Danone: First quarter in line with expectations Guidance reaffirmed
for 2019
2019 First-Quarter
SalesPress release – Paris, April 17, 2019
First quarter in line with
expectationsGuidance reaffirmed for
2019
- Consolidated sales up by +0.9% on a reported basis to
€6,138m
- Start of the year as anticipated: like-for-like sales growth at
+0.8%; growth set to accelerate from Q2
- All reporting entities contributing to growth despite tough
comparisons and calendar phasing
- Sale of Earthbound Farm reflects disciplined capital allocation
and portfolio focus
- 2019 guidance confirmed: like-for-like sales growth of
around 3% and recurring operating margin > 15%
|
Emmanuel
Faber: Chairman and Chief Executive Officer statement |
“The first quarter showed a start of the year in
line with expectations and further progress in our transformation
journey. This performance has coincided with continued action to
deliver sustainable profitable value growth, including the sale of
Earthbound Farm, alongside the roll-out of value-added innovations
across businesses and geographies to make our portfolio more local,
more appealing to younger generations, and better suited to
fast-changing consumer trends. We are pleased with the momentum of
the business, which will become increasingly visible from the
second quarter. This gives us every confidence that we will meet
our full-year guidance. We also remain totally committed to
creating a company aligned with the food revolution, harnessing the
collective voice of our 100,000 Danoners and realizing the vision
of One Planet. One Health”.
€ millionexcept % |
Q1 2018 |
Q1 2019 |
Reportedchange |
LFL SalesGrowth |
VolumeGrowth |
BY REPORTING ENTITY |
|
|
|
|
|
Essential Dairy & Plant-based |
3,296 |
3,308 |
+0.4% |
+0.2% |
-3.8% |
Specialized Nutrition |
1,812 |
1,828 |
+0.9% |
+0.4% |
-0.9% |
Waters |
976 |
1,002 |
+2.7% |
+3.9% |
+1.0% |
BY GEOGRAPHICAL AREA |
|
|
|
|
|
Europe & Noram1 |
3,311 |
3,381 |
+2.1% |
-0.8% |
-2.4% |
Rest of the World |
2,774 |
2,757 |
-0.6% |
+3.0% |
-1.2% |
|
|
|
|
|
|
TOTAL |
6,085 |
6,138 |
+0.9% |
+0.8% |
-2.2% |
All references in this document to Like-for-Like
(LFL) changes of Sales, recurring operating income and margin,
correspond to financial indicators not defined in IFRS. Their
definitions, as well as their reconciliation with financial
statements, are listed on pages 3 and 4. 1North America (Noram):
United States and Canada
In the first quarter 2019, consolidated sales
stood at €6,138m, up +0.8% on a like-for-like basis, with a +3.0%
rise in value, driven by premium innovations and resilient pricing,
and a -2.2% decline in volume. Excluding Morocco, which was
impacted by a boycott that started in April last year, sales were
up +1.5% on a like-for-like basis with volumes down -1.0%.
Argentina, which has been excluded from like-for-like comparison
from this quarter, contributed to company reported growth by +0.3%.
Overall, reported sales were up +0.9% including currency impact of
-0.2%.
ESSENTIAL DAIRY
& PLANT-BASED (EDP)
As previously announced, Danone is reporting
Essential Dairy & Plant-based Noram and International as a
single EDP entity from the first quarter. Under the new reporting
structure, Europe and Noram represents around two thirds of the
entity.
Essential Dairy &
Plant-based reported sales up +0.2% on a like-for-like
basis in the first quarter, including –3.8% decrease in volume and
+4.0% rise in value. While the quarter confirmed the good
fundamentals of the business, growth was impacted by one less
trading day for our fresh activities in Europe and North
America.
In North America, while
category dynamics remained unchanged, sales grew at lower rate than
Q4, impacted by portfolio pruning and a one-off effect from the
final stage of IT integration. In U.S. yogurts, Danone is investing
in growing segments such as plant-based, probiotics and low-sugar
yogurts. The quarter confirmed the stabilization of
Europe, supported by value-added innovation
momentum and investments in fast growing trends such as organic,
probiotics shots, plant-based and on-the-go. The
CIS registered solid sales growth, supported by
further results from its product diversification strategy. In
Latin America, Mexico posted strong sales growth.
