Euro crisis sours Danone outlook

French food industry group Danone said Tuesday that the eurozone crisis had led to a drop in consumption in southern European countries and warned its operating margin would be squeezed.

The announcement sent shares in Danone, which also produces Evian water and Bebelac infant formula, plunging 6.05 percent to €48.71 euros in early trading while the market was up 0.41 percent overall.

“Since the end of the first quarter, the Group has faced a swift deterioration in consumption in Southern Europe that has proven steeper than anticipated, especially in Spain,” said Danone.

Prices for raw materials were also higher than initially expected. 

While it kept its target of 5.7 percent annual sales growth due to strong performance in the rest of the world, it said it now expected its trading operating margin would drop by 0.5 percent instead of staying stable.

The company recorded a trading operating margin of 14.7 percent in 2011.

It said the adjustment was needed to take initiatives to deal with the sales slump in southern Europe.

In April, Danone said that its 2012 first-quarter sales had gained 7.6 percent on a 12-month basis to €5.1 billion ($6.4 billion), and stood by its full-year targets.

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