Colder August weather in Europe and weaker than expected yoghurt sales in the US and Russia have hit Danone’s third quarter results, which missed industry predictions. As a result, the food corporation has lowered its full year 2019 growth expectation to 2.5-3 per cent from 3 per cent.
Danone sales increased by 3.7 per cent to €6.42 billion ($7.16bn) in the third quarter. Like for like sales grew 3 per cent in the same time period, down from the 3.8 per cent growth anticipated by industry experts.
According to Danone, volumes declined by 1.6 per cent and were impacted by lower demand in Waters Europe and EDP Russia. Waters sales were down 0.9 per cent on a like-for-like basis, with a 2.5 per cent decline in volumes following summer temperatures in Europe that were significantly lower than Q3 2018.
However, specialised nutrition recorded a stronger quarter with sales up 9.8 per cent on a like-for-like basis. Early life nutrition sales increased by more than 10 per cent, led by 20 per cent growth in China.
“The return to strong growth momentum for specialised nutrition in Asia is a highlight, reversing the trend reported last year,” said Emmanuel Faber, Danone’s chairman and chief executive. “Mindful of growing geopolitical uncertainties and softness in some markets, we continue to transform our business at pace so that it is well-positioned to respond to market needs. This keeps us on track to deliver sales growth acceleration, steady improvement in recurring operating margin and strong recurring EPS expansion.”
Going forward, the corporation expects further cost inflation “with a mid-to-high single digit inflation in the costs of raw and packaging materials”. This includes the continued inflation in PET cost driven by sustained market demand.