Danone Milks The Benefits Of Promotions – US-FOREX.US
French dairy company Danone is looking healthier. Following a decline in earnings in the first months of the year, the owner of Evian posted a 6% rise in first-half net profits thanks to an aggressive investment in promotions, and reiterated its 2009 targets of medium-term guidance of an 8-10% increase in recurring earnings per share.Danone, which also makes yogurt drink Actimel, said net profit rose to 932 million euros million from 879 million euros a year ago, also helped by a decline in raw material prices and the sale of some assets in Australia and India. And there are some signs that a slight improvement in consumer confidence is also helping the business. While sales in Spain and Italy remain under pressure, business has picked up in France and in the U.K. “Europe is still a difficult market, but Danone is launching more promotions and doing more to explain the benefits of its products. We are not back to the levels of growth of 2006 and early 2007, but business is gradually picking up,” said Marco Gulpers, an analyst with ING Financial Markets in Amsterdam. Some industry experts say that the figures only reflect a very marginal improvement in consumer confidence and still do not serve as indicators of how demand could pick up in the second half of the year. On its outlook, the company said: “Our scenario for 2009 remains that current consumption patterns in our key emerging and developed markets will continue over the balance of the year, with no significant improvement or dramatic breakdown.” Francis Pretre, an analyst with CM-CIC Securities in Paris, had previously expected overall sales to fall by 1% by the end of the year, but now believes sales will increase by 1%.
Danone
also said its operating margin rose to 16% from 15.3% in the last half year. Volumes in fresh dairy, which contributed 57% of company sales in the first six months of 2009, rose 2.7% for the quarter, after five consecutive quarters of declines.
Same-store sales growth in baby food slowed to 7.4% in the second quarter from 10.5% in the first, held back by Russia, Eastern Europe and China, the dairy firm said. Medical nutrition saw growth slow to 8.8% from 10.8%, but volumes rose 9.2%.“We are pleased that our sales by volume are growing again,” said Chief Financial Officer Pierre-Andre Terisse. Last June, rival Nestle
also reiterated its target for 2009 organic sales growth and an increase in operating margin.Shares of Danone, which have risen 7% over the last 10 days, fell 2.4%, or 92 euro cents , to 36.72 euros , during morning trading in Paris on Friday. Danone’s stock has fallen approximately 10% since the start of the year.