French food group Danone stuck to its 2009 earnings growth targets after demand for its baby food and medical nutrition products helped lift first-quarter like-for-like sales by 1 percent. Consumer behaviour will likely remain stable for the rest of the year, with sales growth driven by its leading brands, the maker of Activia yoghurts, Evian bottled water and Bledina baby food said in a statement on Thursday.
Quarterly sales fell 2.3 percent on a reported basis to 3.67 billion euros ($4.85 billion) from 3.76 billion a year earlier, it said. Sales fell in Europe but rose in Asia and elsewhere. The revenue figure was in line with analysts' expectations.
"Baby nutrition and medical nutrition continued to show their potential and resilience, and so did our waters businesses in the emerging markets which continued to deliver strong growth," Danone Chief Executive Franck Riboud said.
"On the other hand, the ongoing market deterioration has weighed, as anticipated, on the performance of the fresh dairy division in various regions." Danone reiterated its forecast for underlying, fully diluted earnings per share at constant exchange rates to rise 10 percent this year.
The group was also still aiming for like-for-like sales growth of a few points below its medium-term guidance of 8-10 percent and a like-for-like improvement in its operating margin. "Particularly disappointing was fresh dairy, which recorded yet another quarter of negative volume growth, and its first quarter of negative organic growth," Bernstein Research analyst Andrew Wood said. "Beverages was as bad as most expectations, given sustained weakness in Western Europe, whereas baby nutrition and medical nutrition continue to outperform."
Danone posted rises of almost 11 percent in like-for-like sales at both its baby nutrition and medical nutrition divisions in the first quarter, with baby food revenue growth partly driven by price increases during 2008. The company's dairy business, which contributes 58 percent of group revenue, saw like-for-like sales dip 1.2 percent amid a "continued difficult economic environment". But volume and sales growth at its blockbuster brands, which also include Actimel yoghurt drinks, outperformed the overall division, Danone said.