'Challenging environment' hampers Groupe Danone

by Keith Nunes
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PARIS — For the first half of fiscal 2008, ended June 30, Groupe Danone posted net income of €701 million ($1,099 million), or €1.47 per common share, compared with net income of €663 million, or €1.38 per share, during the first half of fiscal 2007. Sales for the first six months of 2008 were €7,691 million, up from €6,508 million for the same period last year.

"The 9.6% sales growth, the solid margin improvement of +35 bps and the strong e.p.s. growth of 16.6% in the first half of 2008 are a clear testimony to Danone’s ability to deliver superior and profitable growth in a challenging environment," said Franck Riboud, chairman and chief executive officer. "In those markets where we have recently started to witness softness in consumer spending, our teams have already put all the necessary wheels in motion to be able to make the necessary adjustments and accelerate innovations programmed to ensure and strengthen the competitive of the group and its brands."

During the second quarter of 2008 sales increased 17.6% to €3,931 million compared with €3,341 million during the second quarter of 2007.

Despite negative volumes resulting from price increases and some challenging markets, Groupe Danone’s Fresh Dairy division had sales of €4,358 million during the first half of the year. Overall market conditions in France deteriorated and affected volumes, but the company said the rest of Europe generated solid growth with strong performances in the United Kingdom, Russia and Turkey.

For the Waters division, sales declined from €2,139 million during the first half of 2007 compared with €1,514 million during the same period in 2008. The company said the performance was caused by a difficult market situation in France, Spain and the U.K. as well as bad weather conditions across Europe.

For the rest of 2008, Groupe Danone estimates it will experience sales growth between 8% and 10%, and it expects earnings per share growth of at least 15%.

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