Food group Danone confident about 2026 after China drives 2025 sales beat

By Dominique Vidalon

PARIS, Feb 20 (Reuters) - French food group Danone said it was starting 2026 with confidence after it delivered 2025 sales and cash above analysts' expectations, helped by baby food demand in China, and improved its profit margin thanks to cost cuts.

While the world remains "volatile", CEO Antoine de Saint-Affrique said: "We enter the year with confidence, aligned with the mid-term ambition we have set out."

Danone, which like rival Nestle faces investor pressure to spell out the financial impact of infant formula recalls tied to a contamination scare with the toxin cereulide, also said that at this stage that impact was "not material".

"Impact assessment will be finalized once the recalls have been completed," the company said.

The consumer goods giant, whose brands include Evian and Badoit water and Activia yoghurt, reported 2025 sales of 27.28 billion euros ($32.07 billion), a like-for-like rise of 4.5%, compared with analysts' expectations of 4.4% in a company-provided consensus.

The performance reflected sustained demand for medical nutrition and baby food in China which largely offset weakness in coffee creamers in a competitive U.S. market.

The recurring operating margin for 2025 rose to 13.4% of sales from 13% in 2024, bang in line with expectations of 13.4%.

With cash flow of 2.8 billion euros in 2025, which came above analysts' expectations of 2.5 billion, Danone said it planned to raise its dividend by 4.7% to 2.25 euros per share.

For 2026, Danone said its forecast was in line with its mid-term ambition of like-for-like sales growth of 3-5%, with recurring operating income growing faster than sales.

Danone, like rivals Unilever and Nestle, has slowed price hikes after three years of steep increases following the COVID-19 pandemic to win back shoppers who had turned to cheaper brands during a surge in inflation.

For the fourth quarter alone, sales grew 4.7%, exceeding analysts' estimates of 4.3%, with strong demand in China for infant milk formula and medical nutrition largely offsetting weakness in coffee creamers in a competitive U.S. market.

Investors have been focusing in recent weeks on the potential risk to sales following the infant formula recalls.

While Danone's recall appears to be limited so far to Europe and excludes the Chinese market, analysts worry about a risk of reputational damage in the key Chinese market.

Danone is particularly exposed as around 17% of total profits come from infant formula in China, compared with less than 2% for Nestle, Jefferies analysts say.

($1 = 0.8508 euros)

(Reporting by Dominique Vidalon; Editing by Benoit Van Overstraeten and Sonali Paul)