23 February 2024

2 minute read

By: Global Ag Media

Europe

French food group Danone on Thursday said it was confident for the year ahead after sales growth last year at the top end of its forecast, as higher prices improved its profit margin, offsetting lower volumes, reported Reuters.

By 09:19 GMT, Danone shares were up 1%, after rising up to 3.4% in early trade.

"Building on the positive momentum of 2023, we are starting this financial year with confidence in our Renew strategy," CEO Antoine de Saint-Affrique said.

Saint-Affrique launched the Renew turnaround strategy in March 2022 soon after he was appointed. He said he would make public Danone's "next chapter" at an Investor Day in June.

Meanwhile, he cited "visible progress" for the Essential Dairy and Plant-based (EDP) business in Europe and group sales volumes that turned positive in the fourth quarter as pricing eased and a turnaround at Mizone waters in China, which was hit by lower consumption notably as a result of the pandemic.

For 2024, the world's largest yoghurt-maker, said its forecast was in line with its mid-term ambition of like-for-like sales growth of 3%-5%, with a moderate improvement in recurring operating margin as the group will continue to re-invest in its brands and innovations.

The consumer goods giant, whose brands include Evian and Badoit water and Activia yoghurt, reported 2023 sales of 27.619 billion euros ($29.84 billion), a like-for-like rise of 7%, at the top end of its 6%-7% sales growth guidance and in line with analysts expectations.

The operating margin for full year 2023 rose to 12.6% of sales from 12.2% in 2022, compared with average analysts' estimates of 12.5%.

For the fourth quarter ended Dec. 31, sales grew 5.1%, slightly above market estimates of 5%, with contributions from all its three businesses - EDP, Specialised Nutrition and Waters.

Danone, like its rivals Nestle and Unilever, has increased prices to cope with higher commodities and supply chain costs.

Some analysts have raised concerns this could lead retailers' private label brands to capture market share.

Danone said on Thursday it would raise prices in 2024, citing a need to offset labour costs and shipping prices, but that the increase would be at a slower pace than previously.

With record cash flow of 2.6 billion euros in 2023, Danone said it would give a 5% dividend hike to 2.10 euros.

JP Morgan said the results were strong.

"Overall, we see the results and outlook as reassuring that Danone turnaround is unfolding: the turnaround in volume should please and the company is building a track record as delivering on its promises," the bank's analysts said in a note.

($1 = 0.9255 euros)