Danone posts 10 pct gain in 1st half net profit

By GREG KELLER Associated Press Writer

PARIS (AP) - Danone SA said Tuesday sales of its yogurts, bottled water and baby foods would grow faster than expected this year as strong demand in Asia and developing countries helped its first half earnings rise 10 percent.

The French food company behind Evian water and Activia yogurt reported net profit of euro848 million ($1.1 billion) for the six months ended June 30, up from euro722 million a year earlier.

In a statement, Paris-based Danone said the performance would drive sales growth of at least 6 percent over the full year, compared to its previous forecast of at least 5 percent annual sales growth.

Higher sales by volume of Danone's yogurts and bottled water were offset by lower selling prices and higher raw material prices. That squeezed the group's profit margin to 15.3 percent from 16 percent a year earlier. For the full year, Danone said its margin would be stable with the 15.3 percent recorded last year.

Danone shares fell 3.1 percent to euro44.99 in early trading on the Paris stock exchange.

First half sales at Danone's fresh dairy business, its largest division, grew 7.1 percent to euro4.8 billion. Overall, group sales rose 7 percent to euro8.4 billion in the first half, Danone said.