FDBusiness.com

Benefiting from favorable trends in currencies and commodity price, Danone has reported an 8.8% rise in consolidated sales to €11.392 billion for the first half of 2015 to reach. Organic sales growth was 4.6% comprising a +0.7% rise in sales volume and a +3.9% rise in value. Trading operating income increased by 9.3% to €1.38 billion and trading operating margin advanced 53bps to 12.12%.

As expected, Danone continued to benefit from the lower prices of strategic raw materials, with milk in particular down from record highs in the first half of 2014. But the year-on-year improvement should dwindle over the next six months, since milk prices had already slid sharply in the second half of 2014.

In Europe, Danone continued to streamline its Fresh Dairy Products portfolio, while benefiting from Chinese demand for international Infant Milk Formula (IMF) brands.

In China, following the accelerated structural changes in distribution dynamics for IMF, Danone has decided to reallocate its resources within this market and subsequently to revise downward long-term sales projections for Dumex, leading to an impairment of the brand.

Danone has reached a preliminary agreement with Mengniu and Yashili to merge Dumex in China with Yashili, building a strong local IMF brand platform, and to increase its shareholding in Mengniu.

Danone has confirmed its 2015 targets of organic sales growth of between 4% and 5%, and a slight rise in trading operating margin.

Emmanuel Faber, chief executive of Danone, comments: “First-half growth of 4.6% and half a percentage point rise in margin are fully in line with our roadmap. With a still volatile overall context, we remain focused on our priorities: consolidating our model for profitable, sustainable growth and enhancing our brands and businesses’ ability to serve our consumers’ needs. In Europe, where margins rose significantly, we are executing an overhaul of our Fresh Dairy Products business and finalizing the conditions necessary for a return to growth.”

He continues: “In China, we are strengthening our Early Life Nutrition business model, building on the success of our international brands and reinforcing our partnership with Mengniu and Yashili. In the CIS and in North America, we are guiding our operations carefully through the current transition, to get growth back on track while pursuing investments to develop the category.”