By Dominique Vidalon and Alexander Marrow
PARIS, Feb 20 (Reuters) – French food giant Danone delivered fourth-quarter sales growth above expectations on Friday and said the widespread recall of baby formula was likely to have a modest impact on sales in the next quarter.
The group, whose brands include Aptamil formula and Evian water, delivered a strong performance in Asia in the fourth-quarter though U.S. growth was weaker than expected.
The baby formula recall has hit companies including Danone and Nestle due to possible contamination with the toxin cereulide, with investors keen to understand the extent of the financial and reputational impact.
“The recall of several industry players at the same time has created some disruption on the shelf,” said CFO Juergen Esser, anticipating a one-off impact on first-quarter sales of 0.5%-1% for the group that also makes Activia yoghurt and Volvic water.
Danone, which has recalled products across Europe and the Middle East, said the impact was not material and that an assessment would be finalised once the recalls were completed.
The group, whose shares were 1% lower by 1002 GMT, is particularly exposed to the formula recall as around 17% of total profits come from infant formula in China, compared with less than 2% for Nestle, Jefferies analysts say.
CHINA ‘EXCEPTIONAL’, NEED TO ‘STEP UP’ IN THE U.S.
Since CEO Antoine de Saint-Affrique’s appointment in 2021, Danone has been focusing heavily on protein and gut health and seeking to expand its geographic footprint.
Danone gave 2026 guidance in line with its mid-term aims of like-for-like sales growth of 3-5%, with recurring operating income growing faster than sales.
“We enter the year with confidence,” Saint-Affrique said.
Danone described growth in China, North Asia & Oceania as “exceptional”, with sales growth in the fourth quarter of 10.4% led by rapidly increasing volumes, although analysts noted this was below their expectations.
The performance reflected sustained demand for medical nutrition and baby food in China which largely offset weakness in coffee creamers in a competitive U.S. market, the group said.
The U.S. market did not meet the company’s expectations. “We need to step up our game,” Saint-Affrique said.
Danone’s 2025 sales of 27.28 billion euros ($32.07 billion), a like-for-like rise of 4.5%, compared with analysts’ expectations of 4.4% in a company-provided consensus. Fourth-quarter sales growth of 4.7% also beat expectations.
Danone, like rivals Unilever and Nestle, has slowed price hikes after three years of steep increases to win back shoppers who turned to cheaper brands during a surge in inflation.
It still managed to grow profit margins, with the recurring operating margin for 2025 at 13.4% from 13% in 2024, in line with expectations. With cash flow of 2.8 billion euros in 2025, above analyst expectations of 2.5 billion, Danone said it planned to raise its dividend by 4.7% to 2.25 euros per share.
($1 = 0.8508 euros)
(Reporting by Dominique Vidalon in Paris and Alexander Marrow in London; Editing by Benoit Van Overstraeten, Sonali Paul and Elaine Hardcastle)
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