The world’s largest yogurt maker is still doing well out of China’s baby formula scare

July 29, 2013
How We Buy
July 29, 2013

danone half year net income

The numbers: Not bad. The French food group’s like-for-like sales for the quarter ended June 30 rose 6.7% to €5.72 billion ($7.6 billion) compared to the same quarter last year. Net profit rose to €972 million for the first half of the year, from €881 million a year earlier. Danone’s share price rose by as much as 3.7%.

The takeaway: Danone is still doing well out of the distrust that has surrounded Chinese-made baby products since tainted milk formula killed six children and sickened thousands in 2008. Sales of baby products—which make up about 22% of revenue for the company that also produces Evian mineral water and Activia yogurt—grew 13.5%. That was driven mostly by China and Hong Kong, the company said in a presentation of the results today, July 29. Sales in Asia, Latin America and the Middle East were up 15.3%, compared to 10.2% in North America and -3.0% in Europe.

What’s interesting: It’s not all smooth sailing in China. Last month Chinese authorities began investigating Danone and other baby formula makers for price-fixing, prompting Danone to cut its prices in the country by as much as 20%. “Price reduction in China will have an impact but a manageable impact. Long term, we see China and Asia as strong growth profiles but we are prepared for ups and downs,” finance chief Pierre-André Terisse told analysts today.

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