Danone Confirms Full Year Expectations
Danone has increased like for like sales by 3.8% to €11.05 billion in the first half of 2016 as all four divisions – Fresh Dairy Products, Waters, Early Life Nutrition and Medical Nutrition – grew revenue. Group recurring operating income rose by 11.5% on a like for like basis to €1.478 billion and recurring operating margin advanced 93 bps to 13.37% as Danone continued to implement its strategy for ‘strong, sustainable and profitable growth by 2020’.
As part of its 2020 transformation plan and faced with a more volatile and challenging trading environment, Danone managed to strengthen its balanced growth model and anchor profitable growth in a sustainable manner in the first half of 2016. The company’s margin improvement of 93 bps like for like, reflected the positive contribution of all divisions except Waters, where margin remained impacted by ongoing inventory adjustments in China.
Helped by the solid sales growth generated by all four of its divisions, and in an environment of favorable raw material costs, Danone pursued structural efforts to optimize its cost base. At the same time, Danone continued to step up investment in its brands to ensure future growth. These investments will continue in the second half of the year, in particular with the relaunch of the Activia brand.
Emmanuel Faber, chief executive of Danone.
“We continue to implement our agenda to transform the company and increase the resilience of our business model,” comments Emmanuel Faber, chief executive of Danone. “With fast-evolving dynamics in some emerging markets and an environment that remains complex, we are sticking to our priorities and the Q2 results reflect key steps in our journey, notably in Dairy with confirmed success in the US and sequential improvement in Europe. It is the case, as well, in Early Life Nutrition with significant progress in sustainable channels. I am truly grateful to everyone at Danone for working together in a way that has delivered important transforming achievements at a time the company adapts itself to take up challenges and opportunities for its future and, carry out its mission by actively encouraging healthier eating and drinking habits.”
Danone has confirmed its full year guidance. This entails raising its 2016 recurring operating margin target from ‘solid improvement’ to a range of +50bps to +60bps, while attaining sales growth within a range of +3% to +5%. Danone will also focus on increasing free cash-flow, without setting a short-term target.
