© Reuters. FILE PHOTO: Logo of French food group Danone at the company’s headquarters in Rueil-Malmaison
By Dominique Vidalon
PARIS (Reuters) -Danone on Tuesday kept its target of returning to profitable growth in the second half of 2021 after it announced first quarter sales fell 3.3%, due to the further COVID-19 door lockout. consistently reducing sales of bottled water and baby food.
The French food conglomerate, which is looking for a new executive, said it is working on gradually opening up the economies from the second half of this year as the COVID-19 vaccination programs are launched.
Former boss Emmanuel Faber was abruptly removed from the position of Chairman and CEO last month after clashing with several board members over strategy and calls from the requested operating funds he resigned because of the group’s lackluster profits compared to some rivals.
Danone hasn’t made it clear about finding a new CEO but said it will be “careful to ensure a proper transition”. Previously, it said it was looking for an outside candidate after appointing a duo to manage the operations during the interim period.
The company also said it will continue with Faber board-backed changes to reorganize Danone around regional centers instead of planned “Local First” brands.
It reiterates its expectations for a return to similar sales growth in the second quarter and for the full year 2021 operating profit margin to correspond to the 14% achieved in 2020.
Danone, the world’s largest yogurt maker, said similar sales fell 3.3 percent to € 5,657 billion ($ 6.82 billion) in the first quarter, compared with expectations for a 3.7 percent drop in a Consensus of 19 analysts compiled by the company.
1.6% increase in essential milk and vegetable sales was largely offset by a 11.6% drop in water sales and a 7.7% drop in Special Nutrition sales.
Infant nutrition sales continue to be affected by slowing birth rates and COVID-related disruptions in China, especially cross-border sales have fallen by about 45%.
Under Faber, the company pursued a strategy focused on diversifying into fast-growing products with probiotics, proteins and plant-derived ingredients to minimize slower growth in milk.
However, the pandemic’s complex outlook for the company, which was affected by sales of products like Evian bottled water to the restaurant sector, fell during the government’s enforcement of the ban.
Citi analysts wrote in a note: “We expect this release to support stock price performance until we get some more news streams about a new CEO before the summer.” .
Danone shares were 0.7% lower in early trading at € 59.91. They are up 12% so far this year, supported by speculation surrounding operations shareholder intervention and after falling 27% last year. The shares have outperformed their European region, having lost 7.6% so far this year.
(1 dollar = 0.8293 euros)
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