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Danone Eyes Better Margins In 2023, Q4 Sales Top Estimates

By Donna Ahern
Danone Eyes Better Margins In 2023, Q4 Sales Top Estimates

Danone like-for-like quarterly sales growth topped estimates on Wednesday on the back of higher prices amid soaring raw materials and energy costs which still weighed down its full-year operating margin.

The world's largest yoghurt maker's 2023 forecast was in line with its mid-term like-for-like sales growth target of 3% to 5%, with a moderate improvement in recurring operating margin.

The owner of Activia yoghurt and Evian bottled water reported like-for-like sales growth of 7.8% for 2022, near the top end of its 7% to 8% sales growth forecast.

Fourth-Quarter Sales

Danone reported fourth-quarter sales growth of 7%, beating market expectations of 6.2%, helped by growth across Essential Dairy and Plant-based, Specialised Nutrition and Waters segments.

The operating margin for 2022 declined to 12.2% of sales from 13.7% in 2021, broadly in line with expectations, reflecting inflationary pressure and costs related to investments in brands in the second half of the year.

"Building on 2022 momentum, we are entering 2023 with renewed ambition and confidence in our strategy," Antoine de Saint-Affrique, CEO said in a statement.

Revival Plan

Saint-Affrique is implementing a revival plan amid mounting input costs, uncertainty caused by Russia's invasion of Ukraine that has also led the group to plan shedding control of its dairy food business in Russia.

Overall, price increases contributed 8.7% to annual revenue growth and 11.3% to fourth-quarter growth.

Danone, like its rivals Nestlé and Unilever, has increased prices to cope with surging costs but faces a challenge when it comes to the extent of price hikes before even affluent shoppers decide enough is enough.

Last month Danone also announced it would explore strategic options, including a potential sale, for its organic dairy activity in the United States, comprising the Horizon Organic and Wallaby businesses, as part of its plans to part with non-performing assets.

News by Reuters, edited by Donna Ahern, Checkout. For more A-brand news, click here. Click subscribe to sign up for the Checkout print edition.

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