Danone's water strategy not enough

Related tags Cent United states dollar Profit

Danone's move into the high profit home and office delivery sector
of the bottled water market made little impact on first half
results which were instead reduced by negative exchange rates and

Danone​, the diversified French food and drink group, saw its sales drop by 8 per cent during the first half of 2003 with currency exchange rates and disposals offsetting the boost from expansion in the bottled water sector.

Turnover for the half was €6.6 billion, down from €7.2 billion a year earlier, although like-for-like sales growth was 7.2 per cent, excluding the impact of currency exchange rates (-8.2 per cent) and disposals (-6.4 per cent). Sales were also affected by the SARS outbreak in Asia during the second quarter.

Dairy sales dropped 8 per cent to €3.1 billion, partly due to the sale of the Galbani business, although like-for-like sales were ahead 9.8 per cent. Beverage sales slid 9 per cent to €1.9 billion, again in part due to disposals; like-for-like sales would have been 8.8 per cent higher. Biscuit sales dropped 6 per cent to €1.5 billion, but would have risen by 1.1 per cent on a like-for-like basis.

Operating profits for the half also declined, falling by 1.2 per cent to €787 million, while net profits remained unchanged at €402 million, although actual figures for 2002 were losses of €630 million because of significant exceptional charges of €1 billion.

So a transitional first half for the dairy, bottled water and biscuit group, with little to show for its rapid expansion into the home and office delivery sector in the last six months.

The group maintained its forecasts for 2003 - like-for-like sales growth of 5 to 7 per cent - and will take heart from good operating profit growth of around 12 per cent in both the dairy and beverages sector, but the impact of disposals is still likely to impact second half performances.

Related topics Manufacturers Soft drinks Danone

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