Danone says sales growth to miss target

Zurich - Danone, the world’s biggest yogurt maker, said sales growth will be slightly below its target for 2016 as its fresh dairy business shrinks for a third year, hurt by weak demand in Spain and a slower-than-expected revamp of the Activia yogurt brand across Europe.

Revenue growth will miss the 3% to 5% goal, Danone said in a statement on Monday. Sales increased 3.2% on that basis in the first nine months. The stock fell as much as 3% in Paris.

Chief executive officer Emmanuel Faber is struggling to deliver on his pledge to halt a three-year drop in shipments of fresh-dairy products. To mitigate the sales slowdown, Faber has stepped up cost cuts and an efficiency drive.

Danone said on Monday it expects profitability to beat its target for 2016, raising the outlook for the second time this year.

"The relaunch of Activia doesn’t seem to be delivering on expectations," James Edwardes Jones, an analyst at RBC Capital Markets, wrote in a note.

Danone’s full-year margin will beat the target by as much as 0.1 percentage point, chief financial officer Cecile Cabanis said on a conference call with analysts.

The most recent profitability goal, set in June, was for like-for-like improvement in the recurring operating margin of 0.5 percentage points to 0.6 percentage points.

Danone said it’s been reworking local execution plans as it revamps the Activia brand, and it has started adjusting them in some countries.

In October, the company reported the slowest third-quarter sales growth in more than a decade amid a slowdown in baby food, traditionally one of the Danone’s fastest-growing businesses.