Sales were up from €12.2bn ($14.2bn) in 2017 to €12.5bn ($14.5bn) in 2018, an increase of 2.4%. While operating income dropped by 31.2%, net income-group share, rose by 23.5%.
In the second quarter 2018, consolidated sales stood at €6.4bn ($7.4bn), up 3.3% on a “like-for-like New Danone” basis. Sales growth included a +3.8% rise in value, largely offsetting a 0.5% decline in volume.
EDP International sales in Q2 down
Excluding the impact of the recent consumer boycott in Morocco, sales were up 4.3% and volumes rose 1.3%, which the company said demonstrates improving volume trends.
Reported sales were down 4.4% compared to the second quarter 2017, including:
• the base effect (+1.3%) corresponding to the prior year WhiteWave contribution (from April 1 to 12, 2017);
• other changes in scope of consolidation (-1.4%), resulting from the disposal of Stonyfield in August 2017;
• a negative currency impact (-7.6%) reflecting mainly the appreciation of the euro against the US dollar, the Argentinian peso and the Russian ruble.
Essential Dairy & Plant-Based (EDP) International sales decreased in the second quarter by 2.4% on a “like-for-like New Danone” basis, including an 8% decline in volumes and a 5.6% rise in value. Excluding Morocco, EDP International was back to profitable growth, with sales up +0.4%.
Morocco woes and Yakult sale
In Morocco, sales were down around -40% in the second quarter due to an ongoing consumer boycott. To regain consumer trust, Danone announced its commitment to bring changes to its economic model for fresh milk, including selling at cost.
Danone said other operating income and expenses were -€695m ($808m), mainly related to a non-cash charge of €661m ($769m) corresponding to the impairment of the Centrale brand for €78m ($90.7m) and to an impairment charge of Centrale Danone’s goodwill for €583m ($678m) in Morocco, as a consequence of the ongoing consumer boycott started in April 2018.
Sales trends in Europe remained slightly negative, in line with the first quarter, with solid growth in some countries (UK, Nordics, Eastern Europe) while France and Spain remain challenging.
Recurring net income from associates was stable at €46m ($53.5m), reflecting mainly the good results from the participation in Mengniu and the reduction in Danone’s stake in Yakult from 21.3% to 6.6% in March 2018. The transaction resulted in a €701m ($815m) non-recurring capital gain.
Recurring minority interests decreased to €48m ($55.8m), as the result of the increased ownership in Unimilk from 93% to 98%.
Big Alpro growth
Activia and Danone brands pursued sequential stabilization and local brands (in particular Light & Free, Les 2 Vaches, Fantasia) kept growing strongly.
Alpro sales continued to grow at around 10%, driven by accelerated innovations, while first revenue synergies started in France and Spain, where Alpro is now the second largest player among plant-based alternatives to yogurt.
In the CIS region, sales continued to grow strongly reflecting successful valorization strategy. In Russia, Danone continues to benefit from improving product mix and innovation in global brands (Activia, Danone) and local brands (Prostokvashino, Danissimo) with both segments contributing to strong growth.
Latin America registered strong growth in Mexico and Argentina. Sales continued to decline in Brazil, where Danone said a truckers’ strike exacerbated already difficult market conditions.
The ongoing turnaround plan in Brazil is making good progress, where Danone is restructuring its product offering and distribution model, the company said.
Essential Dairy & Plant-Based (EDP) Noram returned to growth in the second quarter, posting the fourth consecutive quarter of improvement. Sales were up 1.4% on a “like-for-like New Danone” basis (+2.7% excluding Fresh Foods), as a 2.9% increase in volume offset a 1.5% decline in value.
In yogurt, sales increased, driven by product innovations in growing and valorized segments including probiotics, kids and plant-based yogurts.
Plant-based foods and beverage delivered high single-digit growth both in volume and sales.
Danone said this category is fast-growing, supported by dynamic demand for nut-based products, and Danone benefitted from innovations in valorized segments.
Stronger communication campaigns also helped lift demand for products including Silk. Coffee Creamers delivered strong growth in the second quarter.
Performance of Specialized Nutrition in the second quarter was driven by Early Life Nutrition and Advanced Medical Nutrition. Sales were up 10.6% on a “like-for-like New Danone” basis, with a 4.0% rise in volume and a 6.6% increase in value.
Advanced Medical Nutrition delivered mid-to-high-single digit sales growth in the second quarter, with all regions and all product categories contributing to this performance.
Early Life Nutrition posted double-digit growth in the second quarter, due mainly to sales growth of around 30% in China, along with growing contributions from Latin America, India and Africa.
Danone said its focus will remain on accelerating growth and maximizing efficiencies, including the first year of delivery of its Protein program savings. In 2018, the company will progress towards its 2020 ambition through further sales growth and an improved recurring operating margin.
As a result, Danone said it is targeting double-digit recurring EPS growth at constant exchange rate for 2018, excluding the Yakult transaction impact.
Emmanuel Faber, chairman and CEO, said, “Looking to the longer term, we have this summer started to work on the Danone 2030 Goals that were unveiled at our last annual shareholder meeting. These goals reinforce the importance of our « One Planet. One Health » vision which has become a unique way to create and share sustainable value for all.”