Danone shares fall sharply as sales drop below target

Shares in Danone fell 3% as the €39bn French food giant lowered its sales growth forecast following a weaker-than-expected fourth-quarter performance at its European dairy business.

Danone shares fall sharply as sales drop below target

Danone, the world’s largest yogurt maker, blamed worsening market conditions in Spain and problems with a new strategy for dairy brand Activia in some parts of Europe for the shortfall.

“This is a very ambitious transformation for the brand. We have overestimated the speed at which the turnaround would occur. We have to acknowledge we are not yet at the level we thought we would be at this time,” Danone chief financial officer Cecile Cabanis told analysts.

Shares fell 3% in Paris, even though Danone said it would beat its 2016 target for recurring operating margin improvement thanks to efforts to contain its cost base.

The sharp fall came even as profits rose in the company.

Danone had previously forecast 2016 like-for-like sales growth of 3% to 5% and a recurring operating margin improvement of 50 to 60 basis points.

Ms Cabanis declined to set any precise financial forecasts for 2017. She said Danone would maintain its marketing spending plans on key brands such as Activia.

The share price fall made it one of the worst-performing stocks on France’s benchmark CAC-40 index on Monday.

Danone had reported in October a worse-than expected slowdown in third quarter sales growth as difficulties in China hurt its baby food and water divisions.

Danone shares are down by around 4% so far in 2016, while the broader Stoxx Europe 600 Food & Beverages index has fallen 7% in that period.

Bloomberg and Irish Examiner staff

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