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Danone Rebuilding Margins

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Danone Rebuilding Margins

Danone Rebuilding Margins
July 29
12:19 2014

Danone has reported a 2.2% increase in like-for-like sales to Eur10.5 billion for the first half of 2014. However, as anticipated, trading operating margin fell sharply in the first half, down 159 bps to 11.27%.

The decline reflects comparison with the very high figure reported in the first half of 2013, before the group was hit by the steep rise in milk prices and fallout from Fonterra’s false safety alert. The organic sales growth reflects a 3.0% decline in sales volume and a 5.2% increase due to the price/mix effect.

Franck Riboud, chairman and chief executive of Danone, comments: “The first half of the year was particularly eventful, and had all of our teams 100% mobilized. First, we responded to record milk prices with key initiatives in various fields —pricing, mix, cost-cutting measures— all designed to rebuild margins that had come under serious pressure in the first quarter. And these efforts paid off. We also continued to roll out products with high added-value in all our regional markets and continued to build our strategic business platforms, finalizing our partnership with Mengniu and continuing to grow in Africa, most recently through our tie-up with Brookside. As a result, the first half of 2014 saw a host of achievements, and Danone’s results at the end of June are right where we expected—at a necessary transition point on our way to meeting our targets for the year.”

He continues: “We operate in a global environment that is still subject to risks and upheavals, and it presents us with challenges every day. But it holds an equal number of hidden opportunities. This is the mindset that has guided us so far, and it will continue to inspire us. Our agenda for the second half of the year is exactly the same: we will stay focused on reaching our 2014 targets and continue to build strong, profitable, sustainable growth.”

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