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H1 results are strong and better than expected: +6.9% organic growth in Q2 (against +6%) boosted by improved volumes (+8.9%) and a less penalising price effect (-2%). Thanks to the Reset Plan, Danone was again able to report dynamic growth (organic and volumes) of all its divisions. The margin contracted somewhat more than expected in H1 (-74 bp to 15.3% against -55 bp) but this gives no grounds for concern in view of the visibility afforded by the higher targets announced for 2010: organic growth > +6% with an identical margin of 15.3%. The group is confident; there is now real potential for an upward revision of the 2010-11 results.
Danone held up well during the crisis in 2008 and 2009 and has got off to an impressive start in 2010; Q1 organic growth +7%. For the past year, its reset strategy (price repositioning and active promotions) has been a real success. Volume recovery is not affecting its margin thanks to the lower milk price and savings already made (€600 million). Profitable growth has already been achieved and Danone is well prepared for the future.
2009 results are robust, satisfactory, better than expected and highlight the success of the strategy (Reset Plan) put in place by the management. Danone has returned to dynamic growth (both organic and in volume terms) in all its divisions. Cash generation is remarkable (+21% at €1.43 billion) and the 2010 targets credible: organic growth >+5%, FCF >+10% with a “ prudently” stable margin. The announcement of a share buyback programme for 2010 is likely to be appreciated. Plus code confirmed.
Following excellent financial performance in 2008, Danone is well under way to repeating this exploit in 2009. Q3 illustrates the success of its strategy: price repositioning and active promotions boosted sales volumes (+7%) without any negative influence on the margin thanks to the lower price of milk. Concerns over the profitability of growth have been dispelled and more intensive promotions show that Danone has a sufficient leverage effect to prepare future growth.
Our favourable view of this share has been confirmed by robust commercial performance in Q3. Organic growth is gathering momentum (+4.1% vs +1.6% in H1) driven by volumes (+7.1%) in all the activities: PLF +2.3%, Baby Food +6.5%, Clinical Nutrition +12.2%, Waters +4.6%. Guidance has been refined at +4% for organic growth in H2 and a margin improvement of +60/70pb over the year as a whole. The increased momentum of promotional campaigns shows that the management has already secured its 2009 targets and is benefiting from good price/volume elasticity to build growth for tomorrow. PLUS code confirmed.
First half-year results for 2009 are good, above expectations, and demonstrate Danone’s ability to accelerate its profitable growth in a difficult economic context. Two important points: 1/ volumes of fresh dairy products are showing renewed growth (+2.7%) above the hoped-for level (+0.7%); 2/ the operating margin is up sharply (+98bp to 16%) well above the estimates of the consensus (+40bp). Danone has confirmed its 2009 guidance of organic growth of +3-6%, an increase in the margin and in EPS (+10% at constant exchange rates). PLUS code reiterated.
The first quarter was a low point which justified the management’s initial caution over the lack of visibility in 2009. Beyond the fall in the price of milk and an improved product mix, efforts made on the pricing side are boosting sales volumes. Alongside synergies with Numico, this will enable Danone to “monitor” its margin and reach its EPS growth target of +10%.
The lower growth of business activity in Q1 2009 came as no surprise (sales €3.674 billion, -2.3% on published figures). Organic growth reached +1% (guidance close to zero, consensus -1%/+1%) thanks to rising volumes (+1.1%) and stable value (—0.1%). This set of figures is likely to be the most difficult for Danone this year because of the comparison base (+11.4% Q1 2008). The management is sticking to its targets for 2009: +4 to 7% organic sales growth, improved margin, profit per share > +10%. Plus code confirmed.
The good results for 2008 reflected Danone’s ability to achieve even faster profitable growth in a tough economic environment. Targets were reached and sometimes even exceeded (organic growth +8.4%, margin +53pb, profit per share +15%) thanks to the dynamism of Numico and good profitability of the Fresh Dairy Products division. Danone has confirmed its 2009 guidance for organic growth (+4-7%), margin progression (effect of lower commodity costs) and profit per share (+10%), but at constant currency exchange rates (deterioration of the currency variation effect). PLUS code maintained for this share.
