By Ruth Bender
PARIS-- Danone SA on Thursday said sales growth this year would
be broadly steady, despite the challenge to rebuild its troubled
baby-food business in the crucial Chinese market, which hit the
company's profits more sharply than expected.
Last year, Danone was hurt by massive fallout from a food-safety
scare and subsequent product recall in China stemming from a major
supplier.
The French food company said net profit fell to 1.42 billion
euros ($1.95 billion) in 2013 from EUR1.67 billion in the prior
year, below consensus expectations, as operating profit also
declined, weighed down by costs related to the product recall as
well as charges linked to its cost-savings plan in Europe.
Total sales rose 2.1% to EUR21.3 billion in the year, also below
expectations, as strong growth in the U.S. and Eastern Europe
helped offset the decline in China, still-sluggish growth in
Western Europe and the impact of currency shifts.
Danone said it lost EUR370 million in sales in total last
year--slightly more than the company forecast in October--because
of the safety warning from Fonterra Co-Operative Group Ltd. in
August, which triggered a recall of hundreds of thousands of cans
of baby formula across Asia.
The incident prompted Danone to issue a profit warning and
sparked a fight between the two companies, which culminated last
month when Danone ended its supply contract with Fonterra and took
legal action against the New Zealand dairy cooperative.
Still, Danone said it expects like-for-like sales growth of
between 4.5% and 5.5% this year after posting growth of 4.8% in
2013, in line with its recently lowered targets.
Efforts to restore market share in China as well as rising milk
prices, however, should continue to weigh on the Danone's margin.
The company sees its margin ranging from a decline of 20 basis
points to an increase of 20 basis points this year. In 2013, its
margin fell to 13.2% from 14.2% in 2012.
Danone said it would keep its dividend unchanged at EUR1.45 a
share.
Write to Ruth Bender at Ruth.Bender@wsj.com
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