Danone share price up, third-quarter revenue beats forecast due to rebound in Asia

On Wednesday, Danone SA reported better-then-expected Q3 revenue, boosted by improving infant food sales in Asia, while it is still trying to recover from a large product recall in the region.

The French yogurt maker said that total Q3 sales rose to €5.42 billion from €5.26 billion, up 3% from a year earlier. On an organic basis, excluding currency effects, acquisitions and disposals, like-to-like sales marked a 6.9% increase compared to a year earlier and topped the 5.8% increase analysts had expected. Over the first nine months, sales fell to €15.883 billion from €16.317 billion a year earlier, but marked a 3.8% increase in organic growth.

Danone reported a 19.2% spike up in like-for-like sales in its early-life nutrition division, coupled with a 0.7% increase in like-for-like sales in its core fresh dairy segment.

In Europe the company said that fresh dairy sales were down 5%, continuing a trend that started in the first half of this year. However overall like-for-like sales in Europe were up 2.8% during the quarter ended September 30.

In the U.S. sales were flat, as Danone was forced to face rough competition, particularly in Greek-style yogurt.

Last year in Asia the company suffered a 70% decrease in sales in some markets after one of the its main suppliers issued a food-safety warning that later turned out to be false. However, Danone had to pull thousands of products from eight markets in the region.

In an attempt to jump-start growth in China, Danone launched new products, but that was not an easy task for a brand that was once associated with a safety warning.

“We have eradicated the crisis effect outside of China,” Danone’s Chief Financial Officer Pierre-André Térisse said. “In China, we are progressing well.”

Danone said that it would not change its full-year guidance and it is expecting a like-for-like sales growth between 4.5% and 5.5%, free cash flow of about €1.5 billion excluding exceptional items and stable operating margin.

“Despite a difficult economic and political climate during the summer, notably with the Ukraine crisis, we are holding our course and maintaining our targets” Mr. Terisse said on a conference call.

Danone SA closed on Tuesday at €50.49 in Paris. On Wednesday it gained 3.09% to trade at €52.05 at 12:01 GMT, marking a one-year change of -1.87%. The company is valued at €32.51 billion. According to the Financial Times, the 26 analysts offering 12-month price targets for Danone SA have a median target of €52.50, with a high estimate of €65.00 and a low estimate of €44.00. The median estimate represents a 3.98% increase from previous close of €50.49.