Danone shuttering three European plants

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* To cut 325 positions out of 9,000 in European dairy

* Response to falling sales in Hungary, Italy, Germany

* Danone shares outperform CAC-40 index of French blue chips (Adds analyst comments, context)

French food company Danone said on Wednesday it planned to shut three plants in Italy, Germany and Hungary and cut 325 jobs to cope with falling demand for fresh dairy products.

Russian Danone plantA Danone plant in Russia. The world's largest yogurt maker, with brands such as Activia and Actimel, makes 60 percent of its revenue in dairy, a sector hit by a jump in milk prices and weak consumer spending in austerity-hit Europe.

Danone said it would close its sites at Casale Cremasco in Italy, Hagenow in Germany and Budapest in Hungary and gradually shift production to Belgium, Poland, Germany and France to make its European dairy business more competitive.

Danone's European fresh dairy business employs around 9,000 people in 19 factories. While European sales volume showed signs of gradual improvement, business had weakened in Italy, Germany and Hungary, leading to some surplus capacity, it said.

"The overall situation in Europe is improving but we have to manage local situations," a Danone spokeswoman said, pointing out that fresh dairy sales in Hungary had dropped by 20 percent between 2011 and 2013.

The group's fresh dairy sales volumes fell 3.7 percent year-on-year in the first quarter as Danone passed onto customers rising milk prices in some countries including Russia.

"In view of the situation, notably in Italy and Germany, this (the closures) seemed unavoidable," said Natixis analyst Pierre Tegner, who has a "neutral" rating on Danone.

Another analyst, who asked to remain anonymous, said the planned closures were "helpful but not massive" and showed Danone was "serious" about addressing its cost base.

By 0930 GMT, Danone shares were up 0.15 percent at 55.01 euros, outperforming a 0.71 percent decline in the French CAC-40 index

Asked if Danone, which has over 190 production plants and 104,000 employs worldwide, was keeping its sales and profitability guidance for full-year 2014, the spokeswoman said: "That is not the issue for today".

Danone is aiming this year for like-for-like sales growth of 4.5-5.5 percent and a stable operating margin.

The company said it was working with works council representatives to avoid cold lay-offs. It said the dairy plants would be closed by mid-2015 and it was too early to discuss possible provisions in its accounts for related restructuring costs. (Reporting by Dominique Vidalon; additional reporting by Noelle Mennella; editing by James Regan and Tom Pfeiffer)



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