Danone's Growth Fails to Prevent Stock Decline Amid China Concerns
Danone announced its financial results for the first half of 2026, revealing a net profit of €1.175 billion (US$1.27 billion), marking a 13% rise compared to the previous year. The sales for the second quarter also exceeded analysts' expectations, reaching €7.215 billion (US$7.79 billion), which is a 4.2% increase on a comparable basis, above the anticipated 3.7%.
Despite these positive figures, Danone's shares fell by 3.7% to 4% during the trading session following the announcement, hitting a low of €69.32, significantly below the 52-week high of €80.14. The decline was attributed to the composition of growth, wherein price hikes accounted for 2.3 percentage points while sales volume increased by only 1.9%, falling short of the expected 2.2%.
A significant factor affecting investor sentiment was the performance in China. Danone managed to partially recover from a previous crisis in its Specialized Nutrition division, which had suffered due to a formula recall in Europe and supply disruptions related to the Iran conflict. This division saw a 4.5% growth in the quarter. However, sales growth in China slowed to 3.6%, a marked decline from the 10.3% in the previous quarter. Danone attributed this to a 'normalization' of competitive pressures, although analysts at Jefferies highlighted the structural risk posed by China's falling birth rates.
The company benefited from a hot summer in Europe, which boosted bottled water sales, particularly for the Volvic brand, with a growth of 4.7% in this segment. The overall market reaction was shaped by differing analyst perspectives. Jefferies downgraded Danone's outlook to 'Underperform' due to concerns in China and market share losses in North America, while Goldman Sachs maintained a 'Buy' rating, raising the target price for Danone's stock.
Danone's operational performance showed an operating profit of €1.854 billion (US$2.11 billion) with a margin of 13.3%, slightly above the previous year's 13.2% and the expected 13.25%. The recurring profit before tax was €1.71 billion (US$1.85 billion), exceeding the consensus of €1.66 billion. The stock's decline was not influenced by wider market movements, as the CAC 40 index remained stable and U.S. indices saw a slight rise.
Danone reiterated its growth projections for 2026, aiming for a comparable sales growth between 3% and 5%, with operational profit growth outpacing sales. Despite the market turbulence, Danone's figures were viewed as independent of sector-wide trends, as evidenced by Nestlé's unaffected results the previous week.
