French food group Danone keeps profit outlook despite weak Q1

Danone said it was on track to deliver on its 2020 goals for an operating margin above 16 percent of its sales. (Reuters)
Updated 17 April 2019
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French food group Danone keeps profit outlook despite weak Q1

  • Danone said first-quarter underlying sales had risen by a relatively modest 0.8 percent to €6.138 billion
  • The company expects sales growth to accelerate in the second half of the year.

PARIS: French food group Danone kept its forecasts for a further rise in sales and profits this year although weaker demand for infant formula products in China and a consumer boycott in Morocco weighed on first-quarter sales.
Danone, the world’s largest yoghurt maker, said first-quarter underlying sales had risen by a relatively modest 0.8 percent to $6.94 billion (€6.138 billion), marking a slowdown from 2.4 percent growth in the fourth quarter of 2018.
The company nevertheless expected sales growth to accelerate in the second half of the year.
“The first quarter showed a start of the year in line with expectations ... We are pleased with the momentum of the business which will become increasingly visible from the second quarter. This gives us every confidence that we will meet our full year guidance,” CEO Emmanuel Faber said in a statement.
Danone reiterated it was targeting group like-for-like sales growth of around 3 percent and an operating margin above 15 percent for 2019.
Danone added it was on track to deliver on its 2020 goals for an operating margin above 16 percent of its sales and like-for-like sales growth of 4-5 percent.
Danone’s waters division and its dairy business put in solid performances over the quarter, but sales of Danone’s Early Life Nutrition products in China fell around 15 percent in the quarter, partly due to a lower birth rate in China.
This compared with a 10 percent decline in the fourth quarter 2018 and a 20 percent decline in the third quarter, in that division.
China is an important source of growth for Danone, contributing about 30 percent of sales of the Early Life Nutrition business, which makes infant formula and general baby food products.
Danone said it still expected the business in China to return to growth in the second half of 2019.
Danone also said its sale of Earthbound Farm, announced last week, would improve its recurring operating margins in 2019.


US-China trade deal hopes grow as oil prices decline

Updated 19 June 2019
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US-China trade deal hopes grow as oil prices decline

  • Data suggested a smaller-than-expected fall in American crude inventories
  • Preparations underway for Donald Trump to meet Xi Jinping next week at the G20 summit in Osaka

LONDON: Oil prices declined on Wednesday as data suggested a smaller-than-expected fall in American crude inventories, as hopes for a US-China trade deal continue to grow.
Brent crude futures were down 51 cents at $61.72 a barrel.
US West Texas Intermediate crude fell 25 cents to $53.65 a barrel. On Tuesday, it had recorded its biggest daily rise since early January.
After weeks of swelling, US crude stocks fell by 812,000 barrels last week to 482 million, the American Petroleum Institute said on Tuesday, a smaller fall than the 1.1-million-barrel drop analysts had expected.
Official estimates on US crude stockpiles from the US government’s Energy Information Administration are due during afternoon trading.
US President Donald Trump offered some support, saying preparations were underway for him to meet Chinese President Xi Jinping next week at the G20 summit in Osaka, Japan, amid hopes a trade deal could be thrashed out between the two powers. Trump has repeatedly threatened China with tariffs since winning office in 2016.
European Central Bank President Mario Draghi also offered a boost, saying on Tuesday that he would ease policy again if inflation failed to accelerate.
Tensions remain high in the Middle East after last week’s tanker attacks. Fears of a confrontation between Iran and the US have mounted, with Washington blaming Tehran, which has denied any role.
Trump said he was prepared to take military action to stop Iran having a nuclear bomb but left open whether he would approve the use of force to protect Gulf oil supplies.
On Wednesday, oil markets shrugged off a rocket attack on a site in southern Iraq used by foreign oil companies.
“It is interesting to note that the crude oil futures market could not rally on hawks planting bombs in the Strait of Hormuz but could rally on doves planting quantitative easing,” Petromatrix’s Olivier Jakob said in a note.
“This is an oil market that doesn’t know how to react when an oil tanker blows up but knows how to react when the head of a central bank makes some noise.”
Members of the Organization of the Petroleum Exporting Countries have agreed to meet on July 1, followed by a meeting with non-OPEC allies on July 2, after weeks of wrangling over dates.
OPEC and its allies will discuss whether to extend a deal on cutting 1.2 million barrels per day of production that runs out this month.