Danone sales lift share price

Danone is predicting stronger than expected Q1 sales and said it is on track to deliver higher sales and profits this year.

The yoghurt maker, producer of Actimel and Activia, reported a 3.5% rise in first-quarter like-for-like revenue due to robust baby food sales in Asia, stronger dairy product demand in North America and a better than expected performance at its water division, according to Reuters press agency.

The company had projected 3.2% growth in group sales. Danone’s shares rose 4% following its decision to raise its Q1 projections.

Like other European food companies, Danone has also had to cope with challenging conditions in Brazil and Russia.

Danone, which competes globally with Nestle and Unilever, has had to cope with difficult market conditions, including in Europe, as well as the impact of food safety scares in Asia.

Danone’s first-quarter performance lagged its rivals, with Unilever’s first-quarter sales up 4.7% and Nestle producing sales growth of 3.9%.

Emmanuel Faber, who took over as chief executive in October 2014, is trying to return Danone to profitable and sustainable growth by 2020, reviewing its business in China and overhauling its dairy division in Europe, where it has cut costs and launched new products.

“We continue to view Danone as much more robust than in the past and continue to see Danone 2020 as a coherent medium-term strategy,” Société Générale analysts said, referring to Faber’s growth plans.

Meanwhile, Danone and other infant formula manufacturers are keeping a close eye on China’s move to close off a tax loophole that has allowed lower prices to be paid for goods sold through websites operating outside of China.

Products sold on websites and shipped overseas to Chinese consumers now face an effective 11.9% tax increase as the government overhauls an e-commerce system that inadvertently gave some foreign companies a pricing edge over similar imported products available in China’s domestic market.

Reports by press agency Bloomberg cite Danone, Australia’s a2 Milk Co and Bellamy’s Australia Ltd among companies who had enjoyed online sales growth.

The regulation may pose a challenge for some foreign companies including Danone, whose Nutrilon and Cow & Gate brands are sold through such overseas websites.

“Foreign companies need to move toward direct sales because of what the Chinese authorities are doing to quash the grey market,” said James Bascand, an analyst at Forsyth Barr Ltd.


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