PARIS -(Dow Jones)- The integration of Dutch baby food company Numico by French water and dairy company Groupe Danone SA (BN.FR) "is doing great," Danone's co-Chief Operating Officer Emmanuel Faber said Friday during an analyst conference. Faber said he is confident the Numico integration will deliver the planned cost synergies of EUR45 million in 2008, of which EUR20 million have already been delivered in the first half. The executive also said revenue synergies expected from the acquisition of Numico are on track. Regarding the dairy business, Faber said the change in French retail regulations created some complications for Danone in the short term, although the changes address the medium-term issues. The changes partially explain the 6.4% drop in sales and the 15.1% drop in volume in France, Faber said. He said, excluding France, the dairy division experienced 0.7% growth in sales. He said this isn't satisfactory, but will be addressed through a number of promotions in the second half. Faber said the company targets mid-single digit volume growth at its dairy business in 2009, adding Danone is ready to face a potential continuation of the current slowing of consumer spending due to the economic slowdown and higher inflation. Faber said the company's water business went through a "perfect storm" in Europe, most notably in France, Spain and the U.K., as bad weather, combined with port and transportation strikes, dented sales. Faber also said the company's free cash flow in 2008 is likely to beat its target. Danone forecasts full-year free cash flow reaching 7% to 8% of its sales. Danone's Chief Financial office Pierre-Andre Terisse said better weather in Europe and in France in the third quarter so far could show in the figures for the waters division but he declined to elaborate. Faber said any increase in input cost from higher oil or milk prices would be compensated but declined to say whether a drop in input costs would lead to lower products prices. Asked about the trend in the French market and if the third-quarter trend can be guessed from the second quarter, Faber said this could be the case. But he declined to comment further. At 1100 GMT, shares in Danone were trading EUR2.02 or 4.5% higher to EUR46.87 in an overall negative market. Company Web site: www.danone.com -By Geraldine Amiel, Dow Jones Newswires; +33 1 40171740; geraldine.amiel@dowjones.com Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=momliFUbkLkO9OuIQJjF%2Bw%3D%3D. You can use this link on the day this article is published and the following day.
