Here’s Why Shares in Yogurt Giant Danone Are Taking Off

Danone beat first-quarter sales growth expectations on Tuesday on the back of robust baby food sales in Asia, stronger demand for dairy products in North America and a better than expected performance at its water division.

Shares were up more than 4% in early trading in Paris.

The world’s largest yogurt maker, with brands including Actimel and Activia, said it expects economic conditions to remain volatile in emerging markets, however, and kept its full-year sales and profitability goals unchanged.

In recent years Danone, which competes globally with Nestle and Unilever, has faced problems ranging from a weak economy in Europe and food-safety scares in Asia.

Emmanuel Faber, who took over as chief executive in October 2014, has vowed to return Danone to profitable and sustainable growth by 2020, reviewing its business in China and overhauling its dairy division in Europe, where it has cut costs and launched new products.

First-quarter underlying sales rose 3.5%, with Faber saying this “included progress on our dairy agenda, with a confirmed re-acceleration in the United States and sequential improvement in Europe.”

The quarterly performance beat a company-compiled average of analyst estimates of 3.2% like-for-like growth in group sales.

Total sales, which include the effects of foreign exchange rate fluctuations, reached 5.306 billion euros ($6.01 billion), a decline of 3% on a reported basis.

Sales of dairy products, which account for the bulk of the group total, grew 2.3% in the first quarter, slightly above expectations of 2%.

In Europe, Danone said it is relaunching the Danonino, Actimel and Activia brands, which will help it to stabilize dairy sales in the region by the end of the year.

Baby food sales rose 4.8% in the quarter, with sales in China driven by demand for international brands of ultra-premium baby food.

The water business has been a weak spot as a slowing non-alcoholic beverage sector in China forced Danone to cut inventories of its Mizone drink. However, the division delivered growth of 3.9 percent, beating expectations of 2 percent, thanks to strength in Europe, Latin America and Asia, excluding China.

Danone kept its 2016 target for like-for-like sales growth of between 3% and 5% and an improved operating margin from last year’s 12.91%.