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At its investor seminar, Danone decided to adjust its 2020 guidance. The company now expects: • 4-5% LFL sales growth (at least 5% previously) : - At least +5% LFL sales growth for Essential Dairy & Plant-based (EDP) NORAM (which includes North American Fresh dairy business and Whitewave’s former North American business) - At least + 5% LFL sales growth for Specialized Nutrition (Early Life Nutrition: 7-10% previously & Medical Nutrition: 6-8% previously) - At least +5% LFL sales growth for Waters (7-10% previously) - 3%-4% LFL sales growth for Essential Dairy & Plant-based (EDP) International (which includes Fresh dairy products in the rest of the world and WhiteWave’s former business in Europe, Latin America and China) •a recurring operating margin of over 16% in 2020 (13.77% in FY16) driven by: - Protein program (cost efficiency) aiming for €1 billion savings by 2020, with at least €300 million net of reinvestment translating into margin expansion by 2020 (15% of cost efficiencies coming from professional services (warehousing), 25% from logistics, 30% from sales & marketing and 30% from manufacturing). - $300 million of synergies from the WhiteWave acquisition (50% coming from SG&A, 30% from procurement and 20% from the supply chain) - more discipline and stricter resource allocation
Danone Q1 update: sales are up +0.7% lfl (in line with consensus) with volume down 2.5% and pricing +3.3%. On reported figures, sales are up +3% (FX: 2.8%, net M&A: -0.5%). Lfl performance by division: Fresh Dairy -2.3% (cons. -1.9%), Waters +1.7% (cons. 1.5%), ELN +4.1% (cons. +3%) and Medical Nutrition +8.8% (cons. 7%). OG by region: Europe -1.9%, CIS & North America -0.1%, ALMA +3.7%. Following the WhiteWave acquisition, the company has upgraded its FY17 guidance to a double-digit recurring EPS growth at constant exchange rates (5% previously). The group will change its reporting structure: - DanoneWave will include Danone Fresh Dairy Products’ and WhiteWave’s current North American businesses; - Fresh Dairy Products will include Danone’s Fresh Dairy Products in Europe, CIS and ALMA as well as WhiteWave’s business in Europe, Latin America and China; - Early Life Nutrition and Medical Nutrition will report as a single category; - Waters will be reported as previously. Performance will be reported based on two different regions: - Europe and North America will report as a single region; - The Rest of the World’s (RoW) perimeter will cover current ALMA and CIS regions.
FY and Q4 update: Q4 sales grew +2.1% (in line with consensus). OG by division: FD +0.7%, Waters +6.3%, Baby Food +0.6%, Medical Nutrition +6.1%. On a FY basis, sales grew organically +2.9% (in line with consensus), and were down 2.1% on reported figures (FX: -5.5%). The operating margin is up 87bp (+70bp lfl). FY OG by division: FD +2%, Waters +2.9%, Baby Food +3.5%, Medical Nutrition +7.4%. OG by region: Europe -1.4%, CIS & North America +4.6%, ALMA +6.7%. The company announced a new cost-savings programme with a target of €1bn by 2020. The efficiency savings will target professional spending, media and logistics. They are part of the implementation of the group’s mid-term guidance of an operating margin progression of 250bp by 2020. For the FY17, Danone sees a volatile and uncertain environment. Costs of raw materials should increase by mid single-digits (milk costs to rise in Europe and North America). The group said that the weak environment in China might also last into FY17 and that it is expecting a slower start to the year. FY17 guidance is to deliver at least +5% EPS growth lfl (excluding the WhiteWave integration). Once this is completed, the group will review its annual targets. The proposed dividend is €1.7 (+6.3%).
Danone has adjusted its FY16 guidance on the back of a weaker than expected Q4 in Spain and Activia’s performance. Consequently, the company expects the FY16 top-line to be slightly below the guidance of 3-5%, whereas the operating margin should be above the 50-60bp guidance (with a possible positive impact of 5-10bp).
Q3 update: sales grew lfl +2.1% (cons. +2.4%) with -0.7% volume growth and +2.8% pricing. On reported figures, sales were down 1.8% (FX: -4.1%, scope of consolidation +0.2%). OG by division: Fresh Dairy +2.2% (cons. +2.5%), Waters -0.1% (cons. +1%), Early Life Nutrition +1.7% (cons. +2.5%), Medical Nutrition +9.7% (cons. +7%). Fresh dairy saw stronger pricing +4.2% on the back of negative volumes in the CIS and LatAm regions. Waters were impacted by the transition phase and floods in China (excluding China, the Waters performance is up mid single-digit). The Early Life Nutrition performance was impacted by tough comparables and the transition from an indirect to a direct sales model in China (excluding indirect sales, ELN was up mid single-digit in China). Medical Nutrition’s excellent performance was driven across all geographies. The company maintains its FY guidance: 3-5% organic top-line growth and 50-60bp lfl improvement in the operating margin, although the top-line is likely to be in the lower range of this.
