Danone Says Fonterra Milk Scare Won't Hurt Goals

By Ruth Bender

PARIS--French dairy giant Danone SA (BN.FR) Friday said the group will still deliver its growth and margin targets this year even though baby food sales will be dented this quarter by the recent scare over Fonterra Co-Operative Group Ltd. products.

Danone said the recall of some of its infant formula products in eight Asian markets this month following a warning that some of Fonterra's products may contain clostridium botulinum, a bacteria that can cause botulism, have had a "significant impact" on the group's Asian baby nutrition division.

"The division's third-quarter sales will be down, but despite this, our Group is on track to deliver organic growth of around 5% this quarter," Chief Financial Officer Pierre-Andre Terisse said in a statement.

Danone said it is working on restoring sales in affected markets and confirmed it will still reach its full-year targets.

Danone aims to reach organic sales growth of at least 5% this year and expects its profit margin to decline by between 0.3 and 0.5 percentage points.

In early August, Fonterra said some of its products may contain clostridium botulinum, a bacteria that can cause botulism, but that there were no reports of illness related to the whey protein. The announcement came after the company's intensive testing of the products, which were produced in May 2012. Fonterra later recalled them in a raft of places, including China, and the scare led to trade bans on New Zealand dairy products by Russia and some other countries.

The group said it welcomes the findings from New Zealand's government, which said on Wednesday that the global recall earlier this year of some Fonterra dairy products was unnecessary.

"None of the many tests conducted by the group, both before and after this critical period, showed any contamination whatsoever of its products with Clostridium botulinum," Danone said in a statement.

Write to Ruth Bender at [e-mail]

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