Danone: Another quarter focused on execution and delivery; 2021
guidance reiterated
2021
Third-Quarter
SalesPress release – Paris,
October 19, 2021
Another quarter
focused on
execution and
delivery2021
guidance reiterated
-
Net sales of €6,158m in
the third
quarter, up
+3.8%
on a like-for-like (LFL) basis, and +5.8% on a reported
basis
-
Another quarter focused on
execution and
delivery:
-
All categories contributing to growth with
sustained strong momentum in EDP,
continued recoveryin Specialized Nutrition
and Waters
-
Higher inflation and supply chain
pressure, greater focus on
productivity and pricing
initiatives
-
Local First implementation on track
- 2021
guidance reiterated: return to profitable growth in H2,
and FY recurring operating margin broadly in line with 2020
-
Capital market event to take place on
March 8th, 2022
|
Juergen Esser:
Chief Financial Officer
statement
“Today’s results further underscore our progress
to profitable growth. Our actions and focused delivery across all
parts of the company ensured that all categories contributed to a
solid performance this quarter.
We see clear evidence of our brands’ strengths
and relevance to the global health and wellness agenda. Our
Essential Dairy and Plant-based business continued its strong
momentum, particularly in Europe and North America, with market
share gains on key platforms. Our Waters business, led by a strong
performance in Europe, benefited from the improved out of home
mobility. And our Specialized Nutrition business also saw good
dynamics driven by Adult Nutrition and the return to growth of
Infant Milk Formula in China.
Like just about everyone across the sector and
beyond, we see inflationary pressures across the board. What
started as increased inflation on material costs evolved into
widespread constraints impacting our supply chain in many parts of
the world. That said, we are putting even greater focus on
productivity and pricing actions to mitigate the impact on our
performance, thus re-iterating our FY 2021 guidance.”
I.
2021
THIRD-QUARTER
SALES
€ millionexcept % |
Q32020 |
Q32021 |
Reported change |
LFL Sales Growth |
Volume Growth |
9M2020 |
9M2021 |
Reported change |
LFL Sales Growth |
Volume Growth |
BY REPORTING ENTITY |
|
|
|
|
|
|
|
|
|
|
EDP |
3,108 |
3,269 |
+5.2% |
+4.1% |
+0.6% |
9,699 |
9,686 |
-0.1% |
+3.5% |
+1.1% |
Specialized Nutrition |
1,698 |
1,777 |
+4.6% |
+2.9% |
-5.3% |
5,441 |
5,294 |
-2.7% |
-0.8% |
-4.6% |
Waters |
1,015 |
1,112 |
+9.6% |
+4.6% |
+2.4% |
2,864 |
3,031 |
+5.8% |
+4.5% |
-0.6% |
BY GEOGRAPHICAL AREA |
|
|
|
|
|
|
|
|
|
|
Europe & Noram1 |
3,334 |
3,498 |
+4.9% |
+3.9% |
+0.6% |
10,156 |
10,282 |
+1.2% |
+2.5% |
+0.7% |
Rest of the World |
2,486 |
2,660 |
+7.0% |
+3.7% |
-2.1% |
7,848 |
7,729 |
-1.5% |
+2.2% |
-2.1% |
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
5,821 |
6,158 |
+5.8% |
+3.8% |
-0.8% |
18,004 |
18,011 |
+0.0% |
+2.3% |
-0.9% |
1North America (Noram): United
States and CanadaIn the third quarter
of 2021, consolidated
sales stood at €6.2 bn, up +3.8% on a like-for-like basis, led by
+4.6% in value and -0.8% in volume. On a reported basis, sales
increased by +5.8%, benefiting from a positive impact of exchange
rate of +0.8%, notably reflecting the appreciation of the Chinese
Renminbi, the Mexican Peso and the British Pound against the Euro
while the US Dollar and other emerging currencies remained broadly
stable versus last year. Reported sales also benefited from +0.7%
organic contribution of hyperinflation geographies to growth, as
well as a slightly positive scope effect of +0.3%, mainly resulting
from the combined effects of the integration of Harmless Harvest
and Follow Your Heart and the disposal of Vega.
