Danone: Renew Danone: Restoring growth, driving value creation
2022
Capital Market EventPress release
– Paris, March 8, 2022
Renew DanoneRestoring
growth, driving value creation
- New CEO
Antoine de Saint-Affrique, together with a strengthened leadership
team, will present Danone’s new
strategic plan “Renew Danone” today at a Capital Market Event
(CME).
- The
plan will enable Danone to
reconnect with a sustainable profitable growth
model. The delivery of the plan
will be facilitated by a greater alignment between purpose and
performance.
Over the past six months, Antoine de
Saint-Affrique has completed a holistic review of Danone with the
objective to restore growth and drive value creation. The review
confirmed that Danone operates in healthy, on-trend and growing
categories. The company benefits from a strong portfolio of brands
– both global and local, leading positions and a balanced
geographical exposure to Developed and Emerging markets. The review
also confirmed the value of Danone’s commitment to performance and
social and environmental responsibility, and its pioneering roots
to provide people access to health through food.
However, the review also recognised Danone’s
historic underperformance compared to its markets, which can be
attributed to a lack of focus on its core portfolio, late and
sub-scale innovation efforts, inconsistent execution and low
investments.
In this context, and under the oversight of
Danone’s Board of Directors, Antoine de Saint-Affrique and the
Executive Committee have built a plan that aims at restoring
Danone’s performance, competitiveness and value creation for the
long-term.
The plan is articulated around four strategic
pillars:
- Restoration of
Danone’s competitiveness in core categories and geographies;
- Selective
expansion of Danone’s presence, in terms of segments, channels and
geographies;
- Active seeding
of future growth avenues;
- Active
portfolio rotation.
The plan will allow Danone to reconnect with a
sustainable profitable growth model. It will be based upon an
end-to-end step up in the quality of execution, a strengthened
innovation model geared for scale and impact, and increased
investments in consumer value, as well as brands and commercial
development.
Delivery of the plan will be facilitated by a
greater alignment between purpose and performance, consistently
putting consumer and customer at the heart of everything Danone
does. The company will restore passion for execution, a stronger
discipline on capital allocation, and a greater sense of urgency in
seizing opportunities and tackling issues.
Based on this, Danone announces a new set of
targets for the 2022-2024 period:
-
2022 will be a
foundational year with price-led
like-for-like sales growth between +3 and +5% and a recurring
operating margin above 12%, assuming the reinvestment of 100% of
Local First savings, a productivity higher than last year and a low
to mid-teens level of input cost inflation (based on current
macro-economic assumptions);
-
2023-2024
ambition, profitable
growth: like-for-like sales growth between +3 and +5% with
recurring operating income growing faster than like-for-like net
sales;
-
Sustainable value creation and
shareholder returns: sequential ROIC improvement
over the period supported by capital allocation discipline,
portfolio rotation reaching around 10% of net sales, an annual
capital expenditure envelope equivalent to a maximum of 4.5% of net
sales, and further improvement in working capital;
-
Disciplined financial policy:
healthy balance sheet with targeted net debt to EBITDA ratio below
3x, and stable or growing yearly dividend.
Gilles Schnepp: Chairman’s
statement
“Today is an important milestone for Danone. We
have a new CEO, a new strategy, and a clear objective: accelerate
organic growth to restore sustainable value creation. The “Renew
Danone” plan has the unanimous support of the Board and provides
the company with a clear compass.
Complementing this strategy is the Board renewal
program we initiated in July last year. By April 2023, we will have
completed the Board renewal with new senior leaders from industry
and business to ensure that it comprises the right blend of
capabilities, perspectives and experiences to support Danone’s
long-term success. I want to thank the current board members: they
showed a great sense of responsibility and collective interest, and
created the conditions for Danone to solidly enter into this new
phase.
The strategy set out today by Antoine is yet
another step in Danone’s evolution. Building on Danone’s strong
roots, the plan puts in place the foundations to refocus our
business on growth, while creating sustainable returns for our
shareholders, and all our stakeholders.”
Antoine de
Saint-Affrique: CEO’s statement
“Renew Danone” is all about creating the
conditions for sustainable and competitive growth, and then
delivering consistently in a way that creates sustainable value for
all.
