Dairy, bevs boost Danone, but biscuit sales crumble

Related tags Cent Milk Currency Danone

Rumours of a possible sale of the Danone's biscuit business
surfaced again this week after the company unveiled full year
figures pegged back by its weak performance. But the core dairy and
beverage businesses continued to go from strength to strength.

Total sales for the year were up 7.2 per cent at constant exchange rates to €13.1 billion, the highest like-for-like sales growth rate of the last decade for Danone​. But a negative impact of 6.7 per cent from exchange rates, and a reduction in the scope of consolidation following disposals, meant that actual sales were 3.1 per cent lower than in 2002.

Pre-exceptional net profits were ahead by 1.3 per cent to €839 million, but a one-off gain of €455 million in 2002 relating to the final payment from Scottish & Newcastle for the Kronenbourg brewing business meant that reported net profits were some 35 per cent lower in 2003.

Dairy product sales were 9.6 per cent higher than in 2002 on a like-for-like basis at €6.18 billion (although they were 1.5 per cent lower after consolidation and exchange rate effects).

Beverage sales - Danone owns the Evian and Volvic mineral waters, among others, and has a major water cooler business in the US and Europe - were up 9.9 per cent on a like-for-like basis to €3.55 billion, but again were 3.7 per cent lower at in real terms.

Operating profit for the dairy unit was ahead 5.4 per cent at €845 million, while beverage operating profits were up 15.7 per cent to €537 million. Both divisions were boosted by additional sales generated by the summer heatwave.

But it was the biscuit and cereal products operations which let the side down in 2003, with sales of €3.07 billion rising just 0.4 per cent compared to the previous year on a like-for-like basis. In actual terms, biscuit sales were 5 per cent lower than 2002, while operating profits fell 12 per cent to €280 million.

The global biscuit market is in dire straights at the moment after several years of consolidation and a shift in consumer demand to other snacking products such as cereal bars. But any sale of the biscuit business will not be precipitous, with the company expected to wait at least another year in the hope of a return to growth before considering its options.

Danone has been linked to both of its European dairy rivals - Parmalat and Nestlé - in recent months, but chief executive Franck Riboud dismissed the speculation. He said that buying all of part of the ailing Italian milk group would make no sense, as Parmalat's core business is liquid milk, and area where Danone has no significant presence.

As for the suggestion that Danone itself might be a takeover target for Nestle, Riboud was equally as dismissive, saying that there had been no talks between the two companies and that the French company had no intention whatsoever of selling out to the Swiss giant.

Related topics Manufacturers Danone

Related news