Groupe Danone SA Thursday reported a 20% rise in first-quarter sales, driven by its dairy division—the company’s largest by revenue—and thanks in part to the acquisition of a Russian dairy company.
Sales for the first three months of the year were €4.76 billion ($6.9 billion), from €3.98 billion a year earlier, beating analyst expectations of €4.66 billion.
Sales for the dairy division, whose key brand is Activia, were €2.85 billion, up 23%. Its organic sales—that is, with the effects of currency fluctuations and the recent acquisition of Russia’s Unimilk stripped out—were up 6.5%.
Danone, which also sells bottled waters including Evian and baby products including Aptamil formula, said it expects raw-materials prices to continue to rise and be volatile this year. Aiming to improve margins this year despite that rise, the company is increasing prices of some products and cutting costs, including by reductions in packaging.
In France, Danone is increasing prices by around 2%, Danone Chief Financial Officer Pierre-Andre Terisse said in a conference call Thursday.
Danone forecasts a 6% to 9% rise this year in the cost of raw materials, such as milk and plastic packaging, with the first-half increase at the higher end of this range. The company reiterated its target for organic sales growth this year, at 6% to 8%.
Retailers and consumer-goods companies have been cautious about passing on price increases to consumers while unemployment levels remain high. Analysts say companies with well-known branded goods, such as Danone with its Activia yogurt, are best placed to do so in the current environment because customers seek familiar brands.
In France, signs are emerging that grocers are beginning to raise prices. Grocery giant Casino Guichard Perrachon SA said this week that March marked the beginning of selective increases for the country’s retailers.
European consumer-goods companies Nestlé SA and Unilever UL -0.10% PLC will report sales April 15 and April 28, respectively.
Danone shares have gained more than 6% in the past six months, slightly outpacing the the Paris CAC 40 index, up less than 5%. They closed at €46.84 Wednesday.
Source: WSJ