Danone’s third quarter affected by Fonterra recall

Sales for the third quarter of 2013 are up by 4.2% and steady, despite unfavourable exchange rates and the impact of a recall affecting selected infant formula products in Asia, dairy giant Danone has reported. Overall, European sales dipped by 0.9%, while North America, the CIS, Asia-Pacific, Latin America and Afirca/Middle East saw sales improve by 7.8%.

With regard to Asia, a recall of infant formula products in eight markets was triggered by a false alert issued by Fonterra, and this caused “significant losses in sales, earnings and cash-flow,” the company says. This led to an estimated €170 million in lost sales for the full quarter, with the division showing a -8.6% decline in sales growth and volume down -7.3%.

The result is an overall adjustment of target sales to growth between 4.5 and 5%. Chairman Frank Riboud notes, “In fresh dairy products, we are building strong momentum: in North America, Dannon is consolidating its number one position with a very strong showing in Greek yogurt; Danone Russia confirms double-digit growth driven by its flagship brand Prostokvashino; and figures for Europe confirm that we are stabilizing our sales and market share. In the midst of these positive trends, we had to address the false alert issued by Fonterra in early August. In the short term, this will weigh on our sales, our operating margin and our cash-flow, which has led us to adjust our full-year 2013 targets.”