Danone 1st Half Net Income Rose, Despite Morocco Boycott -- Update

(Adds quote from CEO, background on Morocco boycott, details on second quarter sales, details on forward-looking statements)

 
   By Anthony Shevlin

Danone SA (BN.FR) said Friday that first-half net income rose 24% on the year, boosted by growth in its specialized nutrition division, although a consumer boycott in Morocco adversely hit performance.

The French food company said net income was 1.2 billion euros ($1.40 billion), slightly up on a consensus provided by Danone of EUR1.12 billion.

Sales in the first half were EUR12.5 billion, up 4% on a new like-for-like basis that integrates the company's acquisition of WhiteWave.

Danone's operating income in the first half was hit by a consumer boycott in Morocco, which began in April in protest against rising consumer prices.

Operating profit was EUR1.09 billion, compared with EUR1.58 billion the year previous.

Second-quarter group sales were EUR6.41 billion, up 3.3% on a new like-for-like basis. However, volume growth fell 0.5%.

Reported sales in the second quarter fell 4.4% on the year, reflecting a negative currency hit.

Sales in Morocco were down around 40% in the second quarter, the company said, which in turn had a negative effect on Danone's essential dairy and plant-based international division. Analysts at Bryan Garnier expect the boycott to hit the company's organic sales growth by 0.8% over the year.

Last month Danone Chief Executive Emmanuel Faber said he fully respects the choice of the Moroccans who have decided to no longer buy the brand, but added that he "deeply regrets it."

Second-quarter sales in EDP international fell 2.4% on a new like-for-like basis. Excluding Morocco, the division was back to profitably growth with sales up 0.4%, the company said.

"Excluding the exceptional situation in Morocco, all reporting entities delivered growth in the second quarter," said Mr. Faber, who added that the company's first-half performance was achieved "despite ongoing volatility and unexpected headwinds in some markets."

Looking forward, the company said its focus will remain on accelerating growth and maximizing efficiencies.

"In 2018, the company will progress towards its 2020 ambition through further sales growth and an improved recurring operating margin," it said.

Danone targets double-digit recurring EPS growth at constant exchange rate for 2018, excluding the effect of the Yakult transaction.

Write to Anthony Shevlin at anthony.shevlin@dowjones.com

(END) Dow Jones Newswires

July 27, 2018 02:24 ET (06:24 GMT)

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