DANONE Q1 sales: last quarter of decline before returning to
like-for-like growth
2021
First-Quarter SalesPress release – Paris, April
20, 2021
Danone Q1
sales:
last quarter of decline before
returning to
like-for-like growth
- First-quarter
consolidated sales of €5,657m, down -3.3% on a like-for-like (LFL)
basis, reflecting Covid-related headwinds and lapping high Q1 2020
base of comparison
- Sharp -7.0% impact
of FX, resulting in a -9.4% decline in consolidated sales
- 2021 guidance
reiterated:
- Back to like-for-like growth as of Q2; return to profitable
growth in H2- FY recurring operating margin expected to be broadly
in line with 2020 |
€ millionexcept % |
Q1 2020 |
Q1 2021 |
Reported change |
LFL sales growth |
Volume growth |
BY BUSINESS |
|
|
|
|
|
EDP |
3,364 |
3,149 |
-6.4% |
+1.6% |
+0.5% |
Specialized Nutrition |
1,949 |
1,719 |
-11.8% |
-7.7% |
-7.0% |
Waters |
928 |
790 |
-14.9% |
-11.6% |
-11.2% |
BY GEOGRAPHICAL AREA |
|
|
|
|
|
Europe & Noram1 |
3,469 |
3,273 |
-5.6% |
-2.8% |
-2.7% |
Rest of the World |
2,772 |
2,384 |
-14.0% |
-4.2% |
-4.2% |
|
|
|
|
|
|
TOTAL |
6,242 |
5,657 |
-9.4% |
-3.3% |
-3.7% |
1North America (Noram): United States and
Canada
Véronique Penchienati-Bosetta and Shane
Grant: interim
co-CEOs
statement
“Our first quarter landed in line with
expectations and we continue to expect a return to like-for-like
sales growth in the second quarter, and to profitable growth in the
second half of 2021.
We have now experienced over a year of Covid and
the pandemic continues to impact our markets. Though this resulted
in an overall decline in sales, -3.3% on a like-for-like basis,
this first quarter has confirmed many of Danone’s strengths and
ability to win in key areas. EDP sustained its performance momentum
in key developed markets, especially in Probiotics, Protein and
Plant-based. Growth in Adult Medical Nutrition remained strong,
maintaining last years’ momentum. Waters continued to be impacted
by out of home trends but showed sequential improvement compared to
previous quarters.
Our focus is on delivery and execution, and so
it is to our highly motivated and engaged Danoners that we send our
thanks for their resilience and hard work during these
unprecedented times. Through them, together, we will drive Danone
back to profitable growth and winning in the market.”
I.
2021 first-quarter
sales
In the first quarter
of
2021,
consolidated sales stood at €5.7 bn, down
-3.3%
on a like-for-like basis, with a -3.7%
decline in volume and a +0.3% increase in value.
On a reported basis, sales were down -9.4%,
mainly driven by the negative impact of exchange rates (-7.0%) that
resulted from currency devaluations against the euro in the United
States, Latin America, Indonesia, Turkey and Russia. Reported sales
also included a slightly positive scope effect (+0.4%) as well as a
+0.4% organic contribution from hyperinflation geographies such as
Argentina.
In terms of regional dynamics,
Europe and North America sales declined by -2.8% on a like-for-like
basis, from a high base of comparison that was driven by the pantry
loading that benefited these regions in March 2020 for Specialized
Nutrition and, to a lesser extent, Essential Dairy and Plant-based.
Rest of the World sales decreased -4.2%, with China, Latin America,
and Africa experiencing continued pressure in the quarter.
Performance by reporting
entity
ESSENTIAL DAIRY AND PLANT-BASED (EDP)
In the first quarter, net sales were up +1.6% on
a like-for-like basis, including a +0.5% increase in volume and
+1.1% in value, sustaining momentum despite an exceptional first
quarter last year marked by panic buying and pantry loading.
Europe and North America delivered solid growth,
driven by the Probiotics, Protein and Plant-based.
Europe delivered another quarter of growth. This
performance was driven by the continued strength of the Plant-based
portfolio, growing well into double-digits, while the Probiotics
and Protein platforms posted another quarter of solid growth. The
Essential Dairy portfolio registered broad-based market-share gains
led by Actimel, Danette and YoPro. North America
recorded the largest absolute net sales quarter ever despite a high
base of comparison, sustaining a solid growth momentum, notably in
Coffee Creamers and Plant-based, which delivered strong and high
single-digit growth respectively. In the
Rest of the
World, sales were flat, with soft
dynamics in CIS, while Latin America and Africa started to show the
first signs of improvement compared to previous quarters.
SPECIALIZED NUTRITION
In the first quarter, net sales declined by
-7.7% on a like-for-like basis, with a decrease of -7.0% in volume
and -0.7% in value, from a high base of comparison driven by the
pantry loading of March 2020. Adult
Medical Nutrition delivered
another quarter of strong growth, driven by China. Infant
Nutrition remained penalized by Covid-related channel
disruptions in China, whith cross-border channels
sales down around -45%. Domestic channels confirmed their growth
momentum. All in all, China sales decreased at a steep double-digit
rate. In Europe, sales declined at a mid-teens
rate, but market shares held up well amid continued soft category
dynamics. In the
Rest of the
World, Danone continued to
register a solid performance and market-share gains, led by
South-East Asia and Middle East.
