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Danone says China recall weighs on first-quarter sales
by Staff Writers
Paris (AFP) April 16, 2014

French dairy food giant Danone reported on Wednesday a slide in first quarter sales as it struggles to turn around its Chinese business amid volatility in currency markets.

Total sales in the first three months of the year fell by 5.2 percent from the performance a year earlier to 5.061 billion euros ($7 billion), the company said.

The company was hit hard last year but a false health alert by a supplier which caused it to recall products in China and damaged its brand.

Chief financial officer Pierre Andre Terisse said the economic environment remained volatile at the start of the year, with the maker of Activia yogurt and Evian water facing large swings in milk prices and currency exchange values.

"Inflation in the price of milk has remained strong, above 10 percent," he told journalists.

Unfavourable swings in emerging market exchange rates, particularly in Argentina, Brazil, Russia and Indonesia, cut sales by 8.9 percent.

Danone is also seeking to rebuild its infant formula unit in China after a food safety warning by key supplier Fonterra last year forced the group to launch a massive recall in Asia.

Bribery claims at its Dumex baby-milk business have also tarnished its reputation in China, its fourth-biggest market.

Infant nutrition sales fell by 7.7 percent from a year earlier to 1.177 billion due to "the false safety alert triggered by Fonterra in August 2013," the company said.

Danone's European business also remained sluggish, with sales in southern markets still weak after a slowdown in consumer spending during the financial crisis.

Despite the weak start to 2014, Danone confirmed its full-year targets.

It expects organic sales growth of between 4.5 percent and 5.5 percent in 2014, with sales improving again in the second half.

"The group is targeting a return to strong, sustainable, profitable growth be ginning in the second half," it said in a statement.




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