UPDATE 2- Under investor pressure, Danone eyes more profit growth in 2018

From Reuters - February 16, 2018

PARIS (Reuters) - Food group Danone said on Friday it would accelerate sales growth this year and deliver a further rise in profits as it seeks to respond to pressure from investors.

Danone, the worlds largest yoghurt maker, reported overall 2017 earnings that slightly beat expectations, with solid demand for baby food and waters in China more than offsetting weak dairy sales.

Shares in the company rose around 1 percent, outperforming Frances main share index. The stock is down 7 percent so far this year, erasing almost half of last years gains.

Danone, whose brands include Evian Water, Activia yoghurt and Bledina baby food, said it was targeting a double-digit rise in 2018 underlying earnings per share (EPS), excluding the impact of the sale of a $1.9 billion stake in Japans Yakult announced this week.

The company, alongside consumer goods peers such as Nestle and Unilever, is under investor pressure to improve results and it needs to deliver on 2020 profit margin and sales growth targets it set last year.

In August 2017, hedge fund and activist investor Corvex Management bought a 0.8 percent stake in Danone, following similar steps at Nestle and Procter & Gamble.

Danone has been touted as a potential target for suitors or shareholders seeking better returns, given that profits and sales have disappointed some investors in recent years.

The company trades at 17.1 times estimated 12-month forward earnings against 20.1 times for Nestle and 18.3 times for Unilever.

The purchase last year of U.S. group WhiteWave, which makes almond milk and organic products, is intended to boost Danones profit margins, given WhiteWaves generally affluent clientele, while Danone has also been cutting costs.



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