Danone’s results weighed down by the Moroccan boycott

Danone Group’s net profit fell 4.1% in 2018 to 2.35 billion euros, while turnover stagnated at 24.65 billion, with a decline in sales of 2.1% in fourth quarter 2018 weighed down in particular by a drop of 35% in Morocco.

In 2018, the effect of the boycott on sales in Morocco “was -178 million euros compared to 2017 sales, two-thirds of a loss of earnings on milk sales and one-third of ‘a shortfall in dairy products, “Danone said in a press release.

A decrease of 43 million euros

Using the same method, the effect of the boycott represents a decrease of 43 million euros on the group’s profitability compared to 2017, including the effect of promotional actions in the country to regain growth. “We are finding market share in milk and fresh products” in Morocco, explained Finance Director General Cécile Cabanis during a conference call, but she does not expect a return to growth before “the end. of the year “2019.

A campaign against the “high cost of living” targeting Afriquia service stations, Sidi Ali mineral water and Danone milk, accused of hegemonic positions, won wide support in 2018 in Morocco. Launched in April on social networks, anonymously, the campaign was well followed, forcing Centrale Danone – 99.68% owned by the French group – to make a drop of around 10% on certain bricks of pasteurized milk and the creation of an “economic format” to try to raise the bar.

The decline slows in China

Bryan Garnier analysts judged the results of the international dairy products division “better than expected despite the boycott in Morocco”, but underlined the “lethargy of the markets” of specialized nutrition (products for the elderly, sick, or for babies. ). In the fresh dairy products division, which includes the Moroccan subsidiary, the group benefited from a stabilization of activity in Europe, strong sales growth in the CIS zone and improved performance in America. Latin: sales fell only 7% over the year to 8 billion euros.

In North America, dairy and plant-based products experienced strong growth of 12.2% to 5 billion euros. Sales of fresh produce in the United States were however penalized by a ban on romaine salads for 10 days in the fourth quarter by the American authorities “which had a negative impact on the turnover of all the group’s salads”, Bryan Garnier analysts say.

The specialized nutrition division saw its sales stagnate at 7.1 billion, torn between the very good performance of medical nutrition and the decline in infant nutrition, weighed down by a drop in sales in China, which represents 30% of sales. The decline is slowing down in China, however: “it was -10% in the fourth quarter instead of -20% in the third,” Ms. Cabanis assured.

300 million euros in savings in 2018

Danone is aiming for 2019 revenue growth of around 3% on a like-for-like basis and a current operating margin above 15%, close to its organic results in 2018 (where its published operating margin stood out for its part). at 11.12%, almost 4 points less than in 2017). Danone CEO Emmanuel Faber said the group had saved 300 million euros in 2018 and will reach 1 billion in 2020, as planned by its “Protein” savings plan launched in 2017. The group plans “a slow start for 2019”, but “the fourth quarter will be in line with the objectives for 2020”, according to Ms. Cabanis

Around 10:30 am, Danone shares fell 1.50% to 65.04 euros on the Paris Bourse, in a market down 0.3%.

(With AFP)