Paris, Nov 6 - French food group Danone sees signs of a slowdown in key emerging markets it previously viewed as growth drivers, and is braced for a subdued 2009.
The maker of Evian bottled water and Actimel yoghurt said it will focus on winning market share and plans to grow faster than the market next year, helped by blockbuster brands and selective investment in new countries and products.
"There will be a global slowdown, not just in developed countries," Co-Chief Operating Officer Emmanuel Faber told reporters during a group investor seminar in Paris on Thursday.
"The signs of a slowdown in emerging countries that we are beginning to feel are not just ephemeral. There are really warning signs of a slowdown that will significantly affect the large emerging economies."
The company was set to feel the impact in Russia, Mexico, Brazil, Indonesia, Argentina and China, Faber said. Some of these countries were in significant economic difficulty and faced a genuine growth crisis, he added.
Lower-than-expected growth in emerging economies has already forced companies in other sectors, such as carmakers, to cut their expectations.
Danone said it still expects 8-10 percent like-for-like sales growth and an improvement in its operating margin over the medium term. It said it would grow faster than the market in 2009 despite the "volatile and challenging environment". "We are convinced that the combination of both our growth drivers and recognised ability to adequately adapt to market developments will enable Danone to deliver above-market growth in each of our categories," Faber said.
FEW POINTS BELOW GUIDANCE
But Danone also expects like-for-like sales growth to be a few percentage points below its medium-term guidance next year, Faber said, without being more precise.
It is targeting double-digit growth in underlying fully-diluted earnings per share and a like-for-like improvement in its trading operating margin in 2009, he added.
Danone generated 63 percent of its sales in Europe in the first nine months of the year and 12 percent in Asia. Its businesses include fresh dairy products, waters, baby food and medical nutrition. Dairy contributed 57 percent.
The company has weathered a 40 percent increase in the cost of milk powder in the last two years, Faber said. Costs were likely to stop rising, but would not decline until the end of next year at the earliest, Faber said.
Volumes and sales from bottled water in the French and UK markets meanwhile were continuing to decline.
"We will remain in a phase of transition before we can rediscover growth in those two countries in terms of bottled water," Faber said.
Shares in Danone were 5.8 percent lower at 41.37 euros by 1337 GMT, compared with a 3.8 percent drop on the French benchmark CAC 40 index.