Danone is a one-of-a-kind company, with a
culture anchored in a vision combining entrepreneurship and
responsibility. It is a company with iconic local and global
brands, playing in growing and on-trend categories. Danone has been
leading the way in many fields: branding, innovation, people’s
development and sustainability. But we have also been
underperforming our markets for a while and have a lot we can
improve on.
In the short term, we have to take better care
of our core, with a renewed focus on great execution and strong
innovations. We will face into our issues with greater speed and
without compromise but will also make sure we better leverage our
real strengths.
We first must win where we are. We also have the
opportunity to expand our brands in places they should be. This,
combined with active portfolio management, will bring us back in
the race. In parallel, we will start seeding for the future with
the ambition to outperform our markets then.
None of this can be achieved without the passion
of the Danoners. Building from our value, we want to revive a
culture where performance and sustainability go hand in hand, and
where you see the best of being local and global coming together.
We want Danone to be known for being the home of great talents and
great brands, and a synonym for great innovation and great
execution.
We are embarking on a renewal journey with a
worthy destination: bringing Danone back to where it belongs.”
o o O o o
Today’s CME presentations will be broadcast from
8:00 a.m. (Paris time) on the Capital Market Event’s website
(link). Related slides will also be available.
All references in this document to like-for-like
sales growth, recurring operating income, recurring operating
margin, ROIC and net debt/EBITDA ratio correspond to financial
indicators not defined in IFRS. Their definitions, as well as their
reconciliation with financial statements, are listed on page 4. In
addition, the calculation of ROIC and Net Debt/Ebitda is detailed
in the universal registration document (URD).
APPENDIX
Financial disclosure
Starting from 2022, Danone will report its key
indicators (net sales, like-for-like sales growth, recurring
operating income and recurring operating margin) according to its
new operating segments in order to reflect Local First, the
reshaping of the organization announced in November 2020 into a
geographic structure.
As a result, the new leadership team in place
since January 6th 2022 will assess the operational performance of
Danone by geographical zones and the new primary operating segments
will correspond to 4 zones 1:
- Europe;
- North America
which is comprised of the United States and Canada;
- China, North
Asia and Oceania which is comprised of China, Japan, Australia and
New Zealand;
- Rest of the
World including South-East Asia, Latam, CIS, Africa, Turkey,
Middle-East.
The company will retain global category
reporting, on both net sales and recurring operating income and
margin, for EDP, Specialized Nutrition and Waters. It will also
adapt the way it reports organic sales growth: from now on, the Mix
component will be grouped with Volumes, instead of Price.
Please refer to the restated Full-Year 2021 by
new operating segments and global categories below
(non-audited):
FY2021 sales
restated by new operating
segments and global
categories
(€ million) |
Europe |
Noram |
China/North Asia/Oceania |
Rest of the World |
Total |
|
|
|
|
|
|
EDP |
4,002 |
5,087 |
326 |
3,675 |
13,090 |
Specialized Nutrition |
2,723 |
290 |
2,045 |
2,173 |
7,230 |
Waters |
1,615 |
187 |
637 |
1,521 |
3,961 |
Total Company |
8,341 |
5,564 |
3,008 |
7,369 |
24,281 |
FY2021 recurring operating
income and margin restated
by new operating segments
(€ million except %) |
Europe |
Noram |
China/North Asia/Oceania |
Rest of the World |
Total |
|
|
|
|
|
|
Recurring operating income |
1,291 |
603 |
939 |
504 |
3,337 |
Recurring operating margin |
15.5% |
10.8% |
31.2% |
6.8% |
13.7% |
Board
Committee composition
after the 2022 AGM
Danone announced over the past 3 months the
appointment of 4 new directors, in addition to Antoine de
Saint-Affrique : Valérie Chapoulaud-Floquet, former CEO of Rémy
Cointreau, Patrice Louvet,currently President and CEO of Ralph
Lauren, Géraldine Picaud, currently CFO of Holcim and Susan
Roberts, PhD, professor of nutrition at Tufts University and
co-director of the Tufts Institute for Global Obesity Research. It
should be noted that Cécile Cabanis has indicated her intention to
resign from her term of office as Director of the Company at the
end of June 2022.
From April 2022, subject to the appointment of
new Directors by the shareholders’ meeting, the Board will have 3
committees composed as follows:
-
Governance Committee: Valérie Chapoulaud-Floquet
(Chair and Lead Independent Director), Michel Landel and Patrice
Louvet;
- Audit
Committee: Géraldine Picaud (Chair), Frédéric Boutebba and
Gilles Schnepp;
-
Engagement Committee: Serpil Timuray (Chair),
Michel Landel, Susan Roberts and Bettina Theissig.
