Danone (BN) has boosted its profits in the first half thanks to improvements in its core dairy business and price increases, beating analyst expectations.
Net income at the French food giant, which makes Actimel and Activia yoghurt, as well Evian water and baby formula, more than doubled in the six months to 30 June to €935m, with operating profits up 7% to €1.48bn – ahead of market forecasts of €1.4bn.
Like-for-like sales jumped 4.1% in the second quarter – above analyst expectations of 3.7% – as overall volumes grew 1% and prices rose 3.1%.
Total revenues for the half came in at €11.1bn, 3.8% up on a like-for-like basis but down 3% after facing into currency headwinds of -7.7%, with negative trends in the Argentine peso, the Russian rouble, the Mexican peso and the Brazilian real.
Shares in Danone rose 3.4% in today’s trading to €67.93 on the back of the positive results.
CEO Emmanuel Faber said: “The Q2 results reflect key steps in our journey, notably in dairy with confirmed success in the US and sequential improvement in Europe.
“We continue to implement our agenda to transform the company and increase the resilience of our business model.”
The latest results come after Danone agreed earlier this month to acquire US food group WhiteWave Foods in a $12.5bn deal. The branded plant-based foods and drinks group almost doubles the size of the Danone’s US business to account for 22% of overall annual revenues.
The dairy division of Danone reported an increase in like-for-like sales of 3% in the second quarter despite volumes falling 2.2% as it increased prices 5.2%. There was solid momentum in North America and improvement in Europe thanks to the relaunch of the Danonino and Actimel brands starting to pay off.
Danone reiterated its full-year guidance for sales growth of between 3% and 5%, but warned economic conditions would remain volatile and uncertain overall, with deflationary consumer trends in Europe and volatile currencies in emerging markets.
Analysts at HSBC said the Q2 results were a further indication that there was “a major transformation” underway at Danone.
“We think the discount to Nestlé and its wider European food peers should narrow as confidence grows in the longevity and sustainability of this turnaround, particularly in European dairy.”
Liberum added: “Danone is on the path to profitable, sustainable growth with a clear strategy to deliver sustainable top and bottom line growth through 2020. The group’s 2016 targets of 3-5% organic sales growth and +50-60bps trading margin expansion in 2016 appear achievable yet leave sufficient flexibility to adapt to a changing trading environment.”