French food group Danone reported stronger-than-expected first-quarter sales on Wednesday, even as a baby formula recall in Europe and supply chain disruptions linked to the Iran conflict weighed on parts of its business.
The company, which owns brands including Activia yoghurt, Aptamil infant formula and Evian mineral water, said quarterly sales reached €6.708 billion (US$7.88 billion), representing like-for-like growth of 2.7 percent, slightly ahead of analyst expectations of 2.6 percent.
Shares in Danone rose nearly 3 percent following the announcement, as investors welcomed the resilient performance and the group’s decision to maintain its full-year outlook.
Danone said it still expects like-for-like sales growth of 3 percent to 5 percent in 2026, with recurring operating income rising faster than revenue, in line with its medium-term targets.
The company acknowledged, however, that its specialised nutrition division was affected by a combination of factors in the quarter, including a European baby formula recall and logistical disruptions linked to the ongoing conflict involving the Iran.
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The recall, which also impacted competitors such as Nestlé, was triggered by concerns over possible contamination with cereulide toxin. Danone said the situation was now “returning to normal,” but added that restoring consumer trust in its infant nutrition products remained a priority.
Finance chief Juergen Esser said the baby formula segment would undergo a gradual “normalisation” over the course of the year, though he did not provide a precise timeline for recovery.
The company has significant exposure to infant nutrition, particularly in Asia, where around 17% of its total profit is generated from baby formula sales in China, making the segment strategically important for growth.
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Danone also said its exposure to the Middle East and surrounding regions, where supply chains have been disrupted by the Iran conflict, represents only a small portion of overall sales — around 2 percent to 3 percent — limiting the broader financial impact.
The war has, however, added pressure on global logistics routes, particularly for products such as infant formula that rely on complex international supply chains moving through the Middle East.
Despite these headwinds, Danone reported solid underlying demand trends, with volumes rising 1.5% in the quarter and pricing up around 1.2 percent. Analysts said the combination suggested stable consumer demand even in a challenging environment.
Performance varied across regions. While the specialised nutrition business faced disruption, Danone’s U.S. coffee creamer segment showed signs of improvement, helping to offset weaker areas of performance.
Investors have been closely watching Danone’s ability to stabilise its infant formula operations after a series of recalls and regulatory scrutiny across the industry. The company said it remains focused on strengthening quality controls and rebuilding consumer confidence.
Analysts noted that while Danone’s quarterly performance demonstrated resilience, uncertainties remain around the pace of recovery in its nutrition business and the broader macroeconomic environment.
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JPMorgan analysts said the results reflected “confidence in a recovery through the year,” but cautioned that lingering effects from the recall and uneven regional performance could weigh on near-term expectations.
Danone’s ability to sustain growth will depend on continued recovery in its core nutrition segment, stable commodity costs and the resolution of supply chain disruptions linked to geopolitical tensions.
For now, the group’s better-than-expected start to the year has reassured investors, even as risks from product recalls and global instability continue to cloud the outlook for the remainder of 2026.
