Danone has reported first quarter sales up by 5.6% on a like-for-like basis, driven almost equally by increases in volume and price. The company noted that it sees 2013 as a ‘transitional’ year.
"As we expected, the first quarter of 2013 saw a solid performance that highlighted once again the contrast between robust growth in emerging markets and the sluggish economy in Europe,” said chairman Franck Riboud. “In both Russia and the United States our brands scored further strong gains, underpinned by our ongoing efforts to innovate and drive category growth. In Asia growth reached record highs, particularly in Baby Nutrition. Sales continued to grow steadily in both Latin America and Africa, benefiting fully from the emergence of a middle class.”
“In Europe consumer spending is still lacklustre, especially in Fresh Dairy Products,” he continued. “Our teams are fully engaged, taking action to innovate and update our product ranges. The cost reduction and organizational adaptation plan we presented in February is moving ahead on schedule, and consultations with employee representatives are now under way. Initial results of all these measures are expected in the second half of the year. Results to date are in line with our roadmap and reflect progress in building a profitable growth model. On this basis, we stand by our full-year targets for 2013.”
Fresh Dairy Products division sales were up 0.7% like-for-like in the first quarter of 2013, including a 0.5% rise in volume and a 0.2% price/mix effect. This reflects similar trends observed in the previous quarter, said the company, scaled back by one less day this quarter than in the first three months of 2012.
Sales in the CIS and North America region have continued the pace of growth observed at the end of 2012 and are in line with expectations for full-year 2013. In North America, Danone said that momentum is still driven by market share gains in the Greek yoghurt segment, where additional capacity will be added in the short term to meet strong demand. Sales in Latin America and the Africa-Middle East region remained extremely buoyant, with continued double-digit growth.
Conditions in Europe have remained difficult with Q1 trends similar to those observed in the last quarter of 2012. That includes a negative price/mix effect resulting notably from investments in pricing and promotion.
The Baby Nutrition division reported what Danone described as exceptional sales in Q1 2013 with a like-for-like rise of 17.1%. Momentum came once again from ‘booming’ sales in the Asia-Pacific region, especially China this quarter, also boosted by the Chinese New Year which came later than in 2012. Surging growth in Europe was linked to the appeal of international baby formula brands for consumers in some emerging countries.
As in the past, changes in the division’s product mix made a positive contribution to performance: the growing-up milk segment again reported double-digit growth and weaning foods continued to lose ground in Europe.
Danone said that it assumes that trends in consumer demand will continue to show contrasts from region to region, with overall trends negative in Europe - assuming, however, no major political or economic upheavals - and favourable in the rest of the world.
The Group also expects the cost of its major raw materials and packaging materials to remain high, with moderate growth.
This being the case, Danone said that it will continue to adapt its model in Europe, stepping up the pace of updates to its product ranges in response to consumers’ changing needs, and at the same time adapting its structures and costs to achieve €200 million in savings by the end of 2014.
In the rest of the world, Danone will continue to expand its product categories, build its brands and grow its market share in a profitable and lasting way.
Through these actions, Danone said that it plans to get back on track to strong, profitable organic growth as of 2014.
