Danone withdraws 2020 guidance as first quarter sales rise

Danone on Tuesday withdrew its financial guidance for 2020 due to the disruption caused by the coronavirus pandemic, but posted higher first-quarter sales as shoppers bought more dairy, plant-based and nutrition products to eat at home.

The world’s largest yoghurt maker said quarterly like-for-like sales rose a stronger-than-expected 3.7 per cent to €6.24 billion.

Increased at-home consumption and stockpiling in North America and Europe in March, due to government-imposed lockdowns to contain the virus, lifted demand for its staple dairy and plant-based products by 4.6 per cent, while sales of its specialised nutrition products jumped 7.9 per cent.

Finance chief Cecile Cabanis told journalists that consumers were opting for "indulgence and bigger formats" in dairy and plant-based goods, while brands such as Actimel yoghurt – with immune system support claims – were in strong demand in Europe.

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This offset a 6.8 per cent fall in water division sales, where demand was hit by the closure of restaurants and cafes. Around 40 per cent of the division’s sales are normally consumed away from home, Danone said.

Delayed

In China alone, where the relaunch of the Mizone brand had been delayed to the second quarter, water sales fell by around 40 per cent, the group said.

"Second quarter demand and supply conditions will be broadly and deeply impacted by a global lockdown. Beyond the initial pantry loading trends we observed in March, we are unable to predict how the lockdown may affect both supply and demand," chief executive Emmanuel Faber said in a statement.

“Our board of directors therefore has decided to withdraw our financial guidance for the year, while we are managing with a view to protect and leverage our strong cash liquidity situation,” he added.

For 2020, Danone had been targeting like-for-like sales growth of 2-4 per cent and an operating margin above 15 per cent. These goals had already been revised down in February.

Remained confident

Danone, however, said it remained confident of delivering its 2030 goals, accelerating topline growth, continuing to maximise efficiencies and allocating capital with discipline.

Mr Faber’s strategy has centred on diversifying the group’s portfolio into fast-growing products featuring probiotics, protein and plant-based ingredients to mitigate slower growth in dairy.

In 2017, Danone bought US organic food producer WhiteWave in a $12.5 billion deal, to boost growth and bring the company more into line with healthier eating trends.

– Reuters