Danone, currently believed to be a takeover target of PepsiCo, reported a fall in first half net income to €347m from €547m, as the company booked a provision of around €200m from negotiations to sell the group's participation in its HOD business in the US.

This provision made up the majority of non-current net income for the period.

Sales growth was more encouraging, Danone said today (21 July) with consolidated net sales reaching €6,437m in the first half of 2005 compared to €6,257m in the first half of 2004, an increase of 2.9% on a reported basis.

Underlying net income from continuing activities amounted to €503m in the first half of 2005, compared to €468m in the first half of 2004, an increase of 7.5%.

Based on its performance in the period, the group said it was confident in its ability to achieve full year 2005 like-for-like sales growth between 6% and 7%; a rise in trading operating margin of +20 to +40 basis points; and growth in underlying earnings per share from continuing activities of approximately 10%.