PARIS — Danone S.A. plans to merge its Dumex Chinese infant formula business with partner company Yashili International Holdings Ltd. Danone said it will use proceeds from the sale to increase its stake in state-linked milk producer China Mengniu Dairy Co. Danone owns 25% of Yashili together with Mengniu, which owns 51% of the company. The company said it would raise its 9.9% stake in Mengniu by approximately 2 percentage points and would take a €398m impairment loss of Dumex in China.
The move aligns with new chief executive officer Emmanuel Faber’s strategy to return the company to sustainable growth.
|Emmanuel Faber, c.e.o. of Danone.|
“We have three priorities for the year,” Mr. Faber said during a July 24 earnings call with financial analysts. “One is to ensure that our brand and businesses are even more competitive to serve our consumers’ needs in a complex environment. Second, we want to continue to generate profitable growth, as we’ve done in the second half of 2014 and going forward and set the conditions for that growth to be sustainable. And third, preparing and gradually rolling out our Danone 2020 roadmap with a view to create a shared value agenda for all our stakeholders.”
For the first half of the year, Danone reported net income of €666 million ($739.2 million), up from €475 million for the prior-year period. Consolidated sales for the six-month period rose 8.8% on a reported basis to €11,392 million ($12,644.8 million) from €10,467 million the year before. Excluding the impact of exchange rates and scope of consolidation, sales increased 4.6%, reflecting a 0.7% rise in sales volume and 3.9% rise in value. Performance reflected a decline in sales in the fresh dairy products division, continued growth in the waters and early life nutrition divisions, and solid results in the medical nutrition division.
For the second quarter, consolidated sales climbed 9.5% to €5,921 million ($6,572.2 million), or 4.5% on a like-for-like basis, from €5,406 million for the comparable quarter, which included a 1.5% rise in sales volume and 3% rise in value.
Other growth plans under way at Danone include an overhaul of the fresh dairy products business in Europe, where margins rose significantly during the first half of the year.For 2015, Danone expects to deliver organic sales growth between 4% and 5%, assuming economic conditions will remain difficult and unstable overall and the cost of main raw materials and packaging will rise moderately in the year.