Danone Reports Solid Start to the Year, Full-Year Targets Confirmed

16 Apr 2013 --- Danone has reported that Q1 2013 sales were up +5.6% like-for-like, and up +4.3% as reported, with balanced increases in volume (+3.0%) and value (+2.6%). As anticipated, performance varied from region to region: sales grew by over +10% in emerging markets and North America combined, with the accelerating Q1 trend driven by exceptionally strong growth in Baby Nutrition.

At the same time, sales in Europe fell back -5.1%, a trend comparable to that observed in Q4 2012. Danone confirms its full-year targets for 2013: sales[1] growth of at least +5%[2], trading operating margin down, by between -50 bps and -30 bps[2], and free cash-flow[3] held steady of around €2 billion excluding exceptional items.

The Chairman’s comment was as follows: "As we expected, the first quarter of 2013 saw a solid performance that highlighted once again the contrast between robust growth in emerging markets and the sluggish economy in Europe.”

“In both Russia and the United States our brands scored further strong gains, underpinned by our ongoing efforts to innovate and drive category growth. In Asia growth reached record highs, particularly in Baby Nutrition. Sales continued to grow steadily in both Latin America and Africa, benefiting fully from the emergence of a middle class.”

“In Europe consumer spending is still lackluster, especially in Fresh Dairy Products. Our teams are fully engaged, taking action to innovate and update our product ranges. The cost reduction and organizational adaptation plan we presented in February is moving ahead on schedule.”

Consolidated sales rose +4.3% to €5,338 million in the first quarter of 2013. Excluding the impact of changes in the basis for comparison, which include exchange rates and scope of consolidation, sales were up +5.6%. This organic growth reflects a +3.0% increase in sales volume and a +2.6% increase in value.

The exchange-rate effect of -2.4% reflects unfavorable trends in the Argentinian peso, the Brazilian real, the Indonesian rupee and other currencies. Changes in the scope of consolidation led to a +1.2% rise in sales, that primarily reflected the integration of Centrale Laitière (Morocco) from March 2013.

Fresh Dairy Products division sales were up +0.7% like-for-like in the first quarter of 2013, including a +0.5% rise in volume and a +0.2% price/mix effect. This reflects similar trends observed in the previous quarter, scaled back by one less day this quarter than in the first three months of 2012.

Sales in the CIS and North America region have continued the pace of growth observed at the end of 2012 and are in line with expectations for full-year 2013. In North America, momentum is still driven by market share gains in the Greek yogurt segment, where additional capacity will be added in the short term to meet strong demand.

Sales in Latin America and the Africa-Middle East region remained extremely buoyant, with continued double-digit growth.

Conditions in Europe have remained difficult with Q1 trends similar to those observed in the last quarter of 2012. That includes a negative price/mix effect resulting notably from investments in pricing and promotion.

The Waters division once again reported solid growth in sales, up +8.6% like-for-like from Q1 2012. Gains were balanced with sales volume up +4.6% and value up +4.0%, reflecting the positive price/mix effect of growth in aquadrinks in particular.

Vigorous growth in emerging countries continued to drive the division. In Europe, sales edged down, hit by the cold wave in March.

The Baby Nutrition division reported exceptional sales in Q1 2013 with a like-for-like rise of 17.1%.

Momentum came once again from booming sales in the Asia-Pacific region, especially China this quarter, also boosted by the Chinese New Year which came later than in 2012. Surging growth in Europe was linked to the appeal of international baby formula brands for consumers in some emerging countries.

As in the past, changes in the division’s product mix made a positive contribution to performance: the growing-up milk segment again reported double-digit growth and weaning foods continued to lose ground in Europe.

Medical Nutrition division sales rose +6.3% like-for-like in Q1 2013, driven by a volume rise of +6.2%.

Growth was again moderate in Europe, with contrasts from one country to the next. Emerging markets continued to gain momentum within the division, reflecting successful growth in flagship markets such as China, Turkey and Brazil, but also the emergence of new markets such as Russia, Poland and Argentina.

On February 28, 2013, Danone finalized share buybacks mentioned in the press release issued on October 17, 2012, which announced that a total budget of €500-700 million was earmarked for buybacks. Between these two dates, the Group thus purchased 14.1 million shares for a total €700 million.

In addition, as announced when full-year 2012 results were released, Danone has bought back 6.7 million of its own shares since early March to replace treasury shares used to pay minority shareholders for their sale of shareholdings in Danone Spain in early 2013, and thus eliminate dilution resulting from that transaction.