Danone Reports 7% Sales Growth in Q1, Withdraws Article 13.5 Applications

The Fresh Dairy division has decided to withdraw two applications (one application for Activia and one for Actimel that were filed under article 13.5) that were expected to receive an opinion from the EFSA in the coming weeks.

16 Apr 2010 --- Danone has reported a strong start to the year with 7% sales growth in first quarter 2010 and confirmed full-year targets for 2010. ?Total sales increased by 7.0%, driven by all divisions and all regions, with total volume growth of 10.8%. Dairy sales increased 7.6% driven by 12.5% volume growth, while waters sales increased for the third consecutive quarter, by 2.3%. Baby and Medical Nutrition continued strong growth track at 8.5% and 9.3%.

Commenting on the results in the first quarter of 2010, Franck Riboud, Chairman and CEO of Danone said: “With a 10.8% growth of our volumes and 7% growth of our sales, our strong start in 2010 shows the result of the numerous initiatives we have undertaken in 2009: reset plans in our Dairy division, defense of the category in Waters, strong focus of our efforts in Baby Food, innovation in Medical Nutrition. While emerging countries are boosting our sales growth, all our geographies are progressing, with notably strong performances of our Dairy operations in the US and Russia.  Our performance in the first quarter, coupled with our leading market positions and brands, allow us to confirm our targets for 2010.”

Consolidated reported sales increased by 8.3% to € 3,978 million in the first quarter of 2010.  Excluding the effects of changes in exchange rates (+2.1%) and in scope of consolidation (-0.8%), total sales increased by 7.0% on a like-for-like basis.  This like-for-like sales growth was driven by a 10.8% rise in volume and a -3.8% decrease in price/mix.  The aforementioned effects of changes in exchange rates were mainly driven by the favorable development of among others the Indonesian rupee, the Brazilian real and the Polish zloty, which was partly offset by the US dollar, Chinese yuan and Argentinian peso.  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 the end of January 2009.

Sales in the Fresh Dairy division increased by 7.6% on a like-for-like basis, driven by the successful implementation of the Reset Program in the course of 2009 and somewhat helped by the timing of Easter.  This quarter’s organic growth consisted of 12.5% volume growth and -4.9% price/mix growth.  More than 95% of the sales in the division witnessed positive volume growth in the quarter.  As anticipated, price/mix growth was 40 bps less negative than the trough level of Q4 2009.  Next to the significant acceleration in volume growth, the division continued to gain market share (both in volume and in value terms) in the majority of countries in which it operates.

All regions delivered double-digit sales growth, except for Western Europe where sales were stable compared to the first quarter of 2009.  In Western Europe, virtually all countries delivered positive volume growth, with particular encouraging sales performance in France and the UK. 

Danone said that considering the lack of clarity and visibility regarding the application of the European Regulation on health and nutrition claims and the recent announcement of a new meeting (1st of June) organized by the European Food Safety Authority (EFSA) to clarify the criteria and rules of assessment, the Fresh Dairy division has decided to withdraw two applications (one application for Activia and one for Actimel that were filed under article 13.5) that were expected to receive an opinion from the EFSA in the coming weeks.  Danone hopes that the coming period will bring the necessary clarification and stabilization regarding the approval process that all stakeholders are waiting for. Simultaneously, marketing communication continues to be adapted in the European countries.

The rest of Europe generated strong growth across the board, with particularly strong performance in Russia, Poland and Germany.  In the rest of the world, sales growth continued to gain momentum, with outstanding sales performance in the US and continued strong performances in Brazil and Japan.

Among brands, Activia and Danacol continued to deliver strong performances, while Actimel continued to show improvements.  The performance of the core range was very strong as a result of the successful relaunches in various countries.

Waters
The performance of the Waters division in the first quarter of 2010 confirmed improvements observed in the second half of 2009.  Sales increased 2.3%, on a like-for-like basis, based on strong volume growth of 8.5% which was offset by a negative value effect of -6.2%. Volume growth continued to be driven by the emerging markets (55% of the divisional sales) which continued to deliver strong volume and sales growth, despite poor weather conditions in Mexico in January and February.  The environment continued to remain very challenging in Japan and to a lesser extent in Spain, thereby having a continued negative effect on value (mainly country mix) growth. 

The Baby Nutrition division continued to deliver high-single digit growth (+8.5%) on a like-for-like basis which was driven by a volume growth of 8.9% and a value growth of -0.4%.  The division continued to deliver double-digit sales growth in the milk-based portfolio while sales remained stable in the weaning food category, in line with market trends.  European performance reflects the softness of the weaning food category, except for the UK who continued its double-digit growth track.  In the rest of the world, most markets continued to perform well, except Russia which, however, showed an improvement in performance compared to the preceding quarter.  Consequently, market shares showed resilience and improvements across the globe.

Medical Nutrition continued to deliver strong, above-category, sales performance with sales growth of 9.3%, on a like-for-like basis, in the first quarter of 2010.  This growth was driven by a volume growth of 8.2% and a value growth of 1.1%.  Growth was supported by all regions with continued strong performances coming from Southern and Eastern Europe.  In addition, all product categories contributed to the growth with above-average growth coming from the Pediatrics range.