Dairy volumes down for Danone
In its first half results for 2011 the firm’s dairy division posted sales of 5.67bn, a 6 per cent period-on-period rise from 2010, with a 0.2 volume decline.
Revenue up
Overall, the firm posted a 2.7 per cent increase in profit to €861m which was below forecasts of €890m.
Revenue was up 8.7 per cent to €9.73bn for the half, meeting forecasts.
However, commodity price hikes, for key categories such as milk, affected the group’s margins, along with its purchase of Russian dairy group Unimilk for €330m.
"Some of the volume weakness can be explained by cleaning up Unimilk/Russia but this dynamic still needs to be watched carefully as 2011 develops," said Bernstein analyst Andrew Wood
Mixed performance
Overall Q2/H1 performance was mixed, said Wood, with the top-line ahead of expectations but margins and earnings just in-line to marginally below.
Although the analyst said Danone was a strong company, he said it was unlikely that H1’s top-line success was going to be repeated in H2.
“Even the top-line over-delivery raised questions on the quality of the growth given that one-offs and price/mix led the way, and with H2 likely to see a noticeable deceleration,” he said.
More price hikes
The French dairy and water group kept its full-year outlook on sales and margins and its forecast for the rise in commodity costs for 2011.
Danone said it will introduce further price increases on the back of an expected of 6 and 9 per cent over the year for further raw material and packaging costs.
Chief financial officer Pierre-Andre Terisse told a conference call the group was confident about the second half as raw material prices "probably" reached their peak in the first half even though consumption trends remained "difficult", said Reuters.
Other global food groups are also responding to soaring commodities costs by passing the costs on to consumers.
Coca-Cola and PepsiCo recently announced price hikes on the release of their second-quarter results.