In terms of regional dynamics,
strong growth was broad-based in the third quarter. Europe and
North America sales were up +3.9% on a like-for-like basis, driven
by the sustained momentum in EDP and the recovery of Waters in
Europe. Sales in the Rest of the World increased by +3.7% on a
like-for-like basis, notably led by the performance of Specialized
Nutrition in China.
Performance by reporting
entity
- ESSENTIAL DAIRY AND
PLANT-BASED (EDP)
Essential Dairy &
Plant-based posted sales growth of +4.1% in Q3 2021 on a
like-for-like basis, reflecting a +0.6% increase in volume and
+3.5% in value. The Essential Dairy portfolio delivered solid
growth, while Plant-based grew strong mid-single digits. By
geographical area, EDP in Europe and Noram was up
+4.3% on a like-for-like basis during the period. In Europe,
Essential Dairy performance was again driven by the Probiotics and
Protein platforms, led by Actimel and YoPro, that registered
double-digit growth, and Activia that pursued its strong momentum
in the UK and Germany. Alpro delivered another quarter of
double-digit growth, notably led by the strong performance of the
recently relaunched Oat range. In Noram, growth was led by the
Yogurt and Coffee Creations segments, with Oikos, Two Good and
Activia showing very strong growth and market share gains, and
International Delight and Stok delivering double-digit growth. The
performance of the Plant-based portfolio was impacted this quarter
by supply and logistic disruptions hampering Danone’s ability to
produce and serve customer demand. In the Rest of the
World, Latam and Africa continued their sequential
recovery, while dynamics continued to be soft in CIS, amid a
remaining challenging macro-economic and sanitary environment.
Specialized Nutrition sales
increased by +2.9% in Q3 2021 on a like-for-like basis, with a
decrease of -5.3% in volume and an increase of +8.2% in value.
Adult Nutrition delivered mid single-digit growth,
led by China and other emerging platforms, growing double-digits,
while Europe delivered another quarter of growth. By segment, both
the Oral and Tube feeding platforms continue to grow, while the
Healthy Ageing platform pursued its roll-out in South-East Asia and
Africa. Infant Nutrition delivered moderate growth
this quarter. As expected, growth was led by China which grew
double digits with a broad-based contribution from all channels.
Channels distributing domestic labels delivered another quarter of
mid to high single-digit growth while International labels sold in
cross-border e-commerce platforms kept posting steep double-digit
growth. Cross-border indirect channels, which notably include
Daigous and Friends & Family, were back to growth after having
declined by approximately -60% in the same period last year. In
Europe, sales were flat in a declining market, while in other
regions, dynamics were soft due to phasing effects.
Waters sales increased by +4.6%
in Q3 2021 on a like-for-like basis, led by volumes up +2.4% and
value +2.1%. Europe delivered strong mid
single-digit growth, sequentially closing the gap vs 2019 and
registered broad-based market share gains with an excellent
performance of evian, Volvic, Żywiec Zdrój and Font Vella.
In the Rest of the World, Mizone’s sales declined
low single digit this quarter, after three quarters of growth.
While sell-in was temporarily impacted by local lockdowns and bad
weather, execution remained solid, with continuing recruitment of
new young consumers and resilient market shares. Latin America
delivered double-digit growth, thanks to a return to mobility this
summer, while Indonesia’s performance was still negatively impacted
by strong restrictions linked to Covid-19, including the
re-implementation of some local lockdowns over the summer.
II. 2021 OUTLOOK AND
GUIDANCE
Macro-economic outlookDespite
short-term uncertainties, a gradual reopening of economies is
assumed to continue as vaccination programs are rolled out.
Meanwhile, a broad-based acceleration of inflation in milk,
ingredients, packaging and logistics is expected.
2021 guidance reiteratedDanone
expects to return to profitable growth in H2, and FY recurring
operating margin is expected to be broadly in line with 2020.
III.
SHARE BUYBACK
On July 29, 2021, Danone announced the launch a
share buyback program of up to €800m worth of shares in the second
half of 2021. As of October 15, 2021, the Company had repurchased
an aggregate market value of €673 million.
IV.
MAJOR DEVELOPMENTS OVER THE PERIOD
Governance and leadership
changes
- July
29, 2021: As part of the
transition initiated earlier this year on the company’s governance
framework, Danone’s Board of Directors announced an overhaul of its
composition, that will be completed by Danone’s 2023 Shareholders’
Meeting.
