Danone in the first quarter increased LfL revenue above expectations, withdrew the financial forecast for 2020 due to coronavirus
Growth in LfL revenue was higher than the company's expectations on the background of a sharp surge in sales in March, when the dynamics were measured by a high-single-digit indicator. The company cited an increase in home consumption and future purchases in Europe and North America as the reasons for the growth in March dynamics. This had a positive impact on the performance of the dairy, plant-based products divisions (4.6% growth in LfL revenue) and specialized food (+7.9%).
At the same time, LFL revenue for the drinking water division fell by 6.8%. The dynamics was affected by the closure of catering establishments (about 40% of sales usually accounted for consumption channels outside the home). The revenue of Danone in Europe, the United States and Canada in the first quarter increased by 2.6% to 3.469 billion euros (LfL-revenue increased by 4.7%). Sales in the rest of the world increased by 0.5% to 2.772 billion euros (LfL - by 2.6%). Positive dynamics in Southeast Asia and Russia offset the expected drop in sales in China, noted in the company.
Danone also announced that it has withdrawn its forecast of financial indicators for 2020. The first quarter will be remembered for an unprecedented pandemic that can change our way of life and approach to business for a long time, said CEO of Danone Emmanuel Faber, quoted in the message.
In the second quarter, demand and supply will be significantly affected by the global lockdown, and it is still difficult to assess all its consequences. Global changes in both food supply and demand will be extremely volatile and unpredictable, and the optimization and mitigation measures that the company takes or intends to take will affect its revenue and costs.
"Therefore, the Board of Directors decided to withdraw our financial forecast for this year," Faber said.
In February, the company forecast LfL revenue growth in 2020 in the range of 2-4% and operating profitability of the current business above 15% (15.2% at the end of 2019). In the medium term, the company expected LfL sales to grow by 3-5%. Danone's stock price decreased by 2% in the course of trading on Monday in France.
In addition to the brand of the same name, Danone's portfolio includes the brands Activia, Actimel, Nutrilon, Evian water, Danissimo, Biobalance, Rastishka, Smeshariki, Tema, and Malyutka. In Russia, Danone has 16 enterprises.
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