Danone Delivers Strong Sales Growth in Q4, Expects Challenging 2010

The company's key brands (Activia, Actimel, Danonino and Danacol) continued to grow faster than the average of the division, resulting in continued positive product mix.

11 Feb 2010 --- Danone has reported a sales increase of 5.5% in Q4 and 3.2% in FY 09, with volume growth of 8.9% in Q4 and 5.2% in FY 09, trading operating margin improved 61 bps to 15.31% in FY 09. Underlying fully-diluted EPS increased 10.2% to € 2.57 in FY 09, free cash flow from operations increased 20.6% to € 1,427 mln. Proposal to pay a dividend of € 1.20 per share, full-year targets aligned with MT outlook and stable EBIT margin expected vs 2009.

In a statement Danone said it assumes it will continue to face a challenging financial, economic and social environment in 2010, with continued difficult consumption trends in western economies, weak emerging currencies, and inflation of raw materials.'In this context, we will continue to focus on the development of our categories, the strengthening of our competitive positions and on the development of our brands. The growth of our free cash flow will continue to be one of our key priorities, and we will use productivity gains as well as selective and competitive pricing to manage cost inflation,' the statement said.

Consolidated reported sales decreased by 1.6% to € 14,982 mln in 2009.  Excluding the effects of changes in exchange rates (-3.4%) and in scope of consolidation (-1.4%), total sales increased by +3.2% on a like-for-like basis.  This like-for-like sales growth was driven by a +5.2% rise in volume and a -2.0% decline in price/mix.  The aforementioned effects of changes in exchange rates were mainly driven by the depreciation of the Russian ruble, the Polish zloty, the Mexican peso and the British pound.  The change in the scope of consolidation was predominantly driven by the divestiture of Frucor, a beverage-based business based in Australia and New Zealand, which was sold to Suntory Limited and deconsolidated as of January 2009.

Consolidated reported sales remained stable at € 3,682 mln compared to the fourth quarter of 2008.  Excluding the effects of changes in exchange rates (-4.2%) and in scope of consolidation (-1.3%), total sales increased by +5.5% on a like-for-like basis.  This like-for-like sales growth was driven by a +8.9% rise in volume and a -3.4% decline in value.

Sales of the Fresh Dairy division increased by +4.6% in the fourth quarter of 2009, on a like-for-like basis.  This performance was driven by a significant improvement of volume growth (+9.9%) compared to the negative volume performance of -1.0% in the first quarter of the year.  This strong volume and sales growth acceleration throughout 2009 was driven by the Reset Program that was initiated at the start of the year with the aim to rapidly adapt the product and/or price proposition to the changing behaviour and preferences of consumers.  The Reset Program – which among others has been implemented in France, Spain, the US, Mexico, Russia, Poland and Hungary – is centered around new product introductions, adjustments of existing formats as well as substantial consumer price reductions, coupled with targeted and intensified advertising campaigns.  Next to the significant acceleration in volume growth, this has continued to lead to market share improvements in the majority of the markets in which the reset program has been implemented.  All the intended major “resets” were implemented by the end of the year.  It is therefore expected that the resulting negative price/mix effect has troughed at -5.3% in the fourth quarter.

Among brands, Activia and Danacol continued to deliver strong performance, while Actimel continued to show noticeable improvements.  The company's key brands (Activia, Actimel, Danonino and Danacol) continued to grow faster than the average of the division, resulting in continued positive product mix.  The performance of the core range also continued to improve, lead by successful relaunches in various countries.

Sales in the Waters division increased by +3.8% in the fourth quarter of 2009, on a like-for-like basis.  Underlying volumes continued to be strong at 7.6% which were partly offset by a negative value (mainly country mix) effect of -3.8%.  Volume growth continued to be entirely driven by the emerging markets (52% of the sales of the division) with continued strong performances in Indonesia, Mexico and Argentina.  While the performance of Spain and Japan remained weak, depletion rates in France, the UK, and Germany confirm the underlying performance rebound that started in the third quarter.

The Baby Nutrition division delivered a solid sales growth of 7.0%, on a like-for-like basis, driven by +6.0% volume growth and +1.0% value growth in the fourth quarter of 2009.  The division continued to gain market share in the majority of the markets in which it operates, resulting in an overall market share gain of 1% across the markets in which it has a presence.  The performance of the Baby Nutrition division continues to reflect the relative underlying resilience of the category coupled with a softer performance in the weaning food category.  The baby nutrition operations in Russia continued to operate in a challenging environment but are expected to improve from this quarter onwards.  In China, sales were able to maintain the same level as the same quarter last year, despite the very difficult comparable.

Medical Nutrition continued its strong performance with a sales growth of +13.6%, on a like-for-like basis, which continued to be almost entirely driven by volume growth (+12.1%).  Overall, growth continued to be supported by all regions with particularly strong performance coming from Southern Europe and new geographies.  In addition, all product categories contributed to the growth with continued above-average growth coming from Gastro Intestinal Allergy and Paediatrics.