Danone posts first annual earnings decline in a decade due to baby-food sales in Asia

The largest yoghurt manufacturer in the world – Danone – posted its first annual earnings drop in more than ten years after the companys sales of baby food in Asia were damaged by a botulism scare.

Danone made an e-mail statement and announced that its last years adjusted earnings per share decreased 7.6% and reached 2.78 euros (3.82 dollars). According to data compiled by Bloomberg, the average analysts estimates were of 2.84 euros per share. The companys trading operating profit declined by 5% to 2.81 billion euros. Danones projections for 2013 were cut in October 2013 after the company announced that the botulism scare delayed its development by six months.

In its e-mailed statement the company also revealed that it forecasts 2014 to be put under the mark of “sluggish” consumer demand in Europe, continuous milk price inflation and exchange-rate volatility in emerging markets. Despite the fact that the botulism scare in Asia turned out to be a false alarm, Danones baby-food business of was hurt. The company also experienced some bribery claims at its Dumex baby-milk business, which is located in China.

Danone said in its statement, which was cited by Bloomberg: “Organic growth in sales and operating margin will vary widely from one half to the next in 2014. The group thus anticipates a return to strong, sustainable, profitable growth beginning in the second half.”

The company also announced that it projects an increase of its 2014 like-for-like revenue from 4.5 to 5.5%. The operating margin is likely to widen or narrow as much as 0.2 percentage point on a like-for-like basis. Free cash flow estimated to 1.5 billion euros excluding one-time items is expected by the company.

As reported by Bloomberg, one of the analysts working for Kepler Cheuvreux – Mr. Jon Cox wrote in an e-mailed statement that the forecasts are a bit “insipid” and the results look “a shade light, but that isn’t really a surprise given what is happening in its infant nutrition business”. He also wrote: “The worse may be over for a company which has been hurt over the last 24 months. However, hard to see why the stock will run away on the upside.”

Danones shares rose by 1.49% in Paris to EUR 51.72 at 8:49 GMT, marking a market value of 32.15 billion euros. The stock has fallen 4.3% in the past year.