French food and drink group Danone SA warned Tuesday that economic woes in southern Europe would hit its profits this year.
The Paris-based maker of Activia yogurt and Evian bottled water blamed the "swift deterioration" in sales across southern Europe for what it expects to be a half-percentage-point drop in its core operating margin this year. As recently as April Danone had forecast a 2012 profit margin stable with the 14.72 percent margin achieved in 2011.
Shares in the company dropped more than 7 percent on the announcement.
Danone said it would "take steps to make it products more competitive" in these markets, cutting prices and spending more on promotions. Earnings are also going to be held back by rising costs of milk at Danone's dairy operations, the company said.