Danone warned of higher-than-expected losses to the scare
over botulism in milk which has provoked a legal battle with Fonterra, as the dairy
giant unveiled a fall in profits for 2013 and cautioned over a potentially soft
start to 2014.
The French-based group, the world's biggest yoghurt maker,
said that it had lost E370m in sales to the scare in August over tainted milk
powder supplied in Asia by Fonterra, used largely in making infant formula for
the huge Chinese market.
Although Fonterra, the world's top dairy exporter, found
that type a bacterium found in some milk powder was not, after all, the type
which can cause botulism, the all-clear came too late to prevent damage to
sales of infant formula supplied by Danone, and many rivals.
Danone - which has accused Fonterra of "serious failings"
and is suing for compensation - also said that it had lost E305m in operating
profits to the scare, E26m more than initialled expected.
"Costs include product recall and destruction, the
restructuring and recovery plan deployed in response to the crisis, and costs
related to suspensions of business in China as a result of the crisis," Danone
Year of two halves
The group said it would this year "focus on rebuilding" its
Asian sales of infant foods, "in particular through product launches and brand
Danone also said it would continue with a plan to boost its
performance in Europe, where economic weakness has undermined dairy markets,
while attempting to extend its "strong momentum in markets outside Europe".
However, against a backdrop of "sluggish trends" in Europe, of
a "significant carryover of milk price inflation" prompted by soaring demand,
with emerging markets expected to seee "persistently high exchange rate
volatility", Danone prepared investors for a slower start to the year.
"Organic growth in sales and operating margin will vary
widely from one half to the next in 2014," it said, also highlighting
comparisons with the weaker performance following the milk tainting furore.
"The group thus anticipates a return to strong, sustainable,
profitable growth beginning in the second half."
Danone forecast like-for-like sales growth of 4.5-5.5% for
2014, with an operating margin of between -20 and +20 basis points, and underlying
free cash flow of E1.5bn.
The forecasts compare with like-for-like sales growth of
4.8% in 2013, for which Danone reported sales of E21.30bn.
Sales growth slowed to 2.9% in the October-to-December quarter,
sapped by a slowdown in Asian sales following the milk powder scare, besides by
a continued, if waning, drop in European takings.
Nonetheless, a 4.5% fall to E1.64bn in full year earnings
was a less steep decline than expected by investors, who had forecast after-tax
profits of E1.62bn.
Danone shares stood 2.1% higher at E52.03 in morning deals