector hit by a spike in milk prices in Russia and weak consumer spending in austerity-hit Europe.

Danone’s dairy sales fell 1 percent in the fourth quarter, after growing 0.7 per cent in the previous three months and lagging market expectations of a 1 per cent rise.

By 0845 GMT Danone shares were down 1.8 per cent, underperforming the CAC-40 Index of French blue chip stocks.

“Slightly disappointing” said one Paris-based trader, citing the 2015 outlook and the performance of the dairy division.

Reuters