- September 28,
2021: Danone announced the appointment of Laurent Sacchi
as General Secretary, succeeding Bertrand Austruy, with effect from
October 1st. Laurent Sacchi joined Danone’s Executive Committee,
while maintaining his duties as Secretary to the Board of
Directors.
- October 19, 2021:
Danone announced the appointment of Roberto Di Bernardini as Chief
Human Resources Officer with effect from November 29th. Roberto Di
Bernardini will join Danone’s Executive Committee.
Major financial
transactions
- September
7, 2021: As part of the active
management of its hybrid debt portfolio and taking advantage of
favorable market conditions, Danone launched the partial
refinancing of its €1.25 billion hybrid bond. On September 7, 2021,
Danone successfully priced an issue of €500 million undated deeply
subordinated notes, offering a fixed resettable coupon of 1%, with
a first call date on 16 December 2026. On September 15, 2021,
Danone announced the success of the tender offer on part of its
€1.25 billion hybrid bond (bearing a 1.750% p.a. coupon and with a
first call date on 23 March 2023), for a total amount of €500
million. The new €500 million notes were issued and the tender
offer on existing bonds was settled on 16 September 2021.
V. IFRS STANDARDS AND
FINANCIAL INDICATORS NOT DEFINED IN IFRS
IAS29: impact on reported
data
Danone has been applying IAS 29 in
hyperinflation countries as defined in IFRS. Adoption of IAS 29 in
these hyperinflationary countries requires its non-monetary assets
and liabilities and its income statement to be restated to reflect
the changes in the general pricing power of its functional
currency, leading to a gain or loss on the net monetary position
included in the net income. Moreover, its financial statements are
converted into euros using the closing exchange rate of the
relevant period.
IAS29: impact on reported data €
million except % |
Q3
2021 |
Sales |
2.5 |
Sales growth (%) |
+0,04% |
Breakdown by quarter of 9M 2021 sales after
application of IAS 299M 2021 sales correspond to the addition
of:
- Q3 2021
reported sales;
- Q1 and Q2 2021
sales resulting from the application of IAS29 until September 30,
2021 to sales of entities of hyperinflation countries (application
of the inflation rate until September 30, 2021 and translation into
euros using September 30, 2021 closing rate) and provided in the
table below for information (unaudited data).
€ million |
Q1 20211 |
Q2 20212 |
Q3 2021 |
9M 2021 |
EDP |
3,158 |
3,259 |
3,269 |
9,686 |
Specialized Nutrition |
1,723 |
1,795 |
1,777 |
5,294 |
Waters |
793 |
1,126 |
1,112 |
3,031 |
|
|
|
|
|
Total |
5,674 |
6,179 |
6,158 |
18,011 |
1 Results from the application of IAS29 until
September 30, 2021 to Q1 sales of entities of hyperinflation
countries. 2 Results from the application of IAS29 until September
30, 2021 to Q2 sales of entities of hyperinflation countries.
Financial indicators not defined in
IFRS
Due to rounding, the sum of values presented may
differ from totals as reported. Such differences are not
material.
Like-for-like changes in sales,
recurring operating income and recurring operating margin reflect
Danone's organic performance and essentially exclude the impact
of:
- changes in
consolidation scope, with indicators related to a given fiscal year
calculated on the basis of previous-year scope, both previous-year
and current-year scopes excluding entities in countries under
hyperinflation according to IAS 29 during the previous year (as for
Argentinian entities since January 1st, 2019);
- changes in
applicable accounting principles;
- changes in
exchange rates with both previous-year and current-year indicators
calculated using the same exchange rates (the exchange rate used is
a projected annual rate determined by Danone for the current year
and applied to both previous and current years).
