Danone First-Quarter Sales Advance on Activia Yogurt

24 Apr 2007 • by Natalie Aster

Groupe Danone SA, the world's largest yogurt maker, said first-quarter sales rose 3.9 percent as more consumers bought its digestion-enhancing Activia brand in Europe, the U.S. and Latin America, reported The Bloomberg.

Revenue in the three months through March increased to 3.67 billion euros ($4.98 billion) from 3.53 billion euros a year earlier, the Paris-based company said today in a statement. That fell short of the 3.7 billion-euro median estimate of nine analysts surveyed by Bloomberg, causing the shares to drop.

Danone, the bottler of Evian mineral water, has sought to add customers in China and Latin America to tap growth that's stronger than in Europe. The company lures Europeans with products it says have health benefits, such as Activia and the new Essensis yogurt that it claims improves consumers' skin. Sales excluding acquisitions and foreign currency effects rose 10 percent.

``Danone achieved a very strong organic growth, but reported sales growth was below our expectations given a more negative foreign exchange impact than expected,'' Andrew Wood, an analyst at Sanford C. Bernstein, said in a note. He has an ``underperform'' recommendation on the stock.

Danone's shares fell 2.68 euros, or 2.2 percent, to 121.51 euros at 10:44 a.m. in Paris. They have gained 6 percent this year, giving the company a market value of 31.7 billion euros.

``This was our second best quarter in 10 years,'' Chief Financial Officer Antoine Giscard d'Estaing said on a conference call in Paris. Revenue in the previous quarter rose 11.5 percent.

``Good number, but not good enough,'' Credit Suisse analyst Charlie Mills said in a note today. ``Organic growth was impressive, but a strong start had already been well flagged by the group.'' He rates the stock ``neutral.''

Sales at the yogurt unit, the company's biggest contributor to revenue, climbed 12 percent on a basis excluding acquisitions and currency effects, the company said. Growth was propelled by increased consumption of Danone's ``blockbuster'' products that include Activia, the immunity-boosting milk drink Actimel and Essensis, introduced in February. Sales of the ``blockbusters'' rose almost 20 percent, Danone said.

Danone groups the U.S. with China, Russia, Indonesia and Mexico as its five ``new frontier'' markets with high growth potential. Sales in that group, which represents a third of total revenue, advanced 12 percent. Danone expects the share of sales coming from the five markets to climb to about half in coming years, according to Giscard d'Estaing.