Danone records stronger than expected first quarter results

Danone has recorded first-quarter like-for-like net sales growth ahead of expectations at 3.7% to €6.24 billion, as consumers stockpile and increase their at-home consumption.

The world’s largest yogurt maker has also withdrawn its full-year financial guidance for 2020 owing to the lack of visibility caused by the coronavirus pandemic.

Sales include a high-single digit rise in March boosted by the short-term effects of both a shift to at-home consumption as well as pantry loading in Europe and North America.

Both the Essential Dairy & Plant-Based (EDP) and Specialised Nutrition units benefited from this shift with a rise in net sales of 4.6% and 7.9%, respectively.

Meanwhile, its Waters division witnessed its net sales fall by 6.8% on a like-for-like basic due to closures in food service. According to Danone, roughly 40% of the division’s sales are normally consumed away from home.

Its EDP unit recorded strong performance by its plant-based brands, Alpro in Europe and Silk in North America, and its top essential dairy brands such as Actimel, Danone and Danette in Europe, and Horizon and Two Good in the US.

Despite the outbreak impacting the Chinese market, Danone’s specialised nutrition sales in China recorded solid growth with its Aptamil market share boosted by its strong  position in fast-growing e-commerce, while travel bans and Hong-Kong border closure negatively impacted sales in other channels.

While Danone’s growth was driven by Europe and North America, sales in the rest of the world grew at 2.6%, with sustained momentum in South East Asia and a slight improvement in Russia offsetting an expected sales decline in China.

Earlier this year during the outbreak of coronavirus in China, Danone had targeted a like-for-like sales growth of 2-4% for 2020.  

“Q2 demand and supply conditions will be broadly and deeply impacted by a global lockdown,” said Emmanuel Faber, chairman and CEO of Danone.

Faber added: “Beyond the initial pantry loading trends we observed in March, we are unable to predict how the lockdown may affect both supply and demand, with significant differences depending on food habits and lifestyles and people’s income, all in a context of diverse local and national government lockdown strategies and exits, as well as their unknown success rate.

“Our board of directors therefore has decided to withdraw our financial guidance for the year, while we are managing with a view to protect and leverage our strong cash liquidity situation.”