WATERS
In the first quarter, net sales were down -11.6%
on a like-for-like basis, with a decline of -11.2% in volume and
-0.4% in value, once again severely penalized as consumer mobility
remained below pre-Covid levels. In Europe, sales
declined at a high single-digit rate, improving sequentially
compared to recent quarters, on the back of improving mobility, the
continued resilience of at-home formats, and market share gains in
key markets such as France, Germany, Spain and Poland. In
the Rest of the
World, sales in Latin America and
Indonesia continued to decline at a steep double-digit rate, while
Mizone registered another quarter of growth in China, in line with
the last quarter, and entering the high season with innovative
product offerings as well as strong activation plans.
II.
2021 outlook and
guidance
Macro-economic outlook
Despite short-term uncertainties, a gradual
reopening of economies is assumed to start from H2, as vaccination
programs are rolled out. Meanwhile, a broad-based acceleration of
inflation in milk, ingredients, packaging and logistics is
expected.
2021 guidance
reiterated
Danone expects to be back to like-for-like
growth in Q2, and to return to profitable growth in H2. FY
recurring operating margin is expected to be broadly in line with
2020.
III. Major financial
transactions and developments over the period
Changes in governance
In recent months, Danone’s management and Board
of Directors have conducted an open dialogue with shareholders and
social partners, as well as many other internal and external
stakeholders, and a reflection on Danone's governance has been
undertaken. Further to a decision to initiate the process of
separating the functions of Chairman of the Board and Chief
Executive Officer on March 1, 2021, the Board of Directors, at its
meeting on March 14, 2021, reviewed the company’s corporate
governance and decided that Emmanuel Faber would step down as
Chairman and Chief Executive Officer with immediate effect. The
Board appointed Gilles Schnepp as the independent non-executive
Chairman of the Board of Directors, and appointed Véronique
Penchienati-Bosetta and Shane Grant to jointly lead the business as
interim co-CEOs, while the search for a new Chief Executive Officer
was launched. Furthermore, and in order to be in a position to take
into account the company’s future needs, the Board also decided to
pause and reconsider any immediate member refreshments. As a
result, the proposed nominations of Ariane Gorin and Susan Roberts
as Directors will not be presented to the upcoming Annual General
Meeting.
Search for a
new CEO
The immediate priority of the new Chairman,
together with the Board, is to lead the transition, including the
search for a new Chief Executive Officer. An international
executive search firm has been hired to conduct an extensive review
of suitable external candidates. The Governance committee, led by
Jean-Michel Severino, Lead Independent Director, is managing the
day-to-day process.
Confirmation of Local First
The Board reaffirmed its support to the Local
First plan, as it will make Danone stronger, enable the Company to
accelerate growth and value creation and better meet consumer and
customer needs in each country where it operates, as well as unlock
significant resources to be reinvested into brands and commercial
plans. The specific needs of the Specialized Nutrition category
will be supported by dedicated resources, both globally and
locally. Danone will pay careful attention to ensuring a proper
transition and securing the execution of the plan without
disruption to the business.
Financial transactions
and developments
FOLLOW YOUR HEART
ACQUISITIONOn February
18, 2021, Danone announced it acquired 100% of the shares
of Earth Island, maker of Follow Your Heart brands and a U.S.
pioneer in plant-based foods. The transaction was closed on
April 14,
2021.
MENGNIU On February 28,
2021, Danone announced that it had reached an agreement
with COFCO Dairy Investments Limited to convert Danone’s stake in
China Mengniu Dairy Company Limited, currently held indirectly,
into a direct holding. On April
16, 2021, the conversion process
was finalized. This conversion is a first step towards facilitating
Danone’s disposal of its stake in
Mengniu.IV. IFRS
standards and financial indicators not defined in IFRS
IAS29: impact on reported data
Danone has been applying IAS 29 in
hyperinflation countries as defined in IFRS. Adoption of IAS 29 in
this hyperinflationary countries 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 euros using the closing exchange rate of the
relevant period.
IAS29: impact on reported data €
million except % |
Q1 2021 |
Sales |
+4 |
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.
Like-for-like changes in sales,
recurring operating income 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, both previous-year
and current-year scopes excluding entities in countries under
hyperinflation according to IAS29 during the previous year (as for
Argentinian entities since January 1st 2019);
- 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 years).
Bridge from reported data to
like-for-like data
(€ million except %) |
Q1 2020 |
Impact of changesin scope of
consolidation |
Impact of changes in exchange rates and others, including
IAS29 |
Organic contribution from
hyperinflation countries |
Like-for-like growth |
Q1
2021 |
|
|
|
|
|
|
|
Sales |
6,242 |
+0.4% |
-6.7% |
+0.4% |
-3.3% |
5,657 |
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 the 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 Universal Registration Document (current version
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 Juergen
Esser, 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 in the
Investors section of the
website.
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