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Danone infant formula demand drives ‘strong start’ to 2013

By Mark Astley+

29-Jul-2013

Danone claims to have got off to a “strong start” this year, with early signs of stabilisation in Europe and solid demand for infant nutrition products in China driving better-than-expected sales growth in the first half of 2013.

Earlier today, the Paris-based Danone, which manufactures brands including Activia and Actimel, reported total sales of €11.058bn for the six months ended 30 June 2013 – a 6% increase on the €10.475bn the company posted in H1 2012.

The firm’s Baby Nutrition division was a key driver of this growth, posting a 13.5% like-for-like sales increase for the second quarter of the year.

Momentum again came from strong sales in the Asia-Pacific region, particularly in China and Hong Kong, while Europe continued to benefit from indirect demand for international baby formula brands in some emerging countries,” said the company.

Meanwhile, Danone’s Medical Nutrition division achieved like-for-like sales growth of 4.7% in the Q2 on the back of Chinese, Brazilian, Turkish, American and British consumer demand.

The company’s Fresh Dairy Products reported like-for-like sales growth of 2.6% in the second quarter, with double-digit growth from its operations in North America and Russia offsetting still-declining European sales.

“Off to a strong start”

Commenting, Danone chairman Franck Riboud praised the company for its “strong start” to the year despite a difficult “economic and consumption context” in Europe and cases of volatility in emerging markets.

This performance demonstrates the relevance of our action plans, with our teams doing a good job of executing them around the globe,” he said, adding that the company’s European cost-savings plan is “right on schedule.”

In December 2012, Danone announced plans to generate European savings of around €200m over two-years in an attempt to regain its “competitive edge” in the region.

The “first benefits” of its cost-saving plan are expected from the second quarter onwards, said Riboud.

Meanwhile, Danone is working to lay “groundwork for future growth” in North America and emerging markets such as China and Morocco.

“In emerging markets and in North America, our profitable growth drivers are fully operational,” said Riboud. “In these markets, we are continuing to build our brands and our organisations, while at the same time laying the groundwork for future growth.”

Chinese infant formula price cut

On the back of its performance in the first six months of 2013, Danone has reaffirmed its full-year forecast – seemingly overlooking the potential impact of its recent decision to slash the prices of its infant nutrition products in China.

Earlier this month, Dumex, Danone’s infant formula business in Asia, announced plans to slash the prices of its products in China by between 5% and 20% in response to the launch of a government investigation into its and other manufacturers’ pricing practices in the country.

The company has promised to maintain these prices over the next year.

During a conference call earlier today, Danone’s chief financial officer (CFO), Pierre-André Terisse, declined to comment on the potential impact of the price cuts.

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