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Food Group Danone Cuts 2020 Forecasts Due To Coronavirus Outbreak

By Donna Ahern
Food Group Danone Cuts 2020 Forecasts Due To Coronavirus Outbreak

Food group Danone has lowered its 2020 forecast for sales and profit margin, citing a particularly uncertain economic climate and the impact of the coronavirus.

The world's largest yoghurt maker said the coronavirus outbreak would result in €100 million of lost sales, principally affecting its water business in China in the first quarter.

"While we cannot currently predict the duration and extent of the impact of COVID-19, we remain extremely vigilant and are closely monitoring the situation everyday, working hand in hand with local authorities," Danone said in a statement.

'Accelerate Investment'

Finance Chief Cecile Cabanis told journalists that "despite current uncertainties we need to accelerate investment" and the maker of Activia yoghurt and Evian water announced plans to invest €2 billion over 2020-2022 to accelerate climate protection initiatives.

Danone, which is also targeting mid-single-digit recurring earnings per share (EPS) growth for 2020, said it was now targeting like-for-like sales growth of 2-4% in 2020 and an operating margin above 15%.


This compares with its previous 2020 goals of 4-5% sales growth and an operating margin above 16%.

Danone made the 2020 forecast after reporting growth in sales in the fourth quarter, driven by a strong performance in baby food in China and a return to positive sales growth in the waters division.

Overall, Danone reported 2019 sales of €25.287 billion, a like-for-like growth of 2.6%, near the bottom of an already lowered range of 2.5-3% provided in October, and a slowdown from 2.9% growth in 2018.

Diversified Portfolio

The lowered 2020 outlook also deals a blow to Danone CEO Emmanuel Faber's turnaround efforts, which have centred on diversifying the group's portfolio into fast-growing products featuring probiotics, protein and plant-based ingredients to mitigate slower growth in dairy.

In 2017, Danone bought U.S. organic food producer WhiteWave in a $12.5 billion deal, to boost growth and bring the company more into line with healthier eating trends.


The 2019 operating margin however rose 76 basis points to 15.21% of sales, slightly above analysts' expectations of 15.14% helped by efficiency gains of €900 million.

News by Reuters, edited by Donna Ahern Checkout. Click subscribe to sign up for the Checkout print edition


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