PARIS (Reuters) - Higher sales of baby foods helped spur an 18.7 percent rise in first-quarter sales at Groupe Danone SA <DANO.PA> and the French company said on Monday it was on course to meet its 2008 financial targets.
By Sudip Kar-Gupta and Noelle Mennella
PARIS (Reuters) - Higher sales of baby foods helped spur an 18.7 percent rise in first-quarter sales at Groupe Danone SA <DANO.PA> and the French company said on Monday it was on course to meet its 2008 financial targets.
The maker of Actimel yoghurt and Evian bottled water said sales rose to 3.76 billion euros ($6 billion), led by growth in its baby nutritional products division which was boosted by last year's takeover of Dutch baby food maker Numico.
Like many food companies, Danone has countered soaring food prices in recent months by raising its own prices. It said in an analyst presentation that despite "unprecedented price increases," it had stable sales volumes for its dairy products.
!ADVERTISEMENT!Global food prices have risen sharply, driven by stronger demand, poor weather in some countries that has ruined crops and an increase in the use of land to grow crops for biofuels.
Danone's like-for-like sales growth, excluding the impact of acquisitions and foreign exchange rate fluctuations, reached 11.4 percent in the first quarter.
Danone restated its 2008 target of like-for-like sales growth of between 8 and 10 percent and for underlying earnings per share growth of at least 15 percent.
"Based on the group's overall performance in the first three months of the year, we are confident of achieving our targets for 2008 both in terms of growth as well as profitability," Danone Chairman and Chief Executive Franck Riboud said in a statement.
Danone shares initially fell in line with a broader stock market decline, but later rose as analysts welcomed the figures. "Danone put out a good set of numbers," said fund manager Frederic Hamm at Agilis Gestion.
Danone shares were up 1.1 percent at 55.95 euros in early afternoon trade, among the top gainers on France's benchmark CAC-40 index. Danone has a stock market value of around 29 billion euros.
The CAC-40 was down 0.4 percent while the DJ Stoxx European food and beverages sector was up 0.4 percent.
WAHAHA DISPUTE
Danone is one of world's top ten food groups and is the biggest in the world in dairy products and bottled water.
In February the group raised its financial targets for 2008 and beyond after saying its 2007 net profit had tripled thanks to a 3.1 billion euro capital gain on the sale of its biscuit business.
In March, rival Nestle SA <NESN.VX> also issued a confident outlook. Nestle, the world's largest food group, said it expected growth in 2008 to be similar to last year.
However, one issue that has dogged the French company has been a long-standing dispute with its estranged Chinese partner Wahaha over a joint venture.
Danone co-chief operating officer Emmanuel Faber told analysts on a conference call Danone remained "optimistic" it could resolve the spat with Wahaha.
British brokerage Collins Stewart kept a "sell" rating on Danone shares, due to uncertainty about Wahaha and speculation Danone might be interested in Mead Johnson, the baby food business which the Financial Times reported is up for sale by U.S. drugmaker Bristol-Myers Squibb <BMY.N>.
"Despite press speculation last week, there is no mention of a resolution with Wahaha and we think the market will probably attribute a degree of M&A (merger and acquisition) risk to Danone, until such time as the Mead Johnson situation is resolved," Collins Stewart said in a note.
Danone shares have fallen around 8 percent since the start of 2008, compared with a 9 percent decline in the DJ European food and beverage sector.
(Editing by Andrew Hurst and David Holmes)
