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Danone expects to continue raising prices this year

Danone expects to proceed elevating costs this yr after its steepest will increase for the reason that Eighties, mirroring trade opponents akin to Nestlé and Unilever.

The French firm, which makes yoghurt and bottled water amongst different merchandise, raised costs 8.7 per cent yr on yr, led by sharp will increase in North America and Europe within the last months of 2022 — the most important will increase in 4 many years, the corporate stated.

“We count on to carry out further pricing rounds if and when wanted” in 2023, stated chief monetary officer Juergen Esser.

He added that the will increase applied within the second half of final yr ought to imply this yr’s can be much less acute. “We count on inflation to proceed in 2023, however at a decrease stage than final yr and sequentially lowering.”

The corporate stated it handed on two-thirds of its inflation prices to retailers in 2022. “We’re actually delicate to [the impact] particularly the place portfolios are much less differentiated and on potential quantity elasticities,” Esser stated.

Volumes at Danone fell 4.4 per cent within the final quarter of 2022, although the corporate stated about half that lower was voluntary because it trimmed product ranges as a part of a turnround technique. The lower additionally follows a pattern for Danone, the place volumes have fallen yearly for many of the previous decade.

Each Nestlé and Unilever reported a fall in volumes as they ratcheted up costs to the best ranges in many years as inflation surged.

Gross sales, nonetheless, rose probably the most in a decade final yr as Danone elevated costs, however inflation and excessive prices weighed on its revenue margin — notably in its core dairy and plant-based class, which has underperformed for the higher a part of a decade.

Gross sales had been up 7.8 per cent throughout the interval on a like for like foundation, which strips out foreign money impacts, to €27.7bn, beating expectations. Recurring working revenue grew barely to €3.4bn for the yr, however the firm’s margin fell 1.54 proportion factors to 12.2 per cent.

Chief govt Antoine de Saint-Affrique is main a turnround technique on the enterprise after taking on in 2021. The corporate is working to cut back the number of merchandise it sells to stay aggressive.

“These are reassuring numbers . . . however we must always not lose sight of the truth that we aren’t but close to a turnround [and] volumes are sequentially getting worse throughout areas and divisions,” wrote Bruno Monteyne, analyst at AllianceBernstein.

The corporate stated it was contemplating promoting its US natural dairy operation in January. Saint-Affrique stated the corporate was bolt-on acquisitions however the precedence was deleveraging Danone’s steadiness sheet, whereas disposals made final yr ought to assist increase profitability.

“Whereas 2022 was a yr of unprecedented exterior challenges and volatility, for Danone it has additionally been a yr of deep transformation and stable supply,” he stated.

“In 2023, we’ll pursue our transformation, and additional spend money on our manufacturers, merchandise and capabilities whereas delivering in keeping with the midterm steering outlined final yr,” he added.

The corporate has laid out a 2023 goal of like-for-like gross sales development of between 3 and 5 per cent with “reasonable enchancment” in recurring working margin.

It additionally proposed a dividend of €2 per share for 2022, up 3 per cent on final yr.


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