Confirmation to exceed 2008 targets and deliberately prudent guidance for 2009 in a particularly delicate environment strengthen management credibility. Anticipating a worst-case scenario, Danone has set a minimal result target built on a business model which benefits from the strongest organic growth prospects of its sector; its share valuation is also the most attractive.
Confirmation of the aims for 2008 and suspension for 2009 of the MT guidance in a particularly delicate environment, strengthen management credibility and confirm the quality of the Danone model. After modelling a worst case scenario at every level, prudence and credibility help, in our view, to ensure that this new guidance ensures genuine visibility of the company’s result on minimum assumptions. Danone is posting the strongest organic growth of its sector in the crisis and remains cheaper than Nestlé. PLUS code for this stock.
Sales figures published for Q3 2008 show robust and better than expected organic growth (+8.3%), testifying to Danone’s ability to achieve still faster profitable growth in a difficult environment. Significant factors include the recovery of fresh dairy product sales volumes, stabilization of mineral water sales and the highly dynamic contribution made by ex-Numico business activities. Danone’s confirmation of its 2008 growth guidance (organic, margin, profit per share) is an exception at a time when many companies are revising their short and medium-term forecasts downwards. PLUS code on this share.
In the first half of 2008, good progress in organic growth (+9.6%), operating margin (+35bp) and profit per share (+16.6%) exceeded the most optimistic forecasts and clearly showed Danone’s capacity to accelerate its profitable growth in a difficult market environment. In addition, the market should appreciate the fact that the 2008 guidelines for organic growth (+8-10%) and progress of the profit per share >+15%) are being maintained and that the group has upgraded its operating margin improvement target (+40-50bp vs 30bp previously). PLUS code for this share.
We regard the rumours which depressed the share value (-11% since 13 June) as alarmist and unfounded. Investors' fears focussed on prudent comments by Danone about the general weakness of consumer spending; however, this does not in any way jeopardise the group's real ability to achieve its targets. The return to normal promotional activity in the second half, the strong pricing effect and dynamic growth of Numico should bring a much higher profit per share this year (+16.3%). PLUS code confirmed.
With its existing projects for fresh dairy products and water, the dynamic baby food/clinical nutrition markets and future synergies with Numico, Danone’s prospects look promising with 15% top line growth, regular margin improvement and rapid debt reduction. Danone looks set to outperform its peers in the 2007-2010 period (16.5% average annual profit per share growth).
Sales growth for Q1 2008 (+18.7% to €3.76 billion) is sustained by strong organic growth (+11.4%). The performance of fresh dairy products (+10.5%, 60% of group sales) is impressive, this being the group’s most profitable division, as too is the positive contribution of Numico (+18.8% for baby food, +14.6% on the clinical side). The 2008 objectives are ambitious but realistic. Past and future price rises, as well as the consolidation of Numico (growth/margin relays), justify our PLUS code for this share.
Danone’s results for the financial year 2007 came as a good surprise: organic growth (+9.7%) and operating margin (+59pb to 14%) above expectations. Performance of fresh dairy products (+12.2%, 60% of group sales) was particularly strong; this is the growth driver and the most profitable division. 2008 guidance (organic growth +8-10% and profit per share > +15%) is better than the market forecast and reflects the change of scale following the Biscuits/Numico arbitration. PLUS code confirmed.
Publication of the quarterly sales figures reveals strong organic growth (+10.1%), 100 bp above expectations. Once again, Danone has surprised the market favourably and confirmed its 2007 targets (organic growth, operational margin > +20 bp and profit per share +10%), despite the worries surrounding its JV in China. The strength of the group’s fundamentals and its ability to find growth relays (products, geographical areas) confirm our positive opinion on this share.
A highlight of the very good results published for 2006 is organic growth (+9.7%) above the initial guidance and market expectations, with a strong upturn in Q4 (+11.5% against 7.7% consensus). Once again, Danone has surprised the market by confirming the sustainable nature of its organic growth. The group’s ambitious targets for 2007 (organic growth, operating margin and profit per share) are highly transparent and strengthen our favourable opinion of this share.
