Danone to sell Dumex in China, keeps goals (updated)

Yashili International Holdings

24/07/2015 08:17

* Danone H1 operating margin 12.12 pct vs 12.27 pct expected 
    * Danone Q2 like-for-like sales up 4.5 pct vs 4.3 pct 
expected 
    * Danone sells Dumex in China, takes 398 mln eur charge 
 
 (Adds background on China and Russia, division breakdowns) 
    By Dominique Vidalon 
    PARIS, July 24 (Reuters) - Danone  DANO.PA  said on Friday 
it was confident of achieving its full-year goals despite an 
overall economic climate that remained difficult, notably in the 
Russian dairy sector, and weak sales at its flagship Dumex 
infant formula unit in China. 
    The world's largest yoghurt maker, with brands including 
Actimel and Activia, reported higher first-half operating profit 
thanks to cost cuts and second-quarter sales that beat market 
expectations, driven by its baby food and bottled water 
divisions. 
    In China, which contributes 7 percent of group sales, Danone 
continued to benefit from Chinese imports of western European 
infant milk formula and strong online sales. 
    But sales of mass-market Dumex continued to lag, and Danone 
said it was selling the unit, taking a 398 million euro ($437 
million) impairment charge that limited profit growth in the 
first half. 
    Danone, which competes globally with Nestle  NESN.VX  and 
Unilever  ULVR.L , is aiming to rebuild its position in China 
after an infant formula product recall in Asia in 2013. 
    Its core dairy division is also grappling with weak consumer 
spending in Europe and Russia. 
    Danone said earlier on Friday it had struck a "preliminary 
agreement" to sell its Dumex unit to Yashili International 
Holdings Ltd  1230.HK .  ID:nL3N1041DQ  
    In return, Danone will deepen ties with one of the country's 
biggest dairy firms, raising its 9.9 percent stake in China 
Mengniu Dairy Co Ltd  2319.HK , Yashili's indirect parent, by 
around 2 percent, Danone Finance Chief Cecile Cabanis said. 
    First-half operating profit rose to 1.381 billion euros, and 
the operating margin rose by 53 basis points to 12.12 percent of 
sales, Danone said. This was below a company-compiled consensus 
of analysts for operating profit of 1.393 billion and an 
operating margin of 12.27 percent. 
    Second-quarter like-for-like sales rose 4.5 percent, above 
the average market estimate of 4.3 percent. 
    For 2015, Danone said it was keeping its targets for 
like-for-like sales growth of between 4 and 5 percent, and a 
slight rise in its operating margin from 12.59 percent in 2014. 
    Danone's dairy division sales fell 1.1 percent in the second 
quarter after rising 0.2 percent in the first, as sales remained 
weak in Europe and Russia. 
    This reflected a 3.1 percent fall in sales volumes, partly 
offset by a 2.0 percent rise in prices. 
    Baby food sales rose 11.1 percent in the second quarter, 
more than the 9.9 percent analysts had expected. 
 ($1 = 0.9112 euros) 
 
 (Editing by James Regan) 
 ((dominique.vidalon@thomsonreuters.com; +33149495432; Reuters 
Messaging: dominique.vidalon.reuters.com@reuters.net)) 
 
Keywords: DANONE RESULTS