Danone warns of 'difficult' time ahead in France

14th April 2005, Comments 0 comments

PARIS, April 14 (AFP) - Groupe Danone, the French food and beverage company, reiterated Thursday a forecast of double-digit profit this year, despite reporting a "difficult" first-quarter in its domestic market, where sales plunged 7.0 percent.

PARIS, April 14 (AFP) - Groupe Danone, the French food and beverage company, reiterated Thursday a forecast of double-digit profit this year, despite reporting a "difficult" first-quarter in its domestic market, where sales plunged 7.0 percent.

Total sales in the first quarter edged up 0.8 percent to EUR 3.148 billion (USD 4.039 billion) from EUR 3.123 billion in the same period in 2004, outperforming analysts' expectations of EUR 3.097-3.137 billion.

Like-for-like growth was 5.1 percent and the 2004 figures were restated to apply IFRS accounting rules, the company said.

Shares in Danone jumped 0.3 percent to EUR 75.70 in early afternoon Paris trade, bucking the overall market trend. The CAC-40 index was off 0.14 percent at 4,110.14 points.

The shares also benefited from Danone's reassurance that it was on track for an operating margin up 20-40 basis points and underlying earnings per share growth of 10 percent in 2005.

"The headline figures look good and it repeated its outlook," said a London-based dealer.

But Danone warned it would need up to 18 months to bring a turnaround in its domestic operations after revealing sales in France in the first quarter fell 7.0 percent from a year earlier, on a constant scope and exchange rate basis, according to chief finance officer Emmanuel Faber.

Faber said during a conference call with analysts that the fall in France had been caused by three factors, one of which was a 3.0-4.0 percent impact on sales as clients tended to operate with smaller inventories.

Secondly, Faber pointed to a 2.0 percent impact from measures introduced by former finance minister Nicolas Sarkozy to cut prices.

There was also a 1.0 percent effect from fewer trading days in the first quarter this year.

He added that all segments of Danone's operations in France were affected by the fall, with the exception of the Bledina range of food for babies.

The CFO said the situation in France was "difficult" and that it would take "a year to 18 months" to effect a turnaround.

Danone would not release detailed sales figures by country.

Sales in Europe, which represents almost two thirds of Danone's business, were up 1.7 percent on a like-for-like basis in the period, while Asia saw revenues climb 8.4 percent. Sales in the rest of the world were up 15.3 percent, the company said.

Like-for-like sales growth in the first quarter was strongest in the fresh dairy products segment which showed a rise of 6.4 percent, while beverages were up 5.7 percent.

Biscuits and cereal snacks nudged up 1.3 percent but sales in the group's other, minor food business dipped 3.1 percent.

© AFP

Subject: French News

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