The sales figures announced for the first 9 months show higher organic growth (+9.1%) than the market had been expecting (+8.7%). The growth momentum in Q3 was strong ((+9.5% versus 8.1% consensus). Danone has therefore confirmed the fact that the faster organic growth reported since the beginning of the year is set to last and has stepped up its 2006 targets (organic growth and profit per share): all of these factors will support the share price. PLUS code confirmed for this share.
In brief: results for the first half of 2006 are very good. Besides the organic growth (+9% against 7.8% expected), which accelerated strongly during Q2 (+8.9% against 6.9% target), the margin rose by 30bp to 13.5%, in line with the annual objective. This very good first half and higher guidance for 2006 (organic growth and profit per share) are factors which will support the share; its speculative attraction also remains intact. PLUS code confirmed.
Q1 06 sales stood at €3,534 million, i.e. a 14.9% advance marked by very strong internal growth of 9% (7.2% volume, 1.8% price). With this publication, the group established a historic record and exceeded consensus expectations. PLUS code maintained.
Danone has published strong results for 2005 despite the unfavourable background situation. Apart from the figures, the group has announced a share buyback program worth between EUR 600 and 800 million and a substantial dividend increase (+26% at EUR 1.7). We maintain our PLUS code. Danone should continue to deliver better growth than its competitors and improved profitability.
This morning, Danone announced lower than expected organic sales growth. The management is maintaining its organic growth target (67% currently 6.7%) and has upgraded its EPS forecast with growth of more than 10% (against «around 10%»). However, the forecast for the operating margin improvement has been revised slightly downwards (lower end of the range announced previously, i.e. less than 20 basis points). This publication does not affect our opinion. PLUS code maintained.
1st half results are in line with the provisional figures published on 21 July last. Beyond the figures, the share is now benefiting from speculation generated by the publication of an article in l'Expansion. This reverts to the rumour of a possible offer by Pepsico. Our buy recommendation is essentially driven by the solid fundamentals of Danone. However, the best protection against a hostile takeover bid is a strategy enabling a high valuation to be maintained.
The first half results are in line with the provisional figures published on 21 July. Quite apart from the figures, the share is currently benefiting from the speculation following the publication of an article in l'Expansion. This spotlighted the rumour of a potential bid by Pepsico. Our BUY recommendation is based essentially on Danone’s solid fundamentals. However, the best protection against a hostile takeover bid is a strategy enabling a high valuation to be maintained.
This morning, Danone published results which proved better than our own expectations and those of the market. Organic growth stood at 6.5%, with a faster rise in Q2 than in Q1 (7.6% against 5.3%). The operating margin also improved substantially to 13.3% (against 13.1%). Beyond these figures, investors should bear in mind that fact that takeover bids for Danone may be in the offing; an offer by PepsiCo is o the cards. But in our view the likelihood of an early offer has receded. We maintain our positive opinion (PLUS) in view of the excellent fundamentals and figures published this morning but we advise you to take some of your profits.
For the past few sessions, the share has been the subject of speculation about a takeover bid despite denials by PepsiCo and Danone. Since our recommendation, the share has gained approximately 30%. Should an offer be made, the share might be valued at between EUR 100 and 120. But if nothing materializes, Danone will probably lose a good part of its speculative premium very soon. Danone will be publishing its halfyearly results tomorrow. The group is a potential target for a bidder. However, we do not expect any comments on a potential acquisition to be forthcoming and the market may well be disappointed. At the beginning of June, we advised investors to sell Nestlé and buy Danone. At this stage, we recommend taking some of your profits.
Despite a difficult environment and a high comparison base, Danone reported excellent organic growth for the first quarter (+5.1%). The management has confirmed its objectives for the current year. We are expecting performance to accelerate in the second half for several reasons: 1/ the comparison base is improving 2/ Asia and the United States are solid growth relays 3/ and finally, the group’s targets are cautious. We maintain our positive opinion of the share.
Despite a difficult environment, Danone has delivered higher organic growth than its direct competitors. Firstly, we believe that the group will continue to report excellent figures. Secondly, the premium on Danone looks weak given the performance gap. Finally, the exposure of Danone to the dollar is low. We recommend this share as a buy opportunity.
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