Danone Withdraws 2020 Forecast Amid Coronavirus Uncertainty

(Bloomberg) -- Danone abandoned its guidance for 2020 as the coronavirus pandemic weighs on bottled-water sales.

• Sales rose 3.7% on a like-for-like basis in first quarter as consumers stocked up. Analysts expected growth of 0.8%.
• Danone had previously forecast like-for-like sales growth of 2% to 4% and mid-single-digit growth in adjusted earnings per share.

Key Insights

• One of Danone’s biggest challenges is adjusting to extremely fast swings in demand as shoppers stock up and reduce outings. The company is shifting to larger pack sizes and focusing more on products for at-home consumption rather than in restaurants or food service. Actimel performed well as consumers perceive that it may bring health benefits.
• Danone faces higher transport costs and inefficiencies in its supply chain due to the need for employees to maintain distances from each other to prevent infection. Danone is dedicating 300 million euros ($325 million) to extending payment terms and credit to farmers and suppliers to help small companies it does business with.
• Covid-19’s impact is set to get worse, as now 70% of Danone’s sales come from countries that have imposed sanitary measures. That compares to 10% in late February and 33% a month ago.

Market Reaction

• Danone shares were little changed, having gained about 10% over the past month.

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• Read the statement.

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