Danone net income falls amid Pepsi takeover speculation

by Jeff Gelski
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PARIS — Two Paris brokerages, Fideuram Wargny and Ixis Securities, downgraded Danone after the Paris-based company reported Thursday that first-half profit for the fiscal year dropped 37%.

The brokers said prospects of a takeover bid by Purchase, N.Y.-based PepsiCo, Inc. had dimmed following Danone’s release of second-quarter and first-half results.

Danone shares fell 4.2% to €88.75 ($107.06) in Paris trading on Thursday. Shares had risen on Tuesday and Wednesday amid speculation of a PepsiCo takeover.

Jacques Chirac, the French president, on Thursday said he vowed to defend Danone and other French companies from any foreign takeover.

Earlier in the week, Franck Riboud, chief executive officer of Danone, said he was taking the speculation of an impending takeover bid from PepsiCo seriously.

Danone for the first half of fiscal year 2005 reported net income of €445 million, including €347 million attributable to the parent and €98 million attributable to minority interests. In the first half of fiscal year 2004, Danone reported net income of €636 million, including €547 million attributable to the parent and €89 million attributable to minority interests.

Negotiations to sell participation in the HOD business in the United States are at an advanced stage, which led the company to book a provision of about €200 million (net of tax) in 2005 first-half accounts.

Danone’s net sales for the first half were €6,437 million, up 3% from €6,257 million in the first half of the previous year.

Sales rose 7.2% in fresh dairy products, 8.6% in beverages and 1.3% in biscuits and cereal products in the first half.

Danone reported trading operating income in the first half of €857 million, which compared with €820 million in the first half of the previous year. By business line, trading operating profit was €507 million for fresh dairy products (compared with €463 million in the previous year’s first half), €242 million for beverages (compared with €279 million) and €153 million for biscuits and cereal products (compared with €134 million).

Unallocated items reported a trading operating loss of €45 million, which compared to a loss of €56 million in the previous year’s first half.

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