* Reports quarterly sales growth below expectations
* Says full-year margin growth will be at high end of
* Shares claw back early losses
(Adds CFO comments, forecasts on margin, shares, analysts)
By Dominique Vidalon
PARIS, Oct 18 French food group Danone
reported a worse than expected slowdown in quarterly sales
growth on Tuesday as difficulties in China hurt its baby food
and water divisions.
The world's largest yoghurt maker reaffirmed full-year
guidance, however, and its finance chief said that margin growth
would be at the high end of the forecast range.
Danone, which relaunched its key Activia yoghurt brand last
month, also declared confidence in its ability to stabilise
dairy sales in Europe this year and that its medical nutrition
business is performing well.
"Even if the China transition weighs on the growth of the
quarter, the rest of our platforms continue to feed solid
growth, fully in line with our agenda," Chief Financial Officer
Cecile Cabanis said on a conference call.
Emmanuel Faber, who took over as CEO in October 2014, has
vowed to return the French company to "strong profitable and
sustainable growth" by 2020, reviewing its business in China and
overhauling its dairy division, where it has cut costs and
launched new products.
"We are in an environment that remains uncertain, with a
lasting transition in China. We are not looking for short-term
growth at any price. We look to strengthen our model and
increase our margin before we re-accelerate growth," CFO Cabanis
For 2016, Danone is targeting like-for-like sales growth of
3-5 percent and a rise in operating margin of 50-60 basis points
from 12.91 percent in 2015.
Cabanis told analysts that Danone would be "in the lower end
of the range for its top line (revenue) and at the high end for
Shares in the company were up 0.3 percent at 64 euros by
0951 GMT, reversing opening losses of more than 2 percent.
Bryan Garnier analyst Virginie Roumage said the margin
comment was driving the bounce.
Danone reported third-quarter sales of 5.54 billion euros
($6.2 billion), with like-for-like growth of 2.1 percent. That
was below the 4.1 percent in the second quarter and the 2.2
percent average of analyst estimates compiled by the company.
Baby food sales rose 1.7 percent on a like-for-like basis,
sharply lower than the previous quarter's 7.2 percent growth.
Danone had flagged in July that indirect European demand
from Chinese consumers buying baby formula online was declining
because of changes in the Chinese regulatory environment.
These indirect sales, which represent 50 percent of Danone's
baby food business in China, fell 25 percent in the quarter.
Danone said the decline would continue in coming quarters
and that it will strive to build up direct distribution in
China, where slowing consumption also hit sales in its waters
Overall like-for-like sales income from dairy products,
which make up the bulk of Danone's business, rose 2.2 percent,
with a 4.5 percent rise in prices offsetting a 2.3 percent
decline in volumes.
($1 = 0.8928 euros)
(Additional reporting by Noele Mennella; Editing by Mark Potter
and David Goodman)