Food group Danone has lowered its 2020 forecast for sales and profit margin, citing a particularly uncertain economic climate and the impact of the coronavirus.
The world's largest yoghurt maker said the coronavirus outbreak would result in €100 million of lost sales, principally affecting its water business in China in the first quarter.
"While we cannot currently predict the duration and extent of the impact of COVID-19, we remain extremely vigilant and are closely monitoring the situation everyday, working hand in hand with local authorities," Danone said in a statement.
'Accelerate Investment'
Finance Chief Cecile Cabanis told journalists that "despite current uncertainties we need to accelerate investment" and the maker of Activia yoghurt and Evian water announced plans to invest €2 billion over 2020-2022 to accelerate climate protection initiatives.
Danone, which is also targeting mid-single-digit recurring earnings per share (EPS) growth for 2020, said it was now targeting like-for-like sales growth of 2-4% in 2020 and an operating margin above 15%.
This compares with its previous 2020 goals of 4-5% sales growth and an operating margin above 16%.
Danone made the 2020 forecast after reporting growth in sales in the fourth quarter, driven by a strong performance in baby food in China and a return to positive sales growth in the waters division.
Overall, Danone reported 2019 sales of €25.287 billion, a like-for-like growth of 2.6%, near the bottom of an already lowered range of 2.5-3% provided in October, and a slowdown from 2.9% growth in 2018.
Diversified Portfolio
The lowered 2020 outlook also deals a blow to Danone CEO Emmanuel Faber's turnaround efforts, which have centred on diversifying the group's portfolio into fast-growing products featuring probiotics, protein and plant-based ingredients to mitigate slower growth in dairy.
In 2017, Danone bought U.S. organic food producer WhiteWave in a $12.5 billion deal, to boost growth and bring the company more into line with healthier eating trends.
The 2019 operating margin however rose 76 basis points to 15.21% of sales, slightly above analysts' expectations of 15.14% helped by efficiency gains of €900 million.
News by Reuters, edited by Donna Ahern Checkout. Click subscribe to sign up for the Checkout print edition
