July 27, 2018 / 6:04 AM / a year ago

Danone keeps growth outlook despite Morocco boycott

PARIS (Reuters) - Danone (DANO.PA) is counting on baby food sales in China to help power annual earnings higher despite setbacks in Morocco and Brazil that slowed second quarter sales, the French food group said on Friday.

FILE PHOTO: The logo of French food group Danone is pictured during the company's 2017 annual results in Paris, France, February 16, 2018. REUTERS/Pascal Rossignol/File Photo

“We are entering the second half with an operating model capable of offsetting these headwinds,” Chief Financial Officer Cecile Cabanis said on Friday, referring to a boycott in Morocco and a trucking strike in Brazil.

Danone “will progress towards its 2020 ambition through further sales growth and an improved recurring operating margin,” the group said in a statement.

Second-quarter like-for-like sales rose 3.3 percent, topping the 3.1 percent expected by analysts.

This beat the 2.6 percent reported by rival Nestle (NESN.S) but marked a slowdown from 4.9 percent in the first quarter.

Danone is targeting like-for-like sales growth of 4-5 percent by 2020 and an operating margin above 16 percent. It reported a margin of 14.27 percent for the first half.

Shares in the world’s largest yoghurt maker were up 1.9 percent in early trading. Brokerage Liberum described the results as “solid” and kept its “buy” rating on Danone.

Operating profit rose 7.9 percent in the first half helped by cost controls and its takeover of U.S organic food maker WhiteWave last year.

Chinese demand for baby food and sales at its water division remained solid while its dairy business in North America returned to growth in the second quarter.

The boycott in Morocco was launched earlier this year on social media against what protesters say are unfair prices set by large companies.

Danone, which makes 6 percent of its group sales in Morocco, said last month its local dairy unit Centrale Danone (CDA.CS) had lost more than 50 percent of its fresh milk market share due to the boycott.

Cabanis said Danone was seeking to regain consumer trust.

“Sales continued to decline in Brazil where the truckers’ strike exacerbated already difficult market conditions,” Danone said in its statement.

Reporting by Dominique Vidalon; editing by Sudip Kar-Gupta and Jason Neely

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