Groupe Danone SA, the bottler of Evian mineral water, reported annual profit that beat analysts' estimates on sales of health-enhancing Activia yogurt, sending the shares climbing to a record.
Net income of Groupe Danone SA was €1.35 billion ($1.8 billion) for 2006, above the €1.19 billion median estimate of seven analysts surveyed by Bloomberg. Profit fell 7.5% from the prior year's €1.46 billion after gains from the sale of the Paris-based company's HP Sauces unit weren't repeated.
Revenue advanced 8.1% to €14.1 billion. Danone, the world's biggest yogurt maker, has expanded into emerging markets such as China as growth slows in Europe. It has introduced Activia, which aids digestion, and Actimel, an immunity-boosting dairy drink, in countries where yogurt wasn't already part of the daily diet. Now the company is looking to Essensis yogurt, which it says improves skin complexion, to boost sales.
„They are firing on all cylinders,” said James Amoroso, an analyst at Helvea AG in Zurich with an „accumulate” recommendation on the stock. „They are focused on the right product categories and the right regions.” Sales beat the €14 billion median estimate in a survey of analysts.
Fourth-quarter revenue rose 12%, the company said in a statement. Danone stuck to its goal of boosting sales by between 6 and 8% in 2007 and raising earnings before interest and taxes by between 7% and 10%. „I've seen the figures for January, and I think the Q1's growth is going to be closer to 8% than 6%,” CEO Franck Riboud said at a press conference. „For the full year, I can't say.”
Danone shares rose as much as €4.90, or 4.1%, to €125.10 in Paris and were up 3.7% at €124.70 at 11:50 a.m. local time. They have gained 35% in the past year, twice as much as the 15-member Bloomberg Europe Food Index. Annual sales climbed 9.2% to €7.93 billion at Danone's yogurt unit, its largest on that basis. Revenue from health-enhancing goods such as Activia rose 15%. Gains in Latin America, the US and Russia compensated for slower domestic sales, the company said.
„Our growth is fundamentally tied to innovation and our health products,” Chief Financial Officer Antoine Giscard d'Estaing said on a conference call with journalists. Danone started selling three health-enhancing products in the US in January to spur consumption of yogurt, which rose 10% last year after the introduction of Activia.
Dannon Co., the company's US unit, said earlier this month it aims to double the amount of yogurt it makes over three years. Sales of Activia in the country have exceeded Danone's forecast by almost three times since its introduction there in January 2006. Americans eat about 4 kilograms of yogurt each a year on average, about a tenth as much as Europeans, according to Danone.
The company groups the US with China, Russia, Indonesia and Mexico as its five „new frontier” markets. Danone said it has sold 85 tons of Essensis since the yogurt's introduction in France on February 1. Sales began earlier this week in Italy and will start sooner than planned in Spain and Belgium.
Health-promoting products now generate about 65% of sales, the CEO said. The European Union should impose stricter limits on health-related claims that companies can make on food labels to prevent unfounded assertions by competitors, he said.
Full-year sales at Danone's beverage division increased 15% to €3.94 billion, led by Asia. The company will buy more shares of China Huiyuan Juice Group Ltd., the nation's largest maker of pure-juice drinks, to maintain its stake after the Asian company had an initial public offering, Riboud said.
Danone purchased a 22% holding in China Huiyuan last year. The company may increase the stake eventually, according to Riboud.” I was surprised by their strong beverage performance in Asia,” Amoroso said. Profitability in developing countries is approaching that of the entire company, the CEO said. Annual sales at Danone's cookie division gained 3.1% to €2.20 billion on increased consumption in France, Spain and Italy. (Bloomberg)