In order for Strategy to be fully discussed by
the Board as a whole, the Strategy & Transformation Committee
will be dissolved.
Financial indicators not defined in IFRS
Like-for-like changes in sales,
recurring operating income and recurring operating margin reflect
Danone's organic performance and essentially exclude the impact
of:
- changes in
consolidation scope, with indicators related to a given fiscal year
calculated on the basis of previous-year scope, both previous-year
and current-year scopes excluding entities in countries under
hyperinflation according to IAS 29 during the previous year (as for
Argentinian entities since January 1st, 2019);
- changes in
applicable accounting principles;
- changes in
exchange rates with both previous-year and current-year indicators
calculated using the same exchange rates (the exchange rate used is
a projected annual rate determined by Danone for the current year
and applied to both previous and current years).
Bridge from reported data to
like-for-like data
(€ million except %) |
FY 2020 |
Impact of changesin scope of
consolidation |
Impact of changes in exchange rates and others, including
IAS29 |
Organic contribution from hyperinflation
countries |
Like-for-like growth |
FY 2021 |
|
|
|
|
|
|
|
Sales |
23,620 |
+0.4% |
-1.6% |
+0.7% |
+3.4% |
24,281 |
Recurring operating margin |
14.0% |
-12 bps |
-14 bps |
+5 bps |
-9 bps |
13.7% |
Recurring operating income is
defined as Danone’s operating income excluding Other operating
income and expenses. Other operating income and expenses comprise
items that, because of their significant or unusual nature, cannot
be viewed as inherent to Danone’s recurring activity and have
limited predictive value, thus distorting the assessment of its
recurring operating performance and its evolution. These mainly
include:
- capital gains
and losses on disposals of fully consolidated companies;
- impairment
charges on intangible assets with indefinite useful lives;
- costs related
to strategic restructurings or transformation plans;
- costs related
to major external growth transactions;
- costs related
to major crisis and major litigations;
- in connection
with of IFRS 3 (Revised) and IAS 27 (Revised) relating to business
combinations, (i) acquisition costs related to business
combinations, (ii) revaluation profit or loss accounted for
following a loss of control, and (iii) changes in earn-outs
relating to business combinations and subsequent to acquisition
date.
Recurring operating margin is
defined as Recurring operating income over Sales ratio.
ROIC is the ratio of net
operating income in the current year to average capital invested in
the current year and prior years.Invested capital = goodwill and
other tangible and intangible assets + investments in
non-consolidated companies and other financial investments + assets
held for sale net of liabilities + working capital requirements –
provisions and other net liabilities.
Net debt / EBITDA ratio
corresponds to the ratio of net debt to operating income restated
for depreciation, amortization and impairment of tangible and
intangibles assets.
o o O o o
FORWARD-LOOKING STATEMENTS
This press release contains certain
forward-looking statements concerning Danone. In some cases, you
can identify these forward-looking statements by forward-looking
words, such as “estimate”, “expect”, “anticipate”, “project”,
“plan”, “intend”, “objective”, “believe”, “forecast”, “guidance”,
“foresee”, “likely”, “may”, “should”, “goal”, “target”, “might”,
“will”, “could”, “predict”, “continue”, “convinced” and
“confident,” the negative or plural of these words and other
comparable terminology. Forward looking statements in this document
include, but are not limited to, predictions of future activities,
operations, direction, performance and results of Danone.
Although Danone believes its expectations are
based on reasonable assumptions, these forward-looking statements
are subject to numerous risks and uncertainties, which could cause
actual results to differ materially from those anticipated in these
forward-looking statements. For a detailed description of these
risks and uncertainties, please refer to the “Risk Factor” section
of Danone’s Universal Registration Document (the current version of
which is available at www.danone.com).
Subject to regulatory requirements, Danone does
not undertake to publicly update or revise any of these
forward-looking statements. This document does not constitute an
offer to sell, or a solicitation of an offer to buy Danone
securities.
1. As part of the new organization, the management of some
entities has been changed, leading to the reallocation of €143m of
Net Sales to Europe and North America zones (from the previously
known Rest of the World region)
- Press release-CME-20220308
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