European Restructuring to Help Danone Resume Strong Profitable Growth

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European Restructuring to Help Danone Resume Strong Profitable Growth

European Restructuring to Help Danone Resume Strong Profitable Growth
February 21
12:44 2013

Danone has announced a number of restructuring measures, including the cutting of around 900 management and administrative positions across 26 countries, to tackle the significant decline in its sales in Europe and to regain its competitive edge in the region.

The restructuring programme, which is designed to reduce costs by Eur200 million over the next two years, will entail reducing by approximately half the number of Danone’s management units in Europe which will be achieved by combining teams from several countries into multi-country units. Danone will continue to do business in the same number of countries and maintain a division-based structure to make best use of features specific to each business line.

In 2012, Danone increased net sales by 8% to Eur20.9 billion and by 5.4% on a like-for-like basis but the performance was mixed from region to region. Sales declined by 3% in Europe excluding the CIS; but growth was over 10% in Danone’s emerging markets and North America combined. Trading operating income for the year rose by 1.8% to Eur2.96 billion but the trading operating margin at 14.18% was down 50 bps on 2011.

Franck Riboud (pictured), chairman and chief executive of Danone, comments: “2012 was an important year for Danone in many respects. Important in that we achieved some major milestones: our sales exceeded the Eur20 billion mark for the first time, reflecting our ability to bring health through food to an ever-increasing number of people. And for the first time, too, our cash-flow topped Eur2 billion — double the 2008 figure.” 

He continues: “Most of these achievements were due to our operations outside Europe, which now generate 60% of our total sales and reported profitable growth averaging over 10% in 2012. We must make every effort to pursue lasting expansion in these markets. But 2012 also saw some of our business in Europe come under pressure from a severe deterioration in overall consumer demand, which led to a 3% decline in our revenues in this region and a decline of over 10% in our operating income. Clearly this situation is not sustainable, and we will overcome it.”

So 2013 will be a year of transition for Danone as it pursues development in its growth markets and strives to strengthen its operations in Europe, as the global food and beverage group aims at returning to strong, profitable growth by 2014.

For 2013, Danone is targeting  like-for-like sales growth of at least +5%, a decline in trading operating margin by between 50 bps and 30 bps on a like-for-like basis, and free cash-flow of around Eur2 billion excluding exceptional items.

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