Danone sticks to targets after baby food growth spurt

* Q3 like-for-like sales up 4.6 pct vs f'cast 4.3 pct

* Keeps 2015 sales and margin targets, shares up 1.8 pct

* Cuts inventories of Mizone aquadrink in China (Adds CFO comment, forecasts, shares, analyst)

By Dominique Vidalon

PARIS, Oct (HKSE: 3366-OL.HK - news) 19 (Reuters) - French food group Danone (Swiss: 487663.SW - news) is on track to achieve full-year targets despite tough conditions in emerging markets and slower sales of its Mizone drink in China, it said after posting better than expected quarterly results on Monday.

The world's largest yoghurt maker, whose brands include Actimel and Activia, reported third-quarter like-for-like revenue up 4.6 percent, lifted by strong baby food sales and improvement in its core dairy business, which has been cutting costs and launching new products to counter weak consumer spending in Europe.

Danone's quarterly performance lagged the 5.7 percent growth reported by rival Unilever (NYSE: UL - news) last week but beat Nestle (VTX: NESN.VX - news) 's 4.2 percent.

Nestle had lowered its full year outlook, citing weak emerging markets, while Unilever said it expected sluggish global markets to continue to weigh on performance.

Danone's dairy sales, which account for half of group revenue, are expected to stabilise early next year, finance chief Cecile Cabanis told analysts.

The 4.6 percent rise in third-quarter revenue to 5.64 billion euros ($6.4 billion) compared with 4.5 percent in the second quarter and an average estimate of 4.3 percent from analyst forecasts compiled by the company.

Shares (Berlin: DI6.BE - news) in Danone were up 1.8 percent by 1312 GMT, against a 0.25 percent decline for the French blue-chip index.

The company kept its full-year targets of like-for-like sales growth of 4-5 percent and a slight rise in its operating margin from last year's 12.59 percent.

"We expect Danone will achieve 2015 guidance," Liberum analysts said. "European dairy continues to show sequential improvement with stable organic sales growth expected sometime in 2016."

Baby food achieved a 10.9 percent jump in like-for-like sales in the third quarter, with the company citing strong exports of infant formula to China, where it says consumers are increasingly buying foreign-made formula after health scares over locally produced products.

However, growth in its waters division slowed to 6.8 percent from 10.2 percent in the second quarter.

Demand in Europe was sustained by a hot summer, but in China the slowing non-alcoholic beverage sector forced Danone to cut inventories of its Mizone drink. ($1 = 0.8823 euros)

(Editing by David Holmes and David Goodman)