Danone's Russian dairy buy helps boost sales by 20 per cent
Overall, the group reported €4.76bn ($6.9bn) in like-for-like sales for the first three months of this year, up 8.5 per cent from 2010’s €3.98bn figure.
Danone’s dairy division deliver a strong organic growth up 6.5 per cent from 2010, aided greatly by the integration of Russian dairy company, Unimilk, according to Andrew Wood, senior research analyst at Bernstein.
Wood said Danone’s Q1 dairy results had eased some concerns of a Fresh Dairy “boom-bust”.
Overall the division posted a €2.85bn in sales for the first quarter of 2011, compared to €2.32bn in 2010.
Unimilk accounted for a 15.3 per cent like-for-like rise during the first quarter of 2011. Growth in the dairy sector excluding Unimilk was slightly slower at 5.5 per cent.
The group said the high performance of Unimilk was a result of a significant rise in average price per kilo due to higher sales prices and trading-up within the product mix.
“Integration of Unimilk made rapid progress in the first quarter, with reinforcement of the management team and deployment of a program to optimise its product portfolio,” said Danone.
The group said a priority in 2011 would be the integration of Unimilk’s operations in Russia and CIS countries.
According to Danone, sales and cost synergies from the new acquisition are set to boost Unimilk’s operating margin from the second half on.
Danone said the overall growth in dairy sales value reflected the competitive price increases across most countries during the quarter.
The division’s priority markets — including Latin America (Brazil, Mexico and Argentina), the USA, Russia, France and the UK —continued to drive growth.
Activia, children’s brands and indulgent brands were the main drivers with innovation continuing at a steady pace.
Performance was also strong in Danone’s Waters and Baby Food sector, where the group reported 13.3 per cent and 9.3 per cent rise in sales from 2010.
Rise in raw material prices
However, Danone also warned of continued raw material price hikes, expecting total material and packaging costs to increase by six to nine per cent on average over the year.
The group has already introduced price rises this year and said it would continue to use pricing to protect its margins.