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Danone starts reorganization after disappointing quarter
French dairy giant Danone has announced a major reorganization in response to the disappointing results from the third quarter. Partly due to the corona crisis, turnover fell by almost 10%.
Danone plans to change course, the company said in a press release. In the past 3 months, the French food manufacturer has not been able to get out of the shadow of the corona crisis. Due to the crisis in combination with increased competition and high milk prices, turnover fell by 9,3% to more than €5,8 billion. Excluding the effect of adverse exchange rates, sales were 2,5% lower than last year.
Turn things around
The company is in dire straits. There is now a plan to boost profits by 3 to 5%. To achieve this, Danone takes a close look at its product portfolio, inventory management and assets. In total, €500 million worth of parts will be sold, starting with the Argentine activities and the 'Vega' brand. With all the adjustments in mind, the dairy giant has released a new forecast in which they expect a profit margin of 14%.
Another notable event is the resignation of CFO Cécile Cabanis. She has announced that she will be leaving the company as of February 16 after 2020 years of loyal service. In the meantime, her place has been filled by the CFO of Danone's Waters and Africa Divisions: Juergen Esser.
Heavy weather
The company is partly prey to the still flaring corona virus. This applies, for example, to the sale of bottled water. Sales of these fell by 13,5% in the third quarter. According to the company, this is because there are many more people at home who hardly or no longer go out.
Danone is doing well in European milk prices. The company indicates that keeping the milk price high is also a reason for the current problems. The disappointing results cost money and the relatively high milk money, on the other hand, means that the costs rise even further. Adjusting the milk price downwards also makes little sense due to the increased competition. The chance that dairy farmers will leave is relatively high given the current competition.
Positive numbers
In addition to the disappointing results, there are also parts that did develop positively. The 'Essential Dairy & Plant Based' division achieved sales growth of +3,7% in the third quarter. The volume increased by 4%, while the value decreased by 0,3%. Dairy products such as probiotics, organic milk and evaporated milk are included in this division, but vegetable products also make a contribution.
Danone reports that plant-based product sales grew by double digits for the third consecutive quarter. The products are sold under the brand names Alpro, Silk and Actimel. The growth is mainly driven by increased sales in Europe and the United States.
Jorine Cosse
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