Danone eyes growth in volatile emerging markets

Cost cuts, rising baby food sales in Asia, and an improvement at its dairy business in Europe will all help Danone deliver higher sales and profits this year despite volatile emerging markets, the French food group said yesterday.

Danone eyes growth in volatile emerging markets

Shares in the maker of Activia and Actimel yoghurt rose more than 3.5% as analysts expressed relief after recent downbeat comments from rivals such as Unilever and Nestle.

“The guidance looks prudent and achievable, enabling Danone to generate sustainable profitable growth in 2016 and beyond,” Liberum analysts said.

Danone, which also owns the Evian water and Bledina baby food brands, forecast underlying sales to rise 3%-5% this year.

They grew 4.4% percent to €22.41bn in 2015.

It also predicted a “solid” improvement in its operating margin, helped by an expected stabilisation of sales at its European dairy business.

Last year, Danone forecast a 4%-5% rise in 2015 sales and a slight increase in operating margin.

“Economic conditions will remain volatile and uncertain overall, with fragile or even deflationary consumer trends in Europe, emerging markets undermined by volatile currencies, and difficulties in specific markets, in particular Russia, China and Brazil,” it said.

Unilever has said it is preparing for tougher markets and more volatility in 2016, while Switzerland’s Nestle said it was getting harder to raise prices in a tough economic environment.

Emmanuel Faber, who took over as CEO in October 2014, has vowed to return Danone to “strong profitable and sustainable growth” by 2020, reviewing its business in China and overhauling its dairy division where it has cut costs and launched new products.

Sales of dairy ranges, which make up the bulk of the group total, grew 2.6% in the fourth quarter, beating expectations of a 2% rise, driven by accelerating sales in the US and improving volumes in Europe.

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