Danone Reports 9.6% Like-for-Like Sales Growth

Baby Nutrition delivered another outstanding quarter at +16.2% sales growth despite a high comparable and the unprecedented price increases that were put though in the preceding three quarters.

25/07/08 Groupe Danone has said that in the second quarter 2008, consolidated reported sales increased by 17.6% to € 3,1251 million. Excluding the effects of changes in exchange rates (-4.6%) and in scope of consolidation (+14.2%), total sales increased by +8.0% on a like-for-like basis.  This like-for-like sales growth was driven by a +2.0% rise in volume and a +6.0% rise in value. 

In the first half of 2008, consolidated reported sales increased by 18.2% to € 7,691 million. Excluding the effects of changes in exchange rates (-4.6%) and in scope of consolidation (+13.2%), total sales increased by +9.6% on a like-for-like basis.  This like-for-like sales growth was driven by a +2.5% rise in volume and a +7.1% rise in value. 

In the second quarter, the Fresh Dairy division continued to deliver high-single digit sales growth (+8.7%) despite the negative volume effect that resulted from price increases and the challenging market dynamics in a select number of markets.  This quarter’s organic growth consisted of slightly negative volume growth of -1.5% and +10.2% value growth.  The blockbuster brands continued to drive the growth of the division, growing at mid-teen level and with volume growth which is substantially better than the divisional average.  The latter being a clear testimony to the health blockbuster strategy that delivers superior growth throughout the cycle.

The overall market conditions in France further deteriorated at the back end of the second quarter, thereby negatively impacting the volume and sales growth performance of the division.  Excluding France, the division’s volume and sales growth were +0.7% and +11.0%, respectively in Q2 08.  The rest of Europe generated relatively solid growth, with particularly strong performances coming from the UK, Russia and Turkey.  Latin America continued its growth path in the mid-teens.  North America continued to do well on the back of very strong performance of Stonyfield and Activia and the introduction of Danactive (Actimel) in 2007.

The performance of the Waters division reflects a number of factors that negatively impacted results in the second quarter of 2008.  Sales declined by -0.8% based on a solid volume growth of +5.1% which was offset by a negative value effect of -5.9%.  This disappointing performance was mainly driven by the difficult overall market situation in France, Spain and the UK and bad weather conditions across Europe.  This led to negative volume growth in Europe, thereby negatively impacting value growth.  The markets outside Western Europe – which account for roughly 60% of the division’s sales – held up well with continued mid- to high-teens sales growth in Asia and Latin America, respectively, driven by outstanding performance in Indonesia, Mexico and Argentina.

Baby Nutrition delivered another outstanding quarter at +16.2% sales growth despite a high comparable and the unprecedented price increases that were put though in the preceding three quarters.  The strong value effect (+10.6%) results from these price increases that were taken to offset the pressure from rising milk prices.  The resilient volume performance (+5.6%) clearly reflects the strength of our brands and the loyalty of our customers.  All categories and geographies continued to contribute to this performance.  Western Europe continued its acceleration which is mainly driven by the UK, Germany and the Netherlands.  Asia and Eastern Europe also continued their excellent performances, driven by strong growth in Indonesia, China, Poland and Russia.

Medical Nutrition continued its excellent growth track with a sales growth of +12.4% despite a high comparable in the second quarter of 2007.  Sales growth was entirely driven by a volume growth of +13.1%.  Growth was supported by all regions with particularly strong performance coming from Southern Europe.  In addition, all product categories contributed to the growth with above-average growth coming from Gastro Intestinal Allergy and Pediatrics.

Commenting on the results in the first half of 2008, Franck Riboud, Chairman and CEO of Groupe DANONE said “The 9.6% sales growth, the solid margin improvement of +35 bps and the strong EPS growth of 16.6% in the first half of 2008 are a clear testimony to Danone’s ability to deliver superior and profitable growth in a challenging environment.  In those markets where we have recently started to witness softness in consumer spending, our teams have already put all the necessary wheels in motion to be able to make the necessary adjustments and accelerate innovations programmed to ensure and strengthen the competitive advantage of the Group and its brands.  As a result, we reconfirm our sales and EPS targets for the year, and upgrade our margin target for this year to a range of 40 to 50 bps.”