* Q1 sales 3.978 bln euros vs Reuters estimates 3.885 bln
* Q1 like-for-like sales up 7 pct vs 5.9 pct forecast
* Keeps 2010 financial goals, climate still challenging
* Withdraws 2 applications on Activia, Actimel from EFSA
* Shares down 2.4 percent, underperform sector
(Adds CFO, analysts comments, updates shares)
By Dominique Vidalon
PARIS, April 15 French food group Danone
(DANO.PA) withdrew health claim applications on two of its
bestselling yoghurts on Thursday and remained cautious on its
full-year goals amid a soft economic climate.
The world's largest maker of yoghurts also said
first-quarter like-for-like sales grew 7 percent, more than 5.9
percent predicted in a Reuters poll of analysts. But it stuck to
its full-year targets of stable operating margin and
like-for-like sales growth of at least 5 percent.
Danone, which competes with Nestle NESN.VX and Unilever
(ULVR.L) (UNc.AS), said it would remove from a European review
two applications on health claims it makes on Activia and
Actimel, citing confusion about what scientific evidence was
required from the company under the process to validate the
The decision comes as several brokers recently voiced
concern the European Food Safety Authority (EFSA) might reject
Danone's health claims, saying this could hurt the group's image
and stock price. [ID:nLDE62F1A0]
Oddo Securities analyst Pierre Tegner said that Danone's
decision to withdraw from the EFSA process was "smart" as it was
"wiping out the stick that could beat them".
Activia, a yoghurt that Danone claims aids digestion, and
Actimel, a dairy drink it says helps strengthen the body's
defences, had combined 2009 sales of 3.7 billion euros.
Danone can still print the health claims on Activia and
Actimel but it has stopped advertising the claims in some
countries including France and Britain, where the products
improved their performance in the first quarter 2010 from the
last quarter 2009.
The outcome of the review is closely watched by investors as
validation of Danone's health claims would be a strong marketing
tool for the company, whose strategy focuses on well
differentiated dairy brands with a health proposition, sold
often at a higher price.
Danone stock, which has gained nearly 9 percent this year,
was down 2.4 percent at 45.49 euros by 1025 GMT, while the
European Food and Beverage index .SX3P was off 0.89 percent as
investors focused on the guidance and implications from the
Chief Financial Officer Pierre-Andre Terisse told analysts
that Danone's decision to eventually re-apply for the health
claims would depend on whether the EFSA's requirements to
validate the claims were sufficiently clarified at a meeting
slated for June 1.
For Danone, the EFSA review process has not been a smooth
road. In April 2009, it already withdrew its applications
regarding Activia and Actimel as there was confusion about what
data the EFSA needed. Danone filed new applications covering the
two products late last year and early this year.
Quarterly sales rose 8.3 percent on a reported basis to
3.978 billion euros, with all divisions contributing, the owner
of Evian and Badoit bottled water and Bledina baby food said.
The revenue figure beat expectations of 3.885 billion euros
in a Reuters poll of nine analysts.
"Our performance in the first quarter, coupled with our
leading market positions and brands, allow us to confirm our
targets for 2010," Chairman and CEO Franck Riboud said in a
Danone said it expected to continue facing a "challenging
financial, economic and social environment in 2010, with
continued difficult consumption trends in western economies,
weak emerging currencies and inflation of raw materials".
"We accept that it is early in the year and management is
reluctant to increase guidance at this point ... but we continue
to believe that Danone's 2010 guidance is very prudent" said
Sanford C. Bernstein analyst Andrew Wood.
Danone achieved a 12.5 percent rise in volume sales of its
All regions delivered double-digit sales, except Western
europe where sales were stable compared with the first quarter
2009. Dairies make the bulk of group revenue.
In 2009, Danone passed on to its customers lower milk prices
through the so-called Reset initiative, whose benefits only
became fully visible in the second half of the year and
continued in the first quarter 2010.
(Reporting by Dominique Vidalon; Editing by Jon Loades-Carter)