Danone sees European sales fall by 5.2%

Paris-based group is facing weakening demand for dairy products in Spain and Italy

Bottles of Actimel yoghurt drinks, produced by Danone SA, sit on a shelf in the chilled section of a supermarket in London. Photographer: Chris Ratcliffe/Bloomberg

Bottles of Actimel yoghurt drinks, produced by Danone SA, sit on a shelf in the chilled section of a supermarket in London. Photographer: Chris Ratcliffe/Bloomberg

 

Danone reported first-quarter sales growth that beat analysts' estimates as strong demand for baby food in emerging markets offset weak dairy sales in Europe. So-called like-for-like sales gained 5.6 per cent, the Paris-based maker of Evian bottled-water and Activia yogurt said today in a statement.

Total revenue rose to €5.34 billion, matching analyst estimates. The world's biggest yogurt maker is facing weakening demand for dairy products in Spain and Italy as consumers shift to cheaper private-label alternatives.

Sales in Europe fell 5.2 per cent in the first quarter.

Danone, which gets more than half its sales from dairy products, said in February it will cut about 4 per cent of jobs in Europe as part of a plan to reduce costs by €200 million over two years.

The euro-area jobless rate rose to a record 12 per cent in early 2013, a report showed this month.

"The first quarter of 2013 saw a solid performance that highlighted once again the contrast between robust growth in emerging markets and the sluggish economy in Europe," chief executive Franck Riboud said in the statement.

"The cost reduction and organisational adaptation plan we presented in February is moving ahead on schedule."

Danone reiterated its forecast for like-for-like sales growth of at least 5 percent this year.

The company said it's considering buying back shares for €100 million to €200 million within coming weeks. Sales rose by more than 10 per cent in emerging markets and North America combined in the first quarter while falling 5.1 per cent in Europe, Danone said today.

"While Europe struggles, the 'new' markets continue to grow at a healthy rate but we see pressures building," Alex Molloy and Charlie Mills, analysts at Credit Suisse Group AG, wrote in a report last week.

"Price premiums could come under threat here, too notably in the US - Greek yogurt - and in China - infant formula. Meanwhile, the consumer outlook in the group's largest market, Russia/CIS, looks less than robust to us."

Danone's definition of like-for-like sales growth excludes currency changes and strips out changes in consolidation scope.