Paris (Reuters) -Danone raised its estimate for annual sales growth after its like-for-like sales in the second quarter beat analysts’ expectations. This was due to the strong demand for baby food and bottled water, even though the company had to raise prices to cover higher costs.
Danone, which makes more yogurt than any other company in the world, said it now expects like-for-like sales to grow by 5–6% in 2022, up from 3–5% previously.
By 7:05 GMT, its stock had gone up by 3%, to 56.74 euros.
One of the best parts of the quarter was that sales in the nutrition business, which includes baby formula and medical nutrition, went up by 11.4%.
Infant milk formula sales increased by 5 to 10% in China, a very important market.
Danone also increased exports of Neocate specialised formula and Aptamil baby formula to North America to make up for shortages.
Abbott Laboratories (NYSE:ABT), a big company, recalled dozens of types of its Similac, Alimentum, and EleCare formulas in February, leaving U.S. families with one of the most urgent food shortages in recent history.
Danone’s brands include Evian and Badoit water, Activia yoghurt, and Aptamil baby formula. The company’s quarterly like-for-like sales grew by 7.7 percent, which was higher than the 5.6 percent growth that analysts had predicted.
CEO Antoine de Saint-Affrique said in a statement, “The quality of what we delivered in the first half is encouraging, but this is just the beginning of our Renew journey. We believe there is still a lot we can do.“
Saint-Affrique, who became CEO in September 2021, has a plan to turn things around, but the costs are going up and there are a lot of unknowns because Russia invaded Ukraine, which made Danone stop investing in the country.
Due to higher input costs, the company said that its first-half recurring operating margin dropped from 13.1% to 12.1% in the first half of 2021. It also said again that it expected its recurring operating margin for the whole year to be above 12 percent, down from 13.7 percent in 2021.
“Danone looks like a repeat of Unilever (NYSE:UL), with prices that beat expectations on the upside and input costs that keep margins where they should be. The good news is that China Infant Milk Formula is still going strong, “analysts at Jefferies said.
Unilever Plc raised its full-year sales forecast on Tuesday after beating underlying sales forecasts for the first half of the year. The company that makes Dove soap and Knorr stock cubes also raised prices to cover rising costs.
