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As the French dairy company reported an 11.5% rise in half-year profits, it still sees China as a key market for growth.
Despite sales to China slowing due to increased short-term volatility linked to ongoing changes in the Chinese regulatory environment, the group said that China is still a promising market. However, it did see an increase in direct distribution to China through specialised stores and local e-commerce channels.
Overall, its infant formula division, which includes the Aptamil and Nutrilon brands, reported a 7.2% rise in sales, with 1.9% increase in volumes and a 5.3% increase in prices.
Downturn in dairy markets
Danone saw its half-year revenues increase 3.8% to €41bn compared with the same period last year and margins increased by 93 basis points to 13.37%. Operating profits increased 11.5% for the first half of the year. Despite the downturn in dairy markets, where volumes fell 2.2% in the second quarter, its fresh dairy division reported sales up 3% as prices increased 5.2%. Danone saw growth in sales in Russia during the quarter.
Danone also reported that it accelerated growth in South America, the Middle East and Africa. The sale of Dumex (China) to Yashili was finalised in May.
Outlook
On outlook, Danone is still assuming that economic conditions will remain volatile and uncertain overall. It expects fragile or even deflationary consumer trends in Europe, emerging markets as a result of volatile currencies, with difficulties particularly in China and Brazil.
However, Danone raised its operating margin growth to a range of +50 to +60 basis points, while confirming its sales growth guidance within a range of 3% to 5%.
In June, Danone acquired WhiteWave Foods, a US-based manufacturer of branded health foods, in a deal worth $12.5bn (€11.3bn) including debt. The acquisition price, which was almost 25 times earnings (EBITDA), meant this new business did not come cheap for Danone.
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