sales rise at fastest rate in decade

Danone’S revenue grew at the fastest rate in more than a decade, boosted by higher prices on products from activia yogurt to ev ian water.

Sales rose 7.8 percent on a likefor-like basis in 2022, Danone said Wednesday, beating analysts’ estimates. The stock rose as much as 2.8 percent in early trading.

Chief executive a ntoine de Sainta f frique is implementing a turnaround plan for the French food company at a time when inflation hovers near 40-year highs in europe and the United States. He’s struggling to boost the company’s volumes, which have dropped for seven consecutive years, and its operating margin, which shrunk to the lowest level in more than a decade.

Danone raised prices by the most since the 1980s, along with its competition, though that still didn’t cover all the extra costs. Consumer goods companies are in a quandary over how much raw material inflation to pass on to shoppers. absorbing costs means lower profitability, while if they raise prices too much, there’s a risk of losing market share.

Work to do

“We should not lose sight of the fact that we are not yet near a turnaround,” wrote Bernstein analyst Bruno Monteyne. He cited an accelerating decline in quarterly volumes, a sales forecast that’s lower than the competition, and low margins.

Volumes fell 0.8 percent as pricing rose 8.7 percent. Part of the reason for the drop in volume was Danone’s decision to simplify its product portfolio and eliminate items that are underperforming, Juergen e sser, deputy Ceo in charge of finance and operations, told analysts on a call. That process will continue in 2023, particularly in europe, he said.

The yogurt maker forecast likefor-like sales growth of 3 percent to 5 percent this year, with moderate improvement in its recurring operating margin. That would be the first improvement in profitability since 2019. CFo esser said the company expects a gradual slowdown in inflation and a better gross margin in 2023.

Danone is making good progress on its plan for its russian dairy and plant-based foods unit, which it plans to sell, esser said, adding that the local regulators would have to approve any sale. Financial newspaper Kommersant reported this month that Danone is hoping to keep up to 25 percent of the business, a spot on the board of directors as well as an option to return.

The company has also been seeking to sell underperforming US yogurt brands Wallaby and Horizon organic. Danone is looking for bolton acquisitions as well, though its priority is deleveraging debt, Ceo de Saint-a f frique said. Bloomberg News