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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 because the Nineteen Eighties, mirroring business rivals reminiscent of 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 closing months of 2022 — the most important will increase in 4 many years, the corporate mentioned.

“We anticipate to carry out further pricing rounds if and when wanted” in 2023, mentioned 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 could be much less acute. “We anticipate inflation to proceed in 2023, however at a decrease stage than final yr and sequentially lowering.”

The corporate mentioned 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 mentioned.

Volumes at Danone fell 4.4 per cent within the final quarter of 2022, although the corporate mentioned about half that lower was voluntary because it trimmed product ranges as a part of a turnround technique. The lower additionally follows a development 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, nevertheless, rose probably the most in a decade final yr as Danone elevated costs, however inflation and excessive prices weighed on its revenue margin — significantly in its core dairy and plant-based class, which has underperformed for the higher a part of a decade.

Gross sales have been up 7.8 per cent through 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 share factors to 12.2 per cent.

Chief government Antoine de Saint-Affrique is main a turnround technique on the enterprise after taking up 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 mentioned it was contemplating promoting its US natural dairy operation in January. Saint-Affrique mentioned the corporate was taking a look at 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 mentioned.

“In 2023, we’ll pursue our transformation, and additional put money into our manufacturers, merchandise and capabilities whereas delivering according to the midterm steerage outlined final yr,” he added.

The corporate has laid out a 2023 goal of like-for-like gross sales progress 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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