Danone eyes better margins in 2023, Q4 sales top estimates

DANONE like-for-like quarterly sales growth topped estimates on Wednesday (Feb 22) on the back of higher prices amid soaring raw materials and energy costs which still weighed down its full-year operating margin.

The world’s largest yoghurt maker’s 2023 forecast was in line with its mid-term like-for-like sales growth target of 3 per cent to 5 per cent, with a moderate improvement in recurring operating margin.

The owner of Activia yoghurt and Evian bottled water reported like-for-like sales growth of 7.8 per cent for 2022, near the top end of its 7 per cent to 8 per cent sales growth forecast.

Danone reported fourth-quarter sales growth of 7 per cent, beating market expectations of 6.2 per cent, helped by growth across Essential Dairy and Plant-based, Specialised Nutrition and Waters segments.

The operating margin for 2022 declined to 12.2 per cent of sales from 13.7 per cent in 2021, broadly in line with expectations, reflecting inflationary pressure and costs related to investments in brands in the second half of the year.

“Building on 2022 momentum, we are entering 2023 with renewed ambition and confidence in our strategy,” CEO Antoine de Saint-Affrique said in a statement.

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Saint-Affrique is implementing a revival plan amid mounting input costs, uncertainty caused by Russia’s invasion of Ukraine that has also led the group to plan shedding control of its dairy food business in Russia.

Overall, price increases contributed 8.7 per cent to annual revenue growth and 11.3 per cent to fourth-quarter growth.

Danone, like its rivals Nestle and Unilever, has increased prices to cope with surging costs but faces a challenge when it comes to the extent of price hikes before even affluent shoppers decide enough is enough.

Last month Danone also announced it would explore strategic options, including a potential sale, for its organic dairy activity in the United States, comprising the Horizon Organic and Wallaby businesses, as part of its plans to part with non-performing assets. REUTERS