Danone's nine month sales rise 4.2%

French food group Danone posted a 4

French food group Danone posted a 4.2 per cent rise in nine-month sales today and shifted its profitability forecast to the lower end of its previous range, knocking the wind out of its shares.

The maker of Danone yoghurts, Evian mineral water and LU biscuits, reaffirmed its sales and earnings per share (EPS) goals for 2005, but said its operating margin would increase by "at least 20 basis points".

Danone had previously forecast margin growth in a 20 to 40 basis point range. Danone said nine-month sales increased to €9.853 billion ($11.8 billion), beating analysts' average forecasts for €9.798 billion.

Third-quarter turnover of €3.416 billion topped forecasts for €3.361 billion, but underlying sales rose 7.1 per cent, lagging forecasts for 7.6 per cent.

READ MORE

Analysts attributed the revised profitability forecast to higher raw materials costs, a problem that has hurt competitors. Some analysts were disappointed that underlying sales, which exclude currency, disposal and acquisition effects, had not grown more robustly in the third quarter.

Danone shares fell 2.9 per cent in late morning trade, one of the main losers in France's benchmark CAC-40 index.

The group said that sales in France fell 3 per cent in the nine months. However Cedric Louboutin, an analyst at brokerage Fideuram Wargny, said that sales remained encouraging in Europe despite a "delicate environment", and underlying growth was still strong.

The company reaffirmed its full-year goals for underlying sales growth of 6 percent to 7 percent, and earnings-per-share growth of at least 10 percent.