EUR 850.00 For Business Accounts Only

Morningstar | Danone Reports Broadly in Line First-Quarter Results, Maintains Guidance; Shares Fairly Valued

Danone reported first-quarter 2019 results with like-for-like sales up 0.8%, broadly in line with our estimates. Growth was driven by price and mix (up 3%), which more than offset negative volume growth of 2.2%. Management reaffirmed fiscal 2019 guidance of around 3% like-for-like growth and above 15% recurring operating margin (versus 3.7% and 15.5% in our model, respectively). Given this broadly in line set of results, we maintain our EUR 70 fair value estimate and narrow moat rating.

On a more granular view, specialised nutrition was up 0.4% in the quarter (with strong comparables in first-quarter 2018), with early life nutrition declining (close to 15% versus 50% comparable in first-quarter 2018), driven by weakness in China (30% of segment's sales) due to the continued decrease in sales from indirect channels and strong comps. Performance outside China has been healthy, and premiumisation trends in Asia continue apace. EDP sales were up 0.2%, driven by weak volumes (down 3.8%). On a more positive note, the plant-based segment was up mid to high single digits but still lower than the ambitious over 15% CAGR needed to achieve EUR 5 billion sales by 2025, while ex-Morocco, group organic sales growth would have been up 1.5% due to lower decline in volumes (down 1% versus 2.2% reported). Water like-for-like sales were up 3.9%, lower than our 5.5% annual growth expectations figure.