Danone Sales Up 5.9%, Maintains Targets

In the third quarter of 2011, Fresh Dairy division sales increased +3.5% like-for-like, reflecting a slight -1.5% volume decline and a +5.0% increase in value. The results comes as Danone is in reportedly in talks to sell its bottled-water assets to Japan’s Suntory Holdings Ltd., according to people familiar with the matter.

Oct 18 2011 --- Danone has reported that consolidated sales increased +10.5% to €4,805 million in the third quarter of 2011. Excluding the impact of exchange rates (-3.7%) and changes in the scope of consolidation (+8.3%), sales were up +5.9%. This organic growth reflects a +1.5% increase in volume and a +4.4% increase in value. Exchange-rate effects reflect unfavorable trends that started in the second quarter for currencies including the US dollar, the Argentine peso and the Russian ruble. The change in the scope of consolidation was mostly due to the integration of Unimilk (Russia). The news comes as Danone is in reportedly in talks to sell its bottled-water assets to Japan’s Suntory Holdings Ltd., according to three people familiar with the matter.

In the third quarter of 2011, Fresh Dairy division sales increased +3.5% like-for-like, reflecting a slight -1.5% volume decline and a +5.0% increase in value. Excluding Unimilk, Fresh Dairy division sales delivered +4.1% like-for-like growth, fueled by both a +1.2% volume increase and +2.9% growth in value.

Regional performance was consistent with results for the second quarter, except in Russia and the United States, where sales stabilized from last year. In the United States, strong growth in the high value-added Greek-style yogurt segment has contributed to modify market trends. This led Danone to launch a revamped line under the Oikos name, with satisfactory initial results. Markets in Latin America and Africa/Middle-East remained vigorous, with continued double-digit growth, while Western Europe held steady. Activia and indulgence brands provided most of the division’s momentum.

Growth in sales value reflects the full impact of competitive price increases implemented in most countries during the first part of the year. Unimilk continued to concentrate on its priorities: segmenting its brand portfolio, increasing profitability, and integrating the Danone-Unimilk joint venture. teams made further significant progress in integrating the joint venture, which will begin operating as a single company in early 2012. Unimilk met its targets for the third quarter, with sales remaining steady year-on-year as a 11.5% price / mix effect offset an -11.8% decrease in volumes. Volume has remained stable on a monthby- month basis since the beginning of the year.

Waters reported a solid +7.9% like-for-like increase and the division’s performance continued to show a good balance between +4.9% volume growth and a +3.0% price/mix effect. Latin America and Asia continued to drive the division, with double-digit growth reflecting vigorous demand, increased market share, and very strong growth in the aquadrinks segment. In contrast, sales in Western Europe were penalized by unfavorable weather. Business in Japan returned to normal.

The Baby Nutrition division pursued its strong trend with sales up +10.5% like for like, based on +5.5% volume growth. The robust +5.0% increase in value reflects both a favorable growth mix and price increases applied since the beginning of the year in most regions. Sales were up in all regions, with Indonesia, China, the Middle East, the UK and Turkey acting as the division’s top drivers. Growing-up milks continued to deliver double-digit growth, while weaning foods showed a slight increase thanks to a very strong performance in the cereals segment.

Medical Nutrition sales posted a +9.8% like-for-like increase in the third quarter of 2011, driven primarily by volume growth (+9.4%). The main contributors to this division growth were China, Brazil, the Netherlands, the UK and Turkey. All product categories demonstrated positive growth, with Neocate, Nutrini and other pediatric care products showing above-average growth.

Backed by steady growth in the first nine months of 2011, Danone stands by its targets announced at the beginning of the year as follows:
Altogether, targets for 2011 include:
•?a 6% to 8% increase in sales on a like-for-like basis.
•?an increase of around 0.2% in trading operating margin, like for like. This will be fueled by all Group activities, but especially by Unimilk and synergies from its integration.
•?an increase in free cash flow[2] in keeping with the €2 billion target set for 2012.