Danone, slowed down in Q1, expects an acceleration in the second quarter

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DANONE STRONG IN THE FIRST QUARTER WITH CHINA AND MOROCCO

by Pascale Denis

(Reuters) – Danone has seen its organic growth slow down sharply in the first quarter, penalized by the weakness of its infant nutrition in China and the boycott of its dairy products in Morocco, but said it expects sales to accelerate in the second quarter.

Sales of the agri-food group amounted to 6.14 billion euros, up 0.9% on a reported basis.

At constant exchange and perimeter rates, its growth fell to 0.8%, a figure close to the 0.7% consensus set by the company, after a 2.4% increase in the fourth quarter of 2018.

The owner of Evian, Activia, Alpro or Blédina said he expects moderate growth in the first quarter of February and an acceleration in the second half of the year, once the basics of comparisons have become easier in China . in Morocco.

He said an acceleration is expected in the second quarter on Wednesday.

Danone continues to suffer from the drop in infant nutrition in China, where it is hit hard by the drop in the birth rate that started in 2017 and where the comparatives are very high (+ 50% in the first quarter of 2018).

Its sales fell by 15% in the country at the start of the year, but the group's finance director confirmed, during a conference call with the press, a return to growth in the second half of the year.

In Morocco, where the group's dairy products are boycotted, sales have fallen by 30%, but trends should be better in the second quarter thanks to more favorable comparisons.

THE WATERS DISTINGUISH

In total, sales of the Specialty Nutrition division increased by 0.4%, while sales of Dairy and Vegetable (PDE) increased by 0.2%, with limited growth in the United States, stability in Europe and still negative trends in France for Activia.

Only the waters stood out with a solid progression of 3.9%.

The group confirmed its 2019 targets, ie organic growth of around 3% and a current operating margin of over 15%.

The long-awaited assignment of the American Earthbound Farm, finally announced April 11th, will contribute to the improvement of the 2019 operating margin and will result in a non-current loss of a net profit of about 100 million euros recorded in the first half .

Inherited from the acquisition of American Whitewave by Danone in 2017, this specialist in organic salads has accumulated losses, with a turnover of around 400 million dollars (355 million euros) in 2018.

On the stock exchange, Danone's share closed at € 69.68 on Tuesday, marking a rise of 13.3% from the beginning of the year, compared with an increase of 18.3% for the European Stoxx food index and of the drink.

At this price level, the valuation multiples are 16.47 times the estimated results for 2020, compared to 19.87 times for the Swiss Nestlé, a difference that is explained, according to some analysts, by questions about the capacity of the French Group to achieve the goal of a margin of more than 16% by 2020.

(Edited by Matthieu Protard)

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