Danone today (19 February) reported mixed 2012 results after a challenging year, particularly in Europe. However, the company saw fresh dairy volumes increase for the first time for over 18 months in the fourth quarter of the year, which cheered investors. For 2013, Danone forecast another fall in underlying margins but the market seemed to accept this year will be one of transition for the business.
MainFirst analyst Alain-Sebastian Oberhuber
“Danone published slightly better-than-expected results with higher organic growth rates and cash flows and in-line margin development. The outlook given is as we have estimated and will trigger no change. We believe that the situation remains difficult. However, the announced concrete cost savings of EUR200m for FY 2013 and the higher than expected free cash flow number of today, will give Danone’s share some support this morning.
“The company gave an upbeat presentation although 2013 will be a transition year. The company has set the plan to implement heavy cost savings and product relaunches in Europe. The growth markets, emerging markets including [the] North American fresh dairy business, grew +12.5% in 2012, and should continue at this pace. We leave our organic growth rate estimates for FY 2013E of +5.4% and margin development of -40 bps unchanged. However, due to lower financing costs and extraordinary costs we will increase our adjusted EPS 2013E by around +8%, which will be within Danone’s EPS 2013E guidance of a low single-digit growth rate.”
Bernstein analyst Andrew Wood
“Overall the results were mixed … positive on Q4 sales and H2 cash flow, broadly in-line with expectations on H2 margins, but slightly below on H2 EPS.
“All together, FY 2012 was fairly weak for Danone with +5.4% organic growth, -55bps of margin contraction and +4% EPS growth…and management guidance for 2013 does not imply a recovery. Management guided to at least +5% organic growth, with a 30-50bps margin decline and free cash flow of around EUR2bn excluding exceptional items. Our current like-for-like growth estimate for 2013 of +5.0% assumes Danone just meets its target on the top line, and our -35bps of margin contraction is in-line with guidance. This would clearly indicate that 2013 is likely to be another weak year for Danone, albeit perhaps not as bad as some investors had feared.”
Kepler Capital Markets analyst Jon Cox
“Overall, result was better than expected with Q4 organic sales growth particularly solid. Guidance at the top line is slightly better than consensus while expected margin decline more or less in line with expectations. Net profit was lower than expected amid a higher tax rate. Overall, we expect the stock to react positively given poor sentiment going into the numbers.”