France's Danone SA is spending US$665mil to up its stake in China's top dairy firm, China Mengniu Dairy, as it seeks to boost its presence in one of its most important markets - Xinhua Photo.
PARIS: Food group Danone said on Friday it would focus on accelerating sales growth this year and deliver a further rise in profits, thanks to cost cuts and the benefits from its acquisition of U.S. organic food group WhiteWave.
Danone, the world's largest yoghurt maker, said it was targeting a double-digit rise in 2018 recurring earnings per share (EPS) at constant exchange rates, excluding the impact of the sale of a stake in Japan's Yakult announced this week.
Danone said the integration of WhiteWave was progressing well with more than $50 million synergies delivered in 2017, ahead of plan, and it achieved 14.2 percent EPS growth in 2017, in line with its guidance.
"We are starting 2018 with stronger foundations and I am confident that we are on track to accelerate towards our 2020 ambition," Chairman and CEO Emmanuel Faber said in a statement.
"In 2018, the company will progress toward its 2020 ambition through further sales growth and an improved recurring operating margin," added Faber, whose company's brands include Evian water and Actimel yoghurt.
The company, alongside consumer goods peers such as Nestle and Unilever, is under investor pressure to improve results and it needs to deliver on 2020 profit margin and sales growth targets it set last year.
Like-for-like sales in 2017 rose 2.5 percent to 24.677 billion euros ($31 billion), slightly above analysts' expectations of 2.4 percent growth.
This was also slightly better than the 2.4 percent reported by Nestle on Thursday. It marked, however, a slowdown from 2016 and the sixth consecutive year of a sales slowdown for Danone. .
Danone has suffered slower growth overall than its rivals, largely due to weakness in its dairy business in Europe, which has had to contend with sluggish demand and the relatively unsuccessful Activia re-launch, while in China its baby food and waters businesses have had regulatory issues.
Sales growth, nevertheless, started accelerating in the third quarter of 2017, driven by stronger demand for baby milk formula in China and mineral waters, and fourth quarter sales confirmed that trend with like-for-like sales of 3.7 percent.
The purchase of U.S. group WhiteWave, which makes almond milk and organic products, is intended to boost Danone's profit margins, given WhiteWave's generally affluent clientele.
The group's 2017 operating margin rose by 70 basis points to 14.36 percent of sales, slightly above analysts' expectations of 14.26 percent of sales.
Danone, which said earlier this week it would sell a 1.5 billion euros stake in Japanese company Yakult, said free cash flow rose 18.4 percent to over 2 billion euros.
Danone trades at 17.1 times estimated 12-month forward earnings against 20.1 times for Nestle and 18.3 times for Unilever. The stock is down 8.3 percent so far this year, having gained 16.2 percent last year. - Reuters
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