Danone released its Q2 and H1 update. In Q2, sales grew organically 4.1% (cons. +3.7%) with volumes up +1% and pricing +3.1%. On reported figures sales were down 3% (FX:-7.7% and net acquisitions: +0.6%). OG by division: Fresh Dairy +3% (cons +2.7%), Waters 2.7% (cons. +2.7%), Early Life Nutrition +7.2% (cons. +6.2%) Medical Nutrition 7.1% (cons. +6.5%). OG by geography: Europe -0.2%, CIS&North America +4.8%, ALMA +8%. Overall, in H1 sales grew organically by +3.8%, whereas the operating margin was up +93bp lfl and +125bp on reported figures. Waters was the only division where the margin lfl was down (due to inventory adjustments in China). The company confirmed its FY guidance: 3-5% organic top-line growth and 50-60bp lfl improvement in the operating margin.
Danone has announced the acquisition of WhiteWave Foods (the US-based, natural and health-focused food group) for $12.5bn in cash (including $2.1bn debt). The proposed price per share of $56.25 offers a premium of around 24% to WhiteWave’s average close price over the past month and represents a c. 21.2x EBITDA multiple. The deal is expected to close by the end of the year. It is subject to WhiteWave shareholders and regulatory approval.
Danone released its Q1 trading statement. The OG stood at 3.5% (cons. 3.2%) driven by pricing of +2.7% and volumes of +0.8%. The FX impact was -7.2%. Net acquisitions showed an impact of +0.7%. OG by division: Fresh Dairy +2.3% (cons. 2%), Waters +3.9% (cons. 2.1%), Baby Food +4.8% (cons. +5.5%) and Medical Nutrition +6.6% (cons. 6.7%). OG by region: Europe +0%, CIS & North America +5.1%, ALMA +6.3%. The group maintains its FY guidance: 3-5% OG in sales and a solid improvement in the organic operating margin.
Danone released its Q4 and FY results. In Q4, sales grew organically +3.6% (cons +3.2%) with 1.3% in volume and +2.3% in value. Q4 OG by division: Fresh dairy +2.6% (cons +2%), Waters +1.9% (cons +3.9%), Baby Nutrition +6% (cons +3.4%), Medical Nutrition +6.8% (cons +7.7%). For the FY, the revenue grew organically +4.4% (0.9% in volumes, 3.5% in value) and +6% on reported figures. The operating margin increased +17bp organically (FD +24bp, Waters margin -192bp, Baby Food +142bp, Medical Nutrition +1bp) and +32bp on reported figures. Net income was up +5%. The proposed dividend stood at €1.6 per share. In FY16, Danone expects 3-5% OG in sales (on rising raw material prices, a sluggish economic environment and volatile currencies) and a solid improvement in the organic operating margin.
Danone released its Q3 trading update. Q3 sales were up +4.6% LFL (consensus at 4.3% vs. 4.5% in Q2) with volume up 0.8% (consensus at 1.8%) and pricing up +3.8%. FX stood at -0.2% whereas net acquisitions were -0.2%. On reported figures, Q3 sales grew by +4.2% to €5.6bn.
The consumer staples sector continues to trade on well above average historic and market average multiples despite a lack of earnings growth over 2014-15. This has been due to being perceived as ‘low risk' and cash generative with the ability to continue to pay and grow dividends. However cashflow cover of dividends has declined, and a further round of emerging market currency devaluations could have a severe impact on the ability to grow dividends unless they can grow earnings in the developed world. In the short term the performance of the sector is likely to be overshadowed by the potential interest rate increase in the US. We would have an in-line weighting in the UK consumer staples sector. Within that we remain positive on the tobacco subsector and Hilton Foods Group and retain the Sell rating on Associated British Foods. We move PZ Cussons from Sell to Hold
Q2 sales grew by 4.5% LFL (consensus at 4.3%) with volumes at 1.5% and pricing at 3%. The performance was driven by a strong Waters (10.2%, equally price- and volume-driven), Infant Nutrition (11.1%, with 7.3% volume growth) and Medical Nutrition (7.1% with 5% volume growth). Fresh dairy sales decreased by 1.1% LFL (-3.1% in volume and 2% in pricing).
