FDBusiness.com

Reflecting solid performances across all its business categories and geographical regions, Danone increased consolidated sales by16.3% to Eur9.73b in the first half of 2011 and trading operating income by 6.9% on a like-for-like basis to Eur1.39b. Danone has confirmed its full year targets for 2011.

Excluding the impact of changes in exchange rates and the integration of Unimilk, Danone’s majority owned fresh dairy product businesses in Russia and other CIS member countries, organic sales growth was 8.7% – a 4.0% increase in sales volume and a 4.7% growth in value.

Danone’s trading operating margin (EBIT) stood at 14.35% in the first half, down 23 bp like for like from the same period of 2010, but in line with group targets. The decrease mainly reflects the basis for comparison of Unimilk’s margin for the first half, prior to the very steep increase in milk prices in summer 2010. Excluding Unimilk, trading operating margin decreased only by 8 bp, due entirely to the catastrophe inJapanin March 2011 and its impact on Danone’s Fresh Dairy Products operations. Excluding these developments, trading operating margin held steady in the first half of 2011, even in face of the sharp increase in raw material prices, notably milk and PET.

Franck Riboud, chairman and chief executive of Danone.

The rise in raw material prices was offset by cost reduction initiatives that generated savings of Eur246m over the six-month period, as well as competitive price increases applied in the first half of the year in the Fresh Dairy Products, Waters and Baby Nutrition divisions.

“Danone has once again met its targets in a persistently difficult environment shaped by trends in consumption and rising raw material prices. Sales show remarkable growth in the first half, with our Waters division doing particularly well,” comments Franck Riboud, chairman and chief executive of Danone. “We have also met our margin targets, countering steep rises in raw material costs with major efforts to raise productivity and fine-tune pricing. Finally, Danone-Unimilk is on track to achieve its targets and its priorities.”

Danone has reaffirmed its targets announced at the beginning of the year. These include a 6% to 8% increase in sales on a like-for-like basis, and an increase of around 0.20% in trading operating margin, like for like, which will be fueled by all group activities, but especially by Unimilk and synergies from integration. Danone is also projecting·an increase in free cash flow in keeping with the Eur2b target set for 2012.