Market remained “challenging” in Japan and Mexico

Market remained “challenging” in Japan and Mexico

The performance of Danone's waters divisions in Mexico and Japan was “negative” for the first quarter, the company has said, despite an overall increase in sales in the period.

Sales for the quarter increased by 2.3% on a like-for-like basis, based on “strong” volume growth of 8.5% offset by a negative value effect of -6.2%, Danone reported yesterday (15 April). The performance was boosted by strong volume growth in the emerging markets.

However, the environment continued to remain “very challenging” in Japan, the firm said, with the market having a continued negative effect on value growth. 

Speaking at the company’s earnings conference call, CFO Pierre-Andre Terisse said that Mexico and Japan had experienced a “negative” geographical mix in the past few quarters.

“Mexico had difficult weather conditions at the beginning of the year and this had an impact," Terisse said. "Secondly, Japan has been negative in terms of depletions. In addition to that, we have decided to adjust the level of inventories, and this has resulted in a strong negative performance.”

Consolidated group sales in the first quarter of 2010 increased by 8.3% to EUR3.98bn (US$5.40bn). Excluding the effects of changes in exchange rates, total sales increased by 7% on a like-for-like basis. 

The firm warned, however, that it will continue to face a “challenging” financial, economic and social environment in 2010, with “continued difficult consumption trends” in western economies, weak emerging currencies and inflation of raw materials.