Danone eyes further sales and profit growth in 2016

Danone, the world's biggest yogurt maker, indicated that this year's sales growth may decelerate as milk costs rise this year, the latest food company to say slower economies may stunt progress. Sales will rise 3 per cent to 5 per cent on a like-for-like basis this year after rising 4.4 per cent in 2015, the slowest rate in six years, the Paris-based company said in a statement Tuesday. That company last year forecast 4 per cent to 5 per cent growth for 2015.

Trading operating margin should show a “solid” improvement in 2016, Danone also said. “Economic conditions will remain volatile and uncertain overall, with fragile or even deflationary consumer trends in Europe, emerging markets undermined by volatile currencies, and difficulties specific to a few major markets,” including Russia, China and Brazil, Danone said.

The French company joins its bigger rivals with a muted outlook for this year as the outlook for global economic growth worsens. Nestle SA last week indicated that 2016 sales growth will be below the Nespresso maker's long-term target for a fourth year as it becomes harder to raise prices. Unilever, the maker of Ben and Jerry's ice cream, said on Jan. 19 that it's preparing for tougher market conditions and high volatility this year. "We can find little cause for complaint," wrote Jeff Stent, an analyst at Exane BNP Paribas, adding that Danone usually errs "on the side of optimism" with annual forecasts. "The only surprise here to our mind is that Danone has been sensible enough to embrace this range."

Adjusted operating profit rose 8.6 per cent to €2.89 billion. Analysts expected €2.88 billion euros, according to the average estimate. Fourth-quarter sales rose 3.6 per cent, beating the consensus of 3.2 per cent. Fresh dairy sales rose 0.6 per cent in 2015 and the operating margin of the business widened to 10 per cent from 9.3 per cent.

Danone gets more than half its sales from that business, which makes Activia yogurt and Actimel fermented drinks.

Bloomberg