February 15, 2017 / 7:01 AM / a year ago

Food group Danone unveils new cost cuts amid pressures at dairy arm and China

PARIS, Feb 15 (Reuters) - French food group Danone unveiled a new 1 billion euros ($1.1 billion) cost cutting plan, saying the turnaround of its dairy division in Europe was taking longer than expected while tough conditions in China would also endure in 2017.

The world’s largest yoghurt maker did not provide provide sales or operating profit margin growth targets for the current year, saying it would review its financial goals for 2017 after closing its acquisition of U.S. organic food group WhiteWave, which is slated for the first quarter.

Danone, which makes Activia yoghurt, Evian water and Bledina babyfood, said like-for-like sales in 2016 rose 2.9 percent to 21.94 billion euros ($23.22 billion), in line with analysts’ expectations of 2.9 percent growth for 2016, which was a slowdown from 4.4 percent growth in 2015.

The slowdown reflected tough market conditions in Spain and problems with the relaunch of its Activia brand in Europe, which held back dairy sales growth in the final quarter, while pressures in the Chinese market weighed on baby food sales.

Danone had flagged the European dairy problem in December, warning its 2016 sales growth would come below its original target of 3-5 percent.

Its operating margin rose by 70 basis points to 13.77 percent, in line with analysts’ expectations of 13.71 percent.

$1 = 0.9451 euros Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta

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