Danone beat second-quarter sales expectations on Wednesday, boosted by higher sales volumes as price hikes slowed.
The news from the French company sent shares in the world’s largest yoghurt maker up 4% in early trade.
Results
The maker of Activia yoghurt, Evian water and Aptamil infant milk kept its forecast for like-for-like sales growth of between 3% and 5% in 2024 and moderate improvement in recurring operating margin.
Sales volumes rose by 2.9% in the second quarter, compared to a 2.1% increase expected by analysts polled in a company-provided consensus.
The company raised its prices by 1% during the period, less than the 2.9% increase in the previous quarter, and 1.5% seen in the consensus.
Net-net the prices will remain positive in the second half of the year, chief financial officer Juergen Esser said on a call with analysts.
Consumer goods companies like Nestlé and Unilever are slowing down price hikes after three years of steep increases following the pandemic, as shoppers hit by a cost-of-living crisis turned to cheaper, non-branded alternatives.
Nestlé in particular flagged a faster-than-expected slowdown in pricing in its half-year report last week as it scrambled to regain market share.
Bernstein analyst Bruno Monteyne said in a note, “Market doubts of what pricing pressures will do to most consumer stocks in coming quarters will get stronger.”
Future
Danone said its like-for-like sales rose 4.0% led by the increase in volume mix, reaching €6.94 billion in the quarter that ended in June, above analysts’ expectations of a 3.7% growth.
The company’s quarterly results continued the trend of combining a big beat in volumes and a big miss in pricing, thus raising questions about the future impact on margins, Monteyne said.
He added, “The spectre of material negative real pricing (through promotional activity or other) is strong.”
Danone’s recurring operating income for the first half of 2024 was €1.75 billion, with a margin of 12.69%.
This was marginally above analysts’ consensus, which expected a recurring operating profit of €1.73 billion and a margin of 12.6%.
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