Danone Maintains Goals as Q1 Sales Beat Expectations

The Fresh Dairy Products division sales increased by +3.8% on a like-for-like basis in the first quarter of 2012, reflecting volume steady at -0.1% and a +3.9% rise in sales value. Growth in sales value continues to benefit from the impact of competitive price increases applied in most countries in the first half of 2011.

17 April 2012 --- Danone has reported a strong start to the year with organic growth of +6.9% in the first quarter. The full-year targets for 2012 have been confirmed. Consolidated sales rose +7.6% to €5,117 million in the first quarter of 2012. Excluding the impact of changes in the basis for comparison, which include changes in exchange rates and scope of consolidation, total sales were up +6.9%. This organic growth reflects a +2.2% increase in sales volume and a +4.7% increase in sales value. The +1.1% exchange-rate effect reflects favorable trends in certain currencies including the Chinese yuan and the US dollar.

Chairman Franck Riboud comment: “2012 got off to a strong start at Danone, with our solid 6.9% increase in net sales reflecting an allout focus on Group priorities. We are continuing to actively build our operations in the countries driving our growth. Momentum in Asia and Latin America remains strong, while in Russia and the United States our action plans already show the first clear signs of paying off, confirming a return to growth. In Europe, where consumer demand remains sluggish, particularly in the south, we’ve focused on supporting our brands and our product categories. The pace achieved by our growth drivers, the strength of our brands, and the drive and commitment of Danone teams around the globe make me confident and enable us to confirm our full-year 2012 targets.”

The Fresh Dairy Products division sales increased by +3.8% on a like-for-like basis in the first quarter of 2012, reflecting volume steady at -0.1% and a +3.9% rise in sales value. Growth in sales value continues to benefit from the impact of competitive price increases applied in most countries in the first half of 2011.

Markets in Latin America and the Africa/Middle-East region remained extremely vigorous, with continued double-digit growth, while Europe fell back slightly during the quarter due to deteriorated conditions in southern countries. In the CIS region and the United States, action plans are beginning to pay off, with sales up in both volume and value this quarter. Sales volume in the CIS region has now stabilized for the first time in four quarters, while the impact of price hikes introduced in late 2010 and early 2011 has begun to taper off. After focusing on improving profitability, integrating its teams and segmenting its product portfolio in 2011, Danone-Unimilk put the first quarter of 2012 to use by activating key brands. The Prostokvashino brand is the region’s top growth driver. In the United States, the Oikos brand continued to gain market share in the booming Greek yogurt market, consolidating Danone’s leading position in the Fresh Dairy Products category as a whole.

The Waters division turned in another very strong showing, with sales up +16.4% on a like-for-like basis, reflecting a good balance between +7.7% volume growth and an +8.7% price/mix effect. Rising sales volumes were underpinned by sound underlying trends: momentum in emerging markets, and performances in mature markets that remain sound despite a difficult basis for comparison in Japan for the entire first half of 2011. Strong growth in value continues to reflect the effect of price increases introduced since the second quarter of 2011, mainly in emerging markets, as well as the mix effect linked to aquadrinks.

The Baby Nutrition division maintained momentum with first-quarter sales up +9.0% like for like despite the unfavorable date of the Chinese New Year compared with 2011. Growth reflected a +3.8% rise in volume and a +5.2% increase in value. Sales of growing-up milks continued to show double-digit growth, while weaning food declined. The steep rise in value was driven by a balanced combination of a favorable mix, in terms of both products and geographical markets, and the impact of price increases introduced over the past twelve months. All regions reported gains, with Asia, the Middle East, Turkey and the United Kingdom remaining the prime drivers for division growth.

Medical Nutrition reported +6.4% like-for-like rise in sales in the first quarter of 2012, driven by higher volumes (+7.1%). As in Q4 2011, main contributors to growth were China, Brazil, Turkey, the United Kingdom and the Netherlands. However early 2012 was affected by difficult market conditions in Southern Europe and by distributors running down their inventories in North America.

Backed by sustained growth in 2011, Danone is moving into 2012 with confidence. For 2012, the Group expects no significant improvement or decline in the macro-economic environment from the second half of 2011:
•?consumer spending to remain under pressure in Western Europe,
•?raw material prices to hold at levels similar to those observed at the end of 2011, implying inflation in our raw material costs remaining strong in the first half and at mid-single digit for the full-year.

Against this backdrop, the Group’s priorities will remain the same: developing its product categories, pursuing investment in countries with high growth potential, particularly those that Danone calls “MICRUB”, and supporting operations and brands in Western Europe. Drawing on its experience of 2010 and 2011, Danone will continue to manage increases and volatility in raw material costs by focusing on sustained productivity and using selective pricing to maintain its competitive edge.

Altogether, the Group’s targets for 2012 are:
• +5% to 7% increase in net sales on a like-for-like basis
• stable full-year trading operating margin like for like
• a continued rise in free cash flow, reaching €2 billion