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Danone Enters New Transformation Phase

Danone Enters New Transformation Phase

Danone has reported a 4.5% increase in recurring operating income to €3.02 billion on sales down 2.1% to €21.944 billion for 2016, adversely impacted by negative currency trends in the Argentine peso, the Mexican peso, and the Russian ruble. On a like-for-like basis, sales and recurring operating income rose by 2.9% and 8.4% respectively. The robust sales and margin performance have resulted in strong recurring EPS growth of 9.3%.

The Fresh Dairy Products division achieved like-for-like sales growth of 2% in 2016, after a 0.6% growth in 2015. This performance reflects accelerated growth in the CIS and North America region, in line with expectations.

The Waters division reported sales up 2.9% like-for-like. Excluding China, the division’s overall performance was at mid- to high single-digit, supported by strong category dynamics related to consumers’ switch to healthier hydration options and a constant focus on brand innovation and activation.

Early Life Nutrition sales rose by 3.5% in 2016, on a like-for-like basis. This performance includes a decline in ‘indirect’ sales to China. Excluding these, division growth remained strong at mid-single digit growth.

Medical Nutrition growth was very strong at 7.4% in 2016, on a like-for-like basis, and was balanced evenly across the division’s geographical areas.

As part of its 2020 transformation plan, Danone continued to focus in 2016 on building a more resilient and balanced model through disciplined resource allocation, efficiency gains and cost optimisation.

Since 2014, Danone has been transforming its business. It has adopted a new way of managing its strategic resources as cycles, rolled out its ‘One Danone’ organisational change and replaced its annual budget with an ongoing quarterly reallocation process (‘Beyond Budget’ project).

Danone is now entering into a new chapter of its journey towards its 2020 ambition as it adapts to the rapidly changing global trading environment and prepares to integrate the $12.5 billion acquisition of WhiteWave Foods Company, the US-based organic foods giant.

Emmanuel Faber, chief executive of Danone, explains: “With the upcoming addition of WhiteWave, we will soon start a whole new and exciting chapter of our alimentation revolution journey. While we delivered a robust performance leading to a very strong recurring EPS growth in 2016, the challenges we faced, including a slower turnaround of dairy in Europe and major market volatility, are a clear case to step up in our ability to seize consumer opportunities and improve our efficiency.”

Emmanuel Faber, chief executive of Danone.

Danone has decided to adapt the company’s organisation to become more agile at managing fast-moving trends and markets and to bring relevant decision-making closer to local markets and consumers. The development of a new organisational structure to create the best conditions for growth and efficiency will also entail the launch of a €1 billion efficiency programme.

Emmanuel Faber elaborates: “On one hand, I have decided to address our efficiency agenda in a radically new way, and to launch a comprehensive, company-wide program allowing us to spend better and more sustainably and to work more efficiently. On the other hand, fuelled by resources generated from higher efficiency, our new integrated growth and innovation process will gradually bring our brands into an entirely new level of relevance with their communities of consumers, which is the core of the alimentation revolution.”

Danone is aiming to secure consistent recurring EPS growth above 5%, on a like-for-like basis, for 2017, excluding any element related to the WhiteWave transaction.

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