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Danone profits soured by weak currencies, food scare

Global food and dairy group Danone reported a first-half profit slump on Friday (July 25), blaming weak emerging currencies and the effects of a false food scare last year which hurt China sales.

PARIS: Global food and dairy group Danone reported a first-half profit slump on Friday (July 25), blaming weak emerging currencies and the effects of a false food scare last year which hurt China sales.

Net profit fell by 37.0 percent from the equivalent figure last year, but the French-based group said that this was partly because an asset sale had inflated the 2013 figure.

The group, which is a global leader in the dairy industry with activities around the world, stood by its targets for the whole of 2014.

Net profit for the first half totalled 608 million euros (US$818 million).

In the first half of last year, the comparable figure had been boosted by a capital gain on the sale of a stake in Moroccan investment group SNI.

Sales in the second quarter fell by 5.5 percent to 5.4 billion euros but rose by 2.3 percent on a comparable basis allowing for changes in the structure of the company.

For the first six months, sales fell by 5.3 percent to 10.46 billion euros but rose 2.2 percent on the same asset basis.

Activity in the first half was weighed down heavily by a false alert by New Zealand dairy supplier Fonterra, by a record 18.0-percent rise in the price of milk and by weakness of emerging market currencies.

But the outcome was in line with the group's planning, finance director Pierre-Andre Terisse told a telephone press conference.

Danone was still aiming for "strong, lasting and profitable growth from the second half of the year," he said.

The group said it expected sales to rise by 4.5-5.5 percent this year.

Last year, its baby-food business in Asia - mainly in China - was stricken by a false alert by Fonterra that the germ botulism was present in some of the product it had delivered to Danone.

That resulted in stocks being withdrawn from sale and damaging the company's brand.

In the second quarter, Danone's sales of baby food continued to fall, shrinking by 13.6 percent to 1.04 billion euros, or by 9.2 percent on a comparable basis because of weak sales in China.

But the group said that these sales in China were now recovering slowly.

The price of shares in the group was showing a slight fall of 0.2 percent to 55.87 euros in late morning trading.

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