Danone Eyes Higher Sales, Profit Growth In 2019
Food group Danone has vowed to accelerate sales growth and profits this year, thanks to cost cuts and its push into healthy-eating trends.
Danone, which bought US organic food group WhiteWave in 2017, made the forecasts after delivering high 2018 earnings and stronger-than-expected fourth-quarter sales, despite a consumer boycott in Morocco and weaker demand for infant formula products in China.
Danone, which is the world's largest yoghurt-maker and which stabilised its dairy sales in Europe, noted that it was targeting like-for-like sales growth of around 3% in 2019 and an operating margin above 15%.
The company added that this meant that it was on track to deliver on its 2020 goals.
“Our company is becoming more agile every day,” commented Danone chief executive Emmanuel Faber. “We keep adjusting our ways of working and delivering efficiency.
“We adapt to the ever-changing world around us, as exemplified by the impressive acceleration of our innovation rate, supplying a quarter of our total sales in 2018 from only 16% two years ago, and our 40% growth in e-commerce last year,” added Faber.
"In 2018, we delivered a solid performance and continued to successfully transform Danone for the future. We are well on track to reach our objectives and will continue to drive positive change towards superior, sustainable, profitable growth," said chief financial officer Cécile Cabanis.
The 2017 takeover of WhiteWave, which makes almond milk and organic products, is intended to boost Danone's profit margins, given WhiteWave's generally affluent clientele, while Danone has also been cutting costs.
Danone is targeting an operating margin above 16% of its sales and like-for-like sales growth of 4-5% by 2020.
Like-for-like sales in 2018 rose by 2.9%, to €24.651 billion ($27.8 billion) – a slight acceleration from 2.5% in 2017, and slightly above analysts' estimates in a company-compiled consensus for 2.8%.
The 2018 operating margin rose by 51 basis points, to 14.45% of sales.
Fourth-quarter sales growth alone accelerated to 2.4% from 1.4% in the third quarter, beating analysts' expectations of 1.5% growth.
Sales of Danone's Early Life Nutrition products in China fell around 10% in the quarter due to a lower birth rate in that country and tougher year-ago comparables, but this was less than the 20% decline suffered in the third quarter.
China is a key growth engine for Danone, contributing to about 30% of sales in its Early Life Nutrition unit.
Danone has warned that the slowdown in China will last several quarters. It reiterated on Tuesday that it expected the Early Life Nutrition business in China to return to positive growth in the second half of 2019.
While there were relatively fewer births in China, Danone has said that it would continue to benefit from demand for its ultra-premium infant formula products, such as Aptamil Platinum, and for its medical nutrition products.