In Morocco, sales continued to be impacted by the consumer boycott,
decreasing in line with Q4 2018.
Overall, the Plant-based
segment, which represents around 15% of EDP sales, posted
mid-to-high single digit growth, with all brands growing and
extending their market presence, with the exception of Vega.
SPECIALIZED
NUTRITION
Specialized Nutrition reported
sales up +0.4% on a like-for-like basis in the first quarter,
including a +1.3% rise in value and a -0.9% decline in volumes,
against a very tough base of comparison (with sales up +14% on a
like-for-like basis in Q1 2018).
Sales growth was led by Advanced Medical
Nutrition, which registered a mid-single digit increase,
with strong sales growth in pediatrics. Growth in Europe was
enhanced by strong momentum in Poland and the Netherlands. Sales in
China increased at a double-digit rate. In Early Life
Nutrition, as anticipated, growth was adversely impacted
by decreasing sales in China compared with the very strong +50%
growth in Q1 2018. Outside of China, performance was strong as
Early Life Nutrition generated mid-single digit growth driven
primarily by South-East Asia. Sales in Europe continued to be
impacted by Aptamil in the UK where recovery plan is ongoing.
During the quarter, Danone inaugurated a new plant in the
Netherlands to support the expansion of Danone’s range of
specialized infant formula products.
WATERS
Waters delivered a solid
broad-based sales growth of +3.9%, driven by volume (+1.0%) and
value (+2.9%). All regions contributed to this growth.
Europe posted moderate growth
and particularly strong in Poland and Denmark. In the
U.S., evian delivered strong growth as a result of
expanded distribution and market share gains in convenience stores.
Sales rose solidly in Asia supported by Indonesia.
Growth was solid across Latin America where the
biggest brand in the region, Bonafont, was supported in Mexico by
strong category momentum and successful consumer activations.
2019 OUTLOOK
(From press release issued on February 19,
2019)Macroeconomic outlookIn 2019, Danone expects further cost
inflation with a mid-to-high single digit inflation in the costs of
raw and packaging materials, including:· milk price inflation
high-single digit overall, on the back of a rebalancing supply and
demand dynamic,· continued inflation in PET cost driven by
sustained market demand,· inflationary conditions in other raw
materials, including sugar and fruits.2019 guidanceIn 2019, Danone
will continue to progress towards its 2020 objectives by
strengthening its operating model through its priorities:
accelerate growth, maximize efficiencies and allocate capital with
discipline. Delivery of its agenda of sales growth acceleration and
improved recurring operating margin will be supported by valorized
innovations, active portfolio management, and further savings from
the €1 billion Protein efficiency program and WhiteWave integration
synergies. For the year, Danone is targeting like-for-like
sales growth around 3% and recurring operating margin above
15%.
FINANCIAL TRANSACTIONS
AND DEVELOPMENTS OVER THE PERIOD
- On April 1st, 2019, Danone increased its
ownership and became the majority shareholder of the French company
Michel et Augustin, which was the first investment of Danone
Manifesto Ventures in 2016. As a result, from April 1st, 2019,
Danone will fully consolidate the results of Michel et Augustin,
which designs and markets innovative, premium range of biscuits,
dairy products, fresh desserts and beverages.
- On April 11th, 2019, Danone completed the sale
of the U.S. organic salads business Earthbound Farm to Taylor
Farms, in line with its portfolio management and capital allocation
optimization strategy. The transaction will contribute to the
improvement of the recurring operating margin in 2019 and will lead
to a non-recurring loss of net income of around 100 million
dollars, to be fully recognized in H1 2019. Earthbound Farm had
annual sales of about 400 million dollars in 2018.
