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Danone to Cut 900 Jobs After 2012 Profitability Declines

February 19, 2013

Danone to Cut 900 Jobs After Full-Year Profitability Declines

The Danone SA logo sits on the label of the company's Actimel yoghurt drinks in the refrigerated aisle of a supermarket in London, U.K. Photographer: Chris Ratcliffe/Bloomberg

Danone, the owner of Evian bottled- water and Activia yogurt, said it plans to cut 900 jobs in Europe to help address declining profitability as consumption weakens in the southern part of the region.

Both management and administrative positions will be shed in 26 countries across Europe, the Paris-based company said today in a statement as it reported a slight gain in profit. The job cuts are part of a plan announced in December to reduce costs by 200 million euros ($267 million) over two years.

Demand for Danone’s dairy products, which account for more than half of sales, has weakened in southern Europe as the region’s debt crisis pushes shoppers toward cheaper private- label products. Nelson Peltz, the activist investor who said in November that his Trian Fund Management LP owned a 1 percent stake in the company, has called for management to pare costs and focus on cash returns.

“2013 will be a year of transition,” Chief Executive Officer Franck Riboud said in today’s statement. “A year aimed at returning our activities as a whole to strong, profitable growth by 2014.”

Net income from continuing operations rose to 1.82 billion euros last year, from 1.75 billion euros a year earlier, the company said. The average estimate of 28 analysts surveyed by Bloomberg was 1.81 billion euros. The trading operating margin narrowed 0.5 percentage point to 14.2 percent, while sales rose 5.4 percent on a like-for-like basis, exceeding 20 billion euros for the first time.

2013 Targets

Danone said it expects revenue in 2013 to rise at least 5 percent, while the operating margin will probably decline by 30 basis points to 50 basis points on a like-for-like basis. Business conditions will remain “negative” in Europe and positive elsewhere, the company said.

Peltz, who helped bring changes to companies including H.J. Heinz Co., Wendy’s Co. and Family Dollar Stores Inc. (FDO:US), has also called on Danone to avoid costly acquisitions.

The French company said Feb. 1 it won’t attempt a hostile takeover to increase its stake in Yakult Honsha Co., confirming a Nikkei newspaper report. Danone is already the Japanese milk- drink maker’s biggest shareholder, with a 20 percent stake.

The company studies all acquisition opportunities that arise, Chief Financial OfficerPierre-Andre Terisse said on a call with reporters today. He had no comment on Nestle SA’s plans to divest assets after its acquisition of an infant nutrition unit of Pfizer Inc.

Dairy Products

Like-for-like sales increased 4.9 percent in the fourth quarter, exceeding analyst estimates of a 3.7 percent gain. The measure excludes divestments and currency changes.

“The fourth-quarter results were a bit better than expected in terms of growth, though the margin guidance was slightly disappointing,” said Marco Gulpers, an analyst at ING in Amsterdam. “It’s evidence of the very tough situation in southern Europe for Danone.”

Sales of dairy products, which include Actimel drinking yogurt, increased 1.3 percent in the quarter on a comparable basis. The unit generates more than half of Danone’s revenue.

Revenue from Danone’s bottled-water business increased 8.5 percent in the quarter, helped by increased demand in emerging markets, where the company gets about half its sales. Sales of baby-nutrition products climbed 12 percent.

To contact the reporter on this story: Dermot Doherty in Geneva at ddoherty9@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net


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