Danone Reveals 31.2% Third Quarter Sales Increase

In the third quarter 2008, consolidated reported sales increased by 31.2% to € 3,846 million. Excluding the effects of changes in exchange rates and in scope of consolidation, total sales increased by 8.3% on a like-for-like basis.

23/10/08 Groupe Danone has said that In the third quarter 2008, consolidated reported sales increased by 31.2% to € 3,846 million. Excluding the effects of changes in exchange rates (-2.3%) and in scope of consolidation (+25.2%), total sales increased by 8.3% on a like-for-like basis. This like-for-like sales growth was driven by a 2.6% rise in volume and a 5.7% rise in value.

In the first nine months of 2008, consolidated reported sales increased by 22.2% to € 11,537 million.  Excluding the effects of changes in exchange rates (-3.8%) and in scope of consolidation (+16.8%), total sales increased by 9.2% on a like-for-like basis.  This like-for-like sales growth was driven by a 2.5% rise in volume and a 6.7% rise in value. 

In the third quarter, the Fresh Dairy division continued to deliver high single-digit sales growth (+8.2%) 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 -0.2% volume growth and +8.4% value growth.  The blockbuster brands continued to drive the growth of the division, growing double-digit 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 improved somewhat in the course of the third quarter.  This, coupled with a variety of commercial initiatives Danone initiated in the quarter, reversed the downward volume and sales growth trend in France in Q3 08.  The rest of Europe generated relatively resilient growth, with particularly strong performances coming from the UK and Turkey.  Latin America continued to deliver double-digit growth, driven by Brazil.

The performance of the Waters division reflects a number of factors that negatively impacted results in the third quarter of 2008.  Sales grew by 3.7% on the back of a relatively easy comparable.  This growth was driven by a solid volume growth of +5.7% which was offset by a negative value effect of -2.0%.  This disappointing performance was mainly driven by the continued difficult overall market situation in France, Spain and the UK.  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 strong performance in Indonesia, Mexico and Argentina.

Baby Nutrition sustains its above-category sales growth with another strong quarter at +12.7% sales growth despite the significant price increases that were put through.  Sales growth was driven by volume growth of 5.1% and value growth of 7.6%.  All categories and regions continued to contribute to this performance.  Western Europe continued its strong performance of the first half of the year which, in the third quarter, was specifically driven by the UK, Switzerland, Spain and Portugal. 

Asia and Eastern Europe also continued their excellent performances, driven by strong growth in Indonesia, China, Poland and Russia.  All of Danone’s baby food products sold in China are based on milk ingredients that are imported from the ANZ region and have all been classified as safe to consume by the relevant Chinese authorities.  Consequently, Danone’s Baby Food performance in China has not been negatively impacted by the Melamine crisis.

Medical Nutrition continued its double-digit growth trajectory with a sales growth of +11.7% in the third quarter of 2008.  This growth was entirely driven by a volume growth of +13.8% which was partly offset by a negative price and mix effect of -2.1%.  Growth was supported by all regions with continued 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 third quarter of 2008, Franck Riboud, Chairman and CEO of Groupe DANONE said:

“With a sales growth of 8.3%, the performance of the Group in the third quarter was solid and satisfactory and allows us to confirm our targets for 2008.  This performance again reflects the relevance of the business lines we have chosen to be in and the geographic priorities we have set.  It also shows the ability of our teams to adapt quickly to changing consumption patterns and markets.  Our financial strength, competitive advantages and our unique culture provide us confidence in our ability to cope with this phase of difficult economic circumstances that we have entered.”