OTHER INFORMATION
IAS29 impact on reported
data
Danone is applying IAS 29 in Argentina from July
1st, 2018 with effect from January 1st, 2018. Adoption of IAS 29 in
this hyperinflationary country requires its non-monetary assets and
liabilities and its income statement to be restated to reflect the
changes in the general pricing power of its functional currency,
leading to a gain or loss on the net monetary position included in
the net income. Moreover, its financial statements are converted
into euro using the closing exchange rate of the relevant
period.
IAS29 impact on reported data |
Q1 2019 |
|
Sales (€ million) |
-9 |
|
Sales growth (%) |
-0.1% |
|
FINANCIAL INDICATORS
NOT DEFINED IN IFRS
Due to rounding, the sum of values presented may
differ from totals as reported. Such differences are not
material.
Financial
indicators not defined in IFRS
Like-for-like changes in sales
and recurring operating margin reflect Danone's organic performance
and essentially exclude the impact of:
- changes in consolidation scope, with indicators related to a
given fiscal year calculated on the basis of previous-year scope
and, starting January 1st, 2019, previous-year and current-year
scope excluding Argentinian entities;
- changes in applicable accounting principles;
- changes in exchange rates with both previous-year and
current-year indicators calculated using the same exchange rates
(the exchange rate used is a projected annual rate determined by
Danone for the current year and applied to both previous and
current year).
Bridge from reported data to
like-for-like data
(€ million except %) |
Q1 2018 |
Impact of changesin scope of
consolidation |
Argentina organic contribution to growth |
Impact of changes in exchange rates and others, including
IAS29 |
Like-for-like growth |
Q1 2019 |
|
|
|
|
|
|
|
Sales |
6,085 |
0.0% |
+0.3% |
-0.2% |
+0.8% |
6,138 |
Recurring operating income is
defined as Danone’s operating income excluding Other operating
income and expenses. Other operating income and expenses is defined
under Recommendation 2013-03 of the French CNC (format of
consolidated financial statements for companies reporting under
international reporting standards), and comprises significant items
that, because of their exceptional nature, cannot be viewed as
inherent to its recurring activities. These mainly include capital
gains and losses on disposals of fully consolidated companies,
impairment charges on goodwill, significant costs related to
strategic restructuring and major external growth transactions, and
costs related to major crisis and major litigations. Furthermore,
in connection with IFRS 3 (Revised) and IAS 27 (Revised) relating
to business combinations, the Company also classifies in Other
operating income and expenses (i) acquisition costs related to
business combinations, (ii) revaluation profit or loss accounted
for following a loss of control, (iii) changes in earn-outs
relating to business combinations and subsequent to acquisition
date.
Recurring operating margin is
defined as Recurring operating income over Sales ratio.
o o O o o
FORWARD-LOOKING STATEMENTS
This press release contains certain
forward-looking statements concerning Danone. In some cases, you
can identify these forward-looking statements by forward-looking
words, such as “estimate”, “expect”, “anticipate”, “project”,
“plan”, “intend”, “objective”, “believe”, “forecast”, “guidance”,
“foresee”, “likely”, “may”, “should”, “goal”, “target”, “might”,
“will”, “could”, “predict”, “continue”, “convinced” and
“confident,” the negative or plural of these words and other
comparable terminology. Forward looking statements in this document
include, but are not limited to, predictions of future activities,
operations, direction, performance and results of Danone.
Although Danone believes its expectations are
based on reasonable assumptions, these forward-looking statements
are subject to numerous risks and uncertainties, which could cause
actual results to differ materially from those anticipated in these
forward-looking statements. For a detailed description of these
risks and uncertainties, please refer to the “Risk Factor” section
of Danone’s Registration Document (the current version of which is
available on www.danone.com).
Subject to regulatory requirements, Danone does
not undertake to publicly update or revise any of these
forward-looking statements. This document does not constitute an
offer to sell, or a solicitation of an offer to buy Danone
securities.
The
presentation to analysts and investors, held by CFO Cécile Cabanis,
will be broadcast live today from 9.00 a.m. (Paris time) on
Danone’s website (www.danone.com). Related slides will also be
available on the website in the Investors section
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