Danone Sales Growth Beats Market Expectations on Higher Volumes — Update

By Michael Susin

Danone reported third-quarter organic revenue growth that exceeded market expectations after a slower pace of price increases lifted sales volumes.

The French food company behind Activia yogurt and Evian water cautioned that it was facing a challenging market environment, though its update showed that sales volumes picked up as price hikes eased. The company said a strong performance in North America contributed to its results.

After a couple of years of raising prices to cover cost inflation, producers of packaged food are trying to strike a balance between pricing and volume growth. Some companies are moderating the pace of price increases, offering discounts and launching new products in a bid to lure shoppers back to branded products.

Danone on Thursday posted sales growth on a like-for-like basis of 4.2% for the third quarter. Analysts had expected growth of 3.9%, according to consensus estimates compiled by the company.

The company said the sales increase was mainly driven by higher volumes, up 3.6%, while prices contributed with a 0.7% increase.

Danone's organic sales growth accelerated slightly in the last quarter from 4.0% in the second quarter, when volumes were up 2.9% and prices contributed with a 1% increase.

Barclays analysts said the update provided evidence of the work made to bring back sustainable volume growth.

Sales on a reported basis fell to 6.83 billion euros ($7.36 billion) from 6.91 billion euros in the year earlier, missing market expectations of 6.85 billion euros. Reported sales were dragged by the depreciation of several currencies against the euro.

Danone said it continued to expect like-for-like sales growth in 2024 of between 3% and 5% and a moderate improvement in recurring operating margin.

For the year as a whole, analysts expect a 1.8% drop in total net sales for the year to 27.12 billion euros, with like-for-like growth of 4.0%. Analysts expect a contribution of 1.5% from prices and of 2.5% from sales volume.

Investors are closely watching corporate results for clues on whether food manufacturers can hold on to recent price hikes in a context of weaker demand. Nestle and PepsiCo recently cut their respective sales outlooks.

Danone said its performance was supported by North America, where comparable sales grew 5.8%, driven by its high-protein, coffee and water products. In the company's China, North Asia and Oceania region, like-for-like sales were up 8.0%.

The company has been trying to reshape its portfolio in recent years, shedding assets it saw as underperforming and pushing deeper into health and nutrition segments, in a bid to cater to changing consumer tastes.

Write to Michael Susin at michael.susin@wsj.com

(END) Dow Jones Newswires

October 24, 2024 03:26 ET (07:26 GMT)