Danone has maintained its full-year profit and sales forecast following a modest first quarter, as the consumer boycott in Morocco continued to affect sales, while a slowdown of infant formula sales in China compared with last year’s performance also affected growth.
Danone, the world’s largest yogurt producer, said that its 2019 first-quarter sales rose 0.8% year-on-year to €6.13 billion, weaker than the 2.4% growth recorded in the fourth quarter of 2018.
Despite this, the company claimed that it was confident that sales are “set to accelerate” from Q2, and that it is still on track to achieve 3% like-for-like sales growth for the full year.
All three of the company’s major operating divisions – Essential Dairy & Plant-based (EDP), Specialised Nutrition and Waters – recorded like-for-like sales growth in the quarter, with the Waters division recording a 3.9% rise, thanks in part to the increased distribution of Evian waters across the US.
Despite the overall growth of the division Specialised Nutrition, for the third quarter in a row the Early Life Nutrition unit was affected by weaker demand for infant formula products in China, as sales of early life nutrition products in the country fell 15% during the quarter, due in part to a lower birth rate in the country.
Premium products boosted the performance of the EDP division, as sales volumes actually decreased 3.8% but sales value increased 4%, thanks to the strong growth of products in the organic, plant-based and on-the-go categories in Europe.
Emmanuel Faber, Danone’s chairman and CEO, said: “The first quarter showed a start of the year in line with expectations and further progress in our transformation journey.
“This performance has coincided with continued action to deliver sustainable profitable value growth, including the sale of Earthbound Farm, alongside the roll-out of value-added innovations across businesses and geographies to make our portfolio more local, more appealing to younger generations, and better suited to fast-changing consumer trends.
“We are pleased with the momentum of the business, which will become increasingly visible from the second quarter. This gives us every confidence that we will meet our full-year guidance.
“We also remain totally committed to creating a company aligned with the food revolution, harnessing the collective voice of our 100,000 Danoners and realizing the vision of One Planet. One Health”.
During the quarter, Danone completed the sale of the US organic salads business Earthbound Farm, which registered annual sales of around $400 million in 2018, to Taylor Farms.
Danone claimed that the transaction “will contribute to the improvement of the recurring operating margin in 2019” but will lead to a non-recurring loss of net income of around $100 million, to be fully recognized in H1 2019.
© FoodBev Media Ltd 2019