Bridge from reported data to
like-for-like data
(€ million except %) |
Q3 2020 |
Impact of changesin scope of
consolidation |
Impact of changes in exchange rates and others, including
IAS29 |
Organic contribution from
hyperinflation countries |
Like-for-like growth |
Q3 2021 |
|
|
|
|
|
|
|
Sales |
5,821 |
+0.3% |
+0.9% |
+0.7% |
+3.8% |
6,158 |
Recurring operating income is
defined as Danone’s operating income excluding Other operating
income and expenses. Other operating income and expenses comprise
items that, because of their significant or unusual nature, cannot
be viewed as inherent to Danone’s recurring activity and have
limited predictive value, thus distorting the assessment of its
recurring operating performance and its evolution. These mainly
include:
- capital gains
and losses on disposals of fully consolidated companies;
- impairment
charges on intangible assets with indefinite useful lives;
- costs related
to strategic restructurings or transformation plans;
- costs related
to major external growth transactions;
- costs related
to major crisis and major litigations;
- in connection
with of IFRS 3 (Revised) and IAS 27 (Revised) relating to business
combinations, (i) acquisition costs related to business
combinations, (ii) revaluation profit or loss accounted for
following a loss of control, and (iii) changes in earn-outs
relating to business combinations and subsequent to acquisition
date.
Recurring operating margin is
defined as Recurring operating income over Sales ratio.
o o O o o
FORWARD-LOOKING STATEMENTS
This press release contains certain
forward-looking statements concerning Danone. In some cases, you
can identify these forward-looking statements by forward-looking
words, such as “estimate”, “expect”, “anticipate”, “project”,
“plan”, “intend”, “objective”, “believe”, “forecast”, “guidance”,
“foresee”, “likely”, “may”, “should”, “goal”, “target”, “might”,
“will”, “could”, “predict”, “continue”, “convinced” and
“confident,” the negative or plural of these words and other
comparable terminology. Forward looking statements in this document
include, but are not limited to, predictions of future activities,
operations, direction, performance and results of Danone.
Although Danone believes its expectations are
based on reasonable assumptions, these forward-looking statements
are subject to numerous risks and uncertainties, which could cause
actual results to differ materially from those anticipated in these
forward-looking statements. For a detailed description of these
risks and uncertainties, please refer to the “Risk Factor” section
of Danone’s Universal Registration Document (the current version of
which is available at www.danone.com).
Subject to regulatory requirements, Danone does
not undertake to publicly update or revise any of these
forward-looking statements. This document does not constitute an
offer to sell, or a solicitation of an offer to buy Danone
securities.
The
presentation to analysts and investors will be
broadcast live today from 9:00 a.m. (Paris time)
on Danone’s website
(www.danone.com).
Related slides will also be available on the website in the
Investors section.
APPENDIX – Sales by reporting entity and
by geographical area (in € million)
|
First quarter |
Second quarter |
Third quarter |
|
2020 |
2021 |
2020 |
2021 |
2020 |
2021 |
BY REPORTING ENTITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
EDP |
3,364 |
3,149 |
3,238 |
3,254 |
3,108 |
3,269 |
Specialized Nutrition |
1,949 |
1,719 |
1,792 |
1,793 |
1,698 |
1,777 |
Waters |
928 |
790 |
925 |
1,125 |
1,015 |
1,112 |
BY GEOGRAPHICAL AREA |
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe & Noram1 |
3,469 |
3,273 |
3,352 |
3,510 |
3,334 |
3,498 |
Rest of the World |
2,772 |
2,384 |
2,602 |
2,661 |
2,486 |
2,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
6,242 |
5,657 |
5,954 |
6,171 |
5,821 |
6,158 |
|
First quarter 2021 |
Second quarter 2021 |
Third quarter 2021 |
|
Reported change |
Like-for-like change |
Reported change |
Like-for-like change |
Reported change |
Like-for-like change |
BY REPORTING ENTITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
EDP |
-6.4% |
+1.6% |
+0.5% |
+4.8% |
+5.2% |
+4.1% |
Specialized Nutrition |
-11.8% |
-7.7% |
+0.1% |
+2.8% |
+4.6% |
+2.9% |
Waters |
-14.9% |
-11.6% |
+21.6% |
+19.5% |
+9.6% |
+4.6% |
BY GEOGRAPHICAL AREA |
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe & Noram1 |
-5.6% |
-2.8% |
+4.7% |
+6.4% |
+4.9% |
+3.9% |
Rest of the World |
-14.0% |
-4.2% |
+2.3% |
+6.9% |
+7.0% |
+3.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
-9.4% |
-3.3% |
+3.6% |
+6.6% |
+5.8% |
+3.8% |
1North America (Noram): United States and
Canada
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