There are few things more comforting to an investor than when a company follows through on its plans. Danone (BN) announced in February that it would expand in India, China, and other emerging markets as well as in the United States, and two recent purchases in India mean the company is well on its way to doing just that.
Shortly after its second quarter reporting at the end of July, Danone announced it would buy Mumbai-based Wockhardt’s nutrition business for $355 million as well as the product lines’ related production facilities from Carol Info Services, also of Mumbai, plus that company’s entire nutrition manufacturing business.
The deal should be concluded by March 2012 as talks with creditors get ironed out relating to some long-pending issues on bond repayment.
The purchase of Wockhardt’s business lines helps thrust the company into the baby nutrition segment with Dexolac, Farex, and Protinex brands while helping Danone to strengthen its position in one of its key target markets.
Up against Nestlé
In another recent move meant to help push the world’s largest yogurt maker further into baby nutrition, Danone is competing against Nestlé (NSRGY) for a $10 billion contract for Pfizer's Wyeth baby formula. Wyeth sells 80 percent of its milk products for babies and toddlers into emerging markets, in line with Danone’s aims to strengthen market penetration there.
Danone’s first half reporting showed strong sales growth of 8.7 percent with reduced expenses helping to make up for higher milk and plastics prices.
Those costs weighed on overall figures, coming in below analysts’ expectation.
Guidance for 2011 remains at 6 to 8 percent growth. Unicredit recently upgraded Danone to a buy rating. The company next reports on Oct. 18.
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