Danone Writes Down Russia Assets, Reports Better-Than-Expected Sales
Danone, the French multinational, has announced that it is deconsolidating its Essential Dairy and Plant-based (EDP) business in Russia, which has led to a cash impairment of approximately €200 million and a non-cash foreign exchange translation difference of about €500 million.
This move comes after the Russian state took control of Danone’s Russian subsidiary and Carlsberg’s stake in a local brewer earlier this month.
Danone stated that it will continue to provide updates on significant developments related to its EDP operations in Russia. The company is also actively investigating ways to safeguard its assets and rights as a shareholder, with a primary focus on ensuring the safety of its personnel.
On a more positive note, Danone reported better-than-expected half-year like-for-like sales growth, attributing it to price increases implemented to offset rising costs.
Net sales for the first half of the financial year rose by 6.3% on a reported basis to €14.17 billion, and 8.4% on a like-for-like basis.
The growth was primarily driven by a 9.4% increase in pricing, although there was a slight decline in volume by 1.1%. The company’s CEO, Antoine de Saint-Affrique, expressed satisfaction with the solid first-half performance and the overall resilience in sales growth across all geographies.
During the second quarter, like-for-like sales increased by 6.4%, with the strongest performances in Europe (+6.5%), China (+9.6%), and Latin America (+10.8%).
Looking ahead, Danone expects to achieve like-for-like sales growth at the upper end of its +4% to +6% guidance range for the year. This is supported by anticipated improvements in volume/mix in the second half and moderate recurring operating margin improvement.
Barclays analyst Warren Ackerman praised Danone’s performance, noting their visible delivery for six consecutive quarters.
He emphasized the importance of investment behind the company’s brands and anticipated continued top-line growth for the rest of 2023 and beyond. He also highlighted the successful SKU rationalization program and better-than-expected volume/mix figures in Q2.