27 Jul 2012 --- Danone has reported solid +5.9% growth in sales in H1 2012, driven by emerging markets. Solid growth in H1 2012 sales of +7.7% as reported and +5.9% like-for-like. Second quarter results were in line with expectations, marked by a high basis for comparison in 2011 in the Waters division; reported sales up +7.8% and like-for-like sales up +5.0%. Sales were up in all divisions, with variations from one region to the next including a decline in Europe and double-digit growth in the rest of the world.

Chairman’s comment “The consumer environment definitely got tougher in Europe, particularly Southern Europe, in the first half of this year. At Danone, we moved quickly to manage this new situation in line with our strategic priorities: strengthening our brands and pursuing sustainable, profitable growth. Our first-half organic growth in sales stands at nearly 6%, in line with our full-year objectives. In the United States and Russia, our Oikos and Prostokvashino brands are continuing to expand rapidly. In emerging markets, we are continuing to grow at a very brisk pace and are expanding our presence, as we did recently in Morocco and India. Finally, everywhere we operate we are innovating to offer consumers new experiences, adapted to their expectations; examples include Yolado in Spain and the renovation of Dumex in China. These initiatives and results testify to the commitment and determination of our Group and our teams. And they allow me to move into the second half with confidence.”

Danone’s H1 2012 trading operating margin is down -61 bps like-for-like at 13.85%. This decrease mainly reflects raw material costs that are still high compared with the first half of 2011, which benefited from hedging, particularly for packaging and powdered milk. Moreover, the cost of some raw materials including whey, milk proteins, fruit and sugar continued to outpace our projections. Ongoing initiatives to optimize costs generated savings of a significant €246 million in the first half, partially offsetting the rise in raw materials.

Moreover, the decline in sales in Southern Europe, plus the additional resources deployed to support consumption in this region, cut profitability significantly, and higher margins outside Europe, where investment programs were maintained, did not entirely offset the decline. Advertising expenses held steady in the first half of 2012 to keep Group brands’ profile high. Expenditure on digital marketing continues to grow apace. The Group also continued to invest heavily in other growth drivers, in particular in its sales force and R&D costs, which increased over 10%.