Solid and profitable organic growth in the first half with:
Sales up +4.6% in the first half and up +4.5% in the second quarter
Trading operating margin up +53 basis points
Full-year targets confirmed
- Solid, profitable growth in H1 2015, shaped by favorable trends n currencies and commodities, and by a significant increase in investments:
o Sales up +4.6% like-for-like, and up +8.8% as reported
o Trading operating margin at 12.12%, up +53 basis points like-for-like and up +85 basis points as reported
o Underlying fully diluted earnings per share at €1.37, up +6.8% like-for-like and up +18.5% as reported
o Free cash-flow excluding exceptional items at €576 million
- Performance is in line with Danone’s roadmap, laying a solid foundation for a model for profitable, sustainable growth.
- In Europe, the company continued to adapt its Fresh Dairy Products portfolio, while benefiting from Chinese demand for international Infant Milk Formula (IMF) brands.
- In China, following the accelerated structural changes in distribution dynamics for IMF, Danone has decided to reallocate its resources within this market and subsequently to revise downward long-term sales projections for Dumex, leading to an impairment of the brand.
- Danone has reached a preliminary agreement with Mengniu and Yashili to merge Dumex in China with Yashili, building a strong local IMF brand platform, and to increase its shareholding in Mengniu.
- 2015 targets confirmed: organic sales growth of between +4% and +5%, and a slight rise in trading operating margin. Net sales
 Like-for-like: see pages 9-12 for details on calculation of financial indicators not defined in IFRS
 See pages 9-12 for details on calculation of financial indicators not defined in IFRSEmmanuel Faber: CEO’s comment“First-half growth of 4.6% and half a percentage point rise in margin are fully in line with our roadmap. With a still volatile overall context, we remain focused on our priorities: consolidating our model for profitable, sustainable growth and enhancing our brands and businesses’ ability to serve our consumers’ needs. In Europe, where margins rose significantly, we are executing an overhaul of our Fresh Dairy Products business and finalizing the conditions necessary for a return to growth.
In China, we are strengthening our Early Life Nutrition business model, building on the success of our international brands and reinforcing our partnership with Mengniu and Yashili. In the CIS and in North America, we are guiding our operations carefully through the current transition, to get growth back on track while pursuing investments to develop the category. In each region, half-year results confirm the efficient execution of our plans and the excellent work done by our 100,000 employees.
Building on our unique culture, brands, geographical platforms, talent of our teams and trust of our partners, we work every day to lay the foundations for sustainable, profitable growth and are
moving to deploy our Danone 2020 transformation plan for economic and social value creation serving Danone’s corporate mission.”
Consolidated sales rose +8.8% as reported in the first half of 2015 to reach €11,392 million.
Excluding the impact of changes in the basis for comparison, which include exchange rates and scope of consolidation, sales were up +4.6%. This organic growth reflects a +0.7% rise in sales volume and a +3.9% rise in value.
The +4.6% exchange-rate effect reflects favorable trends in currencies including the US dollar, the Chinese yuan, the Argentine peso, the British pound and the Indonesian rupiah.
The -0.4% impact of the change in scope of consolidation results in large part from the deconsolidation of various Fresh Dairy Products operations—in China from July 2014, and in Indonesia with the sale of the Fresh Dairy Products business effective December 2014.
Overview of sales performance – Q2 2015
In the second quarter of 2015, consolidated sales rose +9.5% to total €5,921 million. Excluding the impact of changes in the basis for comparison, which include exchange rates and scope of consolidation, sales were up +4.5%. This organic growth reflects a +1.5% rise in sales volume and a +3.0% rise in value.
The +5.5% exchange-rate effect reflects favorable trends in currencies including the US dollar, the Chinese yuan, the Argentine peso, the British pound and the Indonesian rupiah.
The -0.5% impact of the change in scope of consolidation results in large part from the deconsolidation of various Fresh Dairy Products operations—in China from July 2014, and in Indonesia with the sale of the Fresh Dairy Products business effective December 2014.
Fresh Dairy Products
The Fresh Dairy Products division reported sales down -1.1% like-for-like in the second quarter, reflecting a -3.1% fall in volumes and a +2.0% price/mix effect. As anticipated, this was below firstquarter
figures, with the improvement in volume offset in the second quarter by a less favorable base for comparison in price and mix, particularly in Russia.
Sales in Europe have continued to decline, with performance limited by the basis for comparison in volume that preceded streamlining of the product portfolio starting in mid-2014. These efforts have
helped increase the Fresh Dairy Products division’s gross margin significantly, thus laying the foundations of reinvestment for a sequential improvement in sales volumes as of the second half of
2015. The Actimel brand continued to stabilize.
In the CIS region, with consumer spending still fragile, sales remained solid despite more moderate growth than in the first quarter. The division is carefully managing sales trends in its various
product ranges and key brands like Prostokvashino, Tëma and Danone have continued to do well.
In the United States, Danone is consolidating its leading position, fueled in particular by strong momentum in the children’s segment with the Danimals brand, and by the launch of Greek yogurt
specialty Oikos Triple Zero.
The ALMA zone continued to expand, driven in particular by a solid performance in Mexico.
The Waters division once again reported strong growth in the second quarter of 2015, with sales up +10.2% like-for-like. This rise was split roughly equally between +5.6% growth in volume and a
+4.6% price/mix effect.
As in the past, these figures were underpinned by solid growth in Europe and in plain waters. They also reflect once again the very strong performance of emerging markets in Asia and Latin
America, and the vibrant aquadrink segment.
Early Life Nutrition
The Early Life Nutrition division reported Q2 sales up a steep +11.1% like-for-like, including a +7.3% rise in volume and a +3.8% rise in value.
In the Chinese market, the division continues to benefit from a boom in online sales combined with the popularity of our Aptamil and Nutrilon brands, generating double-digit growth for European
Despite this overall positive environment, Dumex brand products remained well below levels observed in early 2013, hit hard by the false alert raised by Fonterra and by the shift in consumer preferences from supermarkets to both online sales and specialized distribution. Danone has decided to reallocate resources in this market, and subsequently to revise downward long-term
sales projections for Dumex in China. Therefore Danone impaired the brand and certain assets in China for a total amount of €398 million at June 30, 2015.
In an extension of their strategic alliance, Danone has reached a preliminary agreement with Mengniu and Yashili to merge Dumex in China with Yashili and to increase its shareholding in Mengniu. By bringing the Dumex and Yashili brands closer together, this operation would build a strong local brand platform in a context of local consolidation.
Division sales in the rest of the world remained robust, with double-digit growth in the rest of Asia, Latin America and the Middle East.
The Medical Nutrition division reported Q2 sales up +7.1% like-for-like, with volumes up +5.0% and a +2.1% price/mix effect. Growth was driven in all regions by the division’s pediatrics and
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