Danone Lowers Sales Guidance, Cites Spain, Activia -- Update

By Nick Kostov

PARIS--Danone SA (BN.FR) on Monday lowered its sales guidance for this year, citing problems rolling out the rebranding in Europe of its Activia yogurt product and weakness in the Spanish market.

Danone's chief financial officer, Cecile Cabanis, told analysts the company would miss its previous target of 3%-5% sales growth for the year by about 0.1 percentage point. Still, the company raised its margin target for the second time this year as it continued to keep a tight lid on costs.

"The stabilization of dairy Europe will take longer than anticipated," Ms. Cabanis said. The fourth quarter "was an important step for our dairy relaunch and we have to acknowledge that we're not yet where we wanted to be."

At the same time, Spain "continues to be negative," Ms. Cabanis said, adding that "Spain is a big market and it impacts the overall performance."

Its stock fell by up to 3% Monday.

Danone's Chief Executive Emmanuel Faber, who took the reins of the company in October 2014, has vowed to deliver "strong, profitable and sustainable growth" by 2020, in part by restructuring its fresh dairy unit where he has cut costs and focused on its most popular brands.

In particular, Danone has tried to position Activia, a yogurt with sales of about 1.5 billion euros ($1.57 billion) in Europe, as a more high-end product to beat off competition from cheaper rivals. Danone was forced to drop the health claims it made for Activia in recent years after the European Union cracked down on foods that advertise health benefits without sufficient scientific backing.

In June this year, the company said it would target an improvement in its like-for-like recurring operating margin, its most recent profitability target, of between 0.5 percentage point and 0.6 percentage point. Ms. Cabanis said the company now expected to beat this target by as much as 0.1 percentage point.

(Matthew Dalton contributed to this article.)

-Write to Nick Kostov at [e-mail]

(END) Dow Jones Newswires

December 19, 2016 06:32 ET (11:32 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.