French dairy and bottled water company Groupe Danone SA on Thursday reported strong growth in first quarter sales as demand for its yogurts in France and across Europe helped offset consumers' switch to lower priced options.
The Paris-based maker of Evian mineral water and Activia yogurt reported sales of 3.98 billion euros ($5.42 billion) for the January to March period, up from 3.67 billion euros a year earlier.
Danone said it expects to continue to face "difficult consumption trends" this year. The first quarter sales increase was driven by volume growth, which offset a drop in average prices and a shift by cost-conscious consumers to the group's less-expensive brands.
In November, Danone cut its forecast of like-for-like sales growth this year, due to what it termed the "challenging financial, economic and social" environment as well as rising raw material prices and other factors.
The company now expects sales on a like-for-like basis, which excludes foreign currency fluctuations, acquisitions and disposals, to rise at least 5 percent this year, compared to its earlier forecast of 8-10 percent growth.
In the first quarter, sales on this basis rose 7 percent, Danone said.
Higher prices for raw materials and weaker currencies in some developing markets, combined with lower selling prices for Danone's yogurts and bottled water will pressure the group's profitability.
The company said it targets a flat operating margin this year, after last year managing to lift this gauge of profitability by over half a percentage point to 15.3 percent.
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