Danone delivered stronger-than-expected sales growth in the last quarter of 2021, despite a challenging environment marked by mounting inflation, even as the yoghurt-maker’s new chief said that much remained to be done to turn the company around.
Antoine de Saint-Affrique, who took over as chief executive of the French group in September, said on Wednesday that investors would have to wait until the 8 March Capital Market Day for clues on his strategy and outlook for 2022 and the midterm.
Consumer goods companies are grappling with surging costs for commodities, energy, transport and labour, prompting rival Unilever to warn of a drop in margins earlier this month, as it struggles to lift prices enough to offset the extra expenses.
“[While Danone] ended the year on a strong note [...] we still have much more to do, and I look forward to our CME on 8 March, when we will be in a position to share more on the next steps in our growth and renewal journey,” Saint-Affrique said in a statement.
By 08.01 GMT, shares in the French group were up by 2.4%, at €55.88, after the sales beat, which was driven largely by a continuing recovery in its bottled-water business, as countries relaxed Covid restrictions.
‘Q4 is ahead on the top line with FY 21 margins in line. The question remains one of whether new CEO Antoine de Saint-Affrique will take a margin reset, or not,’ Jefferies analysts wrote in a note.
Water And Baby Food
Former Danone boss Emmanuel Faber was abruptly ousted as chairman and CEO last year, following clashes with some board members over strategy and calls from activist funds for him to resign over the group’s lacklustre returns, compared with some rivals.
The main challenge for Saint-Affrique is to boost profit margins and sales across the group’s three businesses – dairy and plant-based products, infant formula, and bottled water – while facing mounting input costs, with the further stress of a conflict in Ukraine.
Danone, which is the world’s largest yoghurt-maker, reported that its 2021 like-for-like sales rose by 3.4%, to €24.281 billion ($27.48 billion) – slightly above analysts’ estimates in a company-compiled consensus for a 3% rise.
Danone noted that this reflected an acceleration in the fourth quarter, to 6.7% sales growth – above market expectations of 5.5% growth – with all three businesses contributing.
Most of the fourth-quarter sales beat came from the bottled-water division, which posted a 17.4% jump in sales. The division whose sales had been hit by restaurant and bar closures tied to Covid-19 restrictions continued its recovery, with the Mizone and Aqua brands returning to positive growth in Asia.
Infant nutrition also posted very strong growth in the quarter, driven by China and the rest of the world.
The 2021 operating margin declined by 30 basis points, to 13.7% of sales, in line with the company’s outlook and analysts’ expectations of 13.7%, as accelerating sales growth and strong productivity helped to partly offset inflationary pressure.