* Q4 like-for-like baby food sales decline slows to 6.9 pct
* Eyes 2014 like-for-like sales growth of 4.5-5.5 pct
* Sees stable operating margin plus or minus 0.2 pct
* Asia infant formula inventories back to normal levels -CFO
(Adds details from CEO call, analysts)
By Dominique Vidalon
PARIS, Feb 20 French food group Danone
said group sales growth would accelerate in 2014 as a recovery
in European dairy gathers momentum and that it aimed to return
to strong profitable growth from the second half of the year.
The world's largest yoghurt maker also said it was confident
about prospects in China despite accusations there of bribery
and overpricing, and it hopes to rebuild its baby food business
in Asia after an infant formula recall dented profits.
To reduce its dependence on lower-growth Europe, Danone has
been expanding in emerging markets, notably in China, where
previous food-safety scares have boosted demand for foreign baby
milk formula. China now accounts for 20 percent of its baby food
sales, making it the No. 2 contributor after dairy.
"Our priorities for 2014 are to continue the recovery in
Europe, aiming to stabilise the top line of dairy products in
Europe, expand in emerging markets and rebuild positions in baby
food in Asia," Chief Financial Officer Pierre-Andre Terisse told
a conference call with journalists.
For this year, Danone set a goal of underlying sales growth
of 4.5 percent to 5.5 percent. It also said its 2014 operating
margin would be stable within a range of 20 basis points lower
to 20 basis points higher.
"Danone's reporting/guidance was slightly disappointing but
it was not a disaster which, after a couple of years of more
significant disappointments, is probably good news for Danone,"
Bernstein analyst Andrew Wood said.
By 1243 GMT Danone shares were up 1.7 percent, among the top
gainers on the CAC-40 index of French blue chips.
GRADUAL CHINA RECOVERY
China contributes six percent of group sales but the maker
of Bledina baby food, Evian and Volvic water and Activia and
Actimel yoghurt faced a variety of problems there last year.
In July 2013 it was hit by a fine and had to cut prices in
China after a milk-powder price-fixing probe.
Then in August it had to recall infant formula products in
Asia due to a health scare that began with concerns raised by
New Zealand-based supplier Fonterra. A bacteria found by
Fonterra turned out to be less harmful than feared. Danone is
now suing the company for unspecified
Danone said on Thursday the recall in Asia cost the group
370 million euros in lost sales last year and shaved 26 basis
points from its operating profit margin.
In the fourth quarter alone the recall cut 200 million euros
($275 million) off the baby food division's sales.
Danone said that baby food sales fell 6.9 percent in the
fourth quarter after falling 8.6 percent in the third quarter.
This compared with analysts' average forecast for an 8.7 percent
decline in a company-compiled consensus.
Infant formula inventories were however now back to normal
and recovery plans to get sales back on track were being
deployed in the countries affected and had some impact with the
pace of recovery varying from market to market.
Chairman and Chief Executive Franck Riboud told analysts,
"The fundamentals of China are still good. Families are still
looking for the best products for their child... We can even
look to upgrade our product range in China."
In China and in Australia New Zealand, the trend was very
gradual, the statement said
Danone's market share in China, which had fallen to 12
percent in October 2013 after the Fonterra recall from 19
percent in July 2013, was now at 14 percent.
Last week Danone said it was spending 486 million euros to
lift its stake in China's top dairy firm, aiming to tap into
booming local demand and secure greater control over supply
quality in a region often hit by food safety
"We will not have the time nor the money to fight alone in
China. I think it is a really good idea to link with local
players," Riboud said.
SILENT ON MEDICAL NUTRITION
Danone said on Thursday that its 2013 operating margin fell
by 81 basis points to 13.19 percent in 2013, in line with a
company-compiled consensus of analysts.
Lower sales in Europe combined with a higher-than-expected
rise in milk and dairy ingredient prices hit margins, it said.
Underlying sales stripping out acquisitions, divestments and
currency effects grew 4.8 percent to 21.298 billion euros in
2013, above analysts estimates of 4.7 percent growth.
The drivers were the strong performance of the waters
division and the robust performance of dairies. Dairy products
account for 60 percent of group sales.
This was in line with Danone's 4.5-5 percent forecast range
given in October and topped the 4.6 percent achieved by Swiss
The Medical Nutrition business showed 6.4 percent growth in
the fourth quarter after a 5.6 percent growth in the third.
Reuters reported last week that Danone was mulling its sale
as it expands its dairy business in higher-growth emerging
markets. Terisse declined to comment on Thursday.
The stock trades at 17.57 times 12-month forward earnings,
against 18.75 times for Nestle and 17.42 times for Unilever.
($1 = 0.7271 euros)
(Editing by Louise Ireland)