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Danone Raises Sales Outlook After Topping Q2 Estimates

Danone has raised its annual revenue growth forecast after its second-quarter like-for-like sales beat analysts' estimates on strong demand for baby food and bottled water, even as the company raised prices to mitigate higher costs.

Danone, the world's largest yoghurt maker, said it now expects like-for-like sales to grow at 5%-6% in 2022 compared with a previous forecast of 3%-5%.

By 0705 GMT its shares gained 3% to €56.74.

Nutrition Business

A highlight of the strong quarterly performance was an 11.4% jump in sales in the nutrition business, which includes infant milk formula and medical nutrition.

In the key Chinese market alone, infant milk formula posted mid-to-high single-digit growth.

In North America, Danone also stepped up exports of Neocate specialised formula and Aptamil baby formula to address shortages.

Read More: Danone Doubles Supply Of Some Baby Formula To US Amid Shortage

Top manufacturer Abbott Laboratories in February recalled dozens of types of its Similac, Alimentum and EleCare formulas, creating one of the most urgent food shortages in recent history for US families.

Danone, whose brands include Evian and Badoit water, Activia yoghurt and Aptamil baby formula, reported quarterly like-for-like sales growth of 7.7% compared with analysts' estimates of a 5.6% growth.

"While the quality of our first half delivery is encouraging ... this is only the start of our Renew journey: we believe there is still much we can do," CEO Antoine de Saint-Affrique said in a statement.

Revival Plan

The revival plan of Saint-Affrique, who took over as chief executive in September 2021, faces mounting costs, coupled with uncertainties caused by Russia's invasion of Ukraine that has forced Danone to suspend investments in the country.

The company said its first-half recurring operating margin declined to 12.1% from 13.1% in the first half of 2021 due to higher input costs. It reiterated its outlook for full-year recurring operating margin above 12% compared with 13.7% in 2021.

"Danone reads like a re-run of Unilever with pricing surprising on the upside but input cost inflation keeping margins in with expectations. The good news story is continued strong China Infant Milk Formula," Jefferies analysts said.

Unilever Plc on Tuesday raised its full-year sales guidance after beating first-half underlying sales forecasts as the maker of Dove soap and Knorr stock cubes hiked prices to counter soaring costs.

News by Reuters, edited by Donna Ahern, Checkout. For more supply chain stories, click here. Click subscribe to sign up for the Checkout print edition.

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