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Danone Reports In-Line Price/Mix-Driven Q3, Confirms Guidance; Cost Inflation Mounts; Maintain FVE

Ioannis Pontikis, CFA Senior Equity Analyst

Analyst Note

| Ioannis Pontikis, CFA |

Danone reported third-quarter results with like-for-like sales up 3.8%, slightly ahead of company-compiled expectations (3.6%). Value (mix/pricing) was up 4.6% (versus 2.8% consensus) and volume was down 0.8% (versus up 0.8% for consensus). Essential dairy and plant-based, or EDP, was up 4.1% on a like-for-like basis with specialized nutrition and water up 2.9% (volume down 5.3% with value up 8.2%) and 4.6%, respectively, with China growing double digits in the adult and infant nutrition segments. EDP's performance was particularly noteworthy since the company faced supply and logistic disruptions "hampering Danone's ability to produce and serve demand in plant-based." On cost inflation, which is top of mind for investors lately, Danone said it expects cost of goods sold inflation in the second half to be 9%, about 200 basis points higher than in the first half. In response, the company is moving from "selective pricing into broad-based pricing." Danone reiterated guidance to be back to profitable growth in the second half, with margins broadly in line with 2020 (13.9% in our model versus 14% last year and 13.7% for consensus). After this mostly in-line set of numbers, we do not expect to change our EUR 60 fair value estimate. The shares trade in the 3-star territory.

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Company Profile

Business Description

Following the acquisition of WhiteWave, Danone restructured the firm into three broad segments: essential dairy and plant-based products, which represents just over half of group revenue; specialised nutrition; and bottled water. The firm's portfolio includes well-known brands such as Danone/Dannon dairy products, Nutrilon and Cow & Gate infant nutrition, and Evian and Volvic bottled water. Danone derives about 60% of its annual sales outside Western Europe, up from about just one third in 2001.

17, Boulevard Haussmann
Paris, 75009, France
T +33 144352020
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Jun 30, 2006
Fiscal Year End Dec 31, 2021
Stock Type
Employees 101,911