DANONE : to Cut 900 Jobs In Europe Turnaround Plan
02/19/2013| 03:34am US/Eastern
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By Ruth Bender
PARIS--Danone SA (BN.FR) Tuesday said it will cut around 900 jobs across Europe over the next two years in an attempt to combat a "severe deterioration in overall consumer demand," in the region and instigate a gradual recovery of sales in 2013.
While baby milk in China and greek-style yogurt in the U.S. helped maintain profit levels in 2012, the French dairy company continued to suffer in western and southern Europe, where competition from new and cheaper brands challenged its blockbuster products - Activia yogurt and Actimel yogurt drink - hitting revenue and operating profit hard.
"Clearly this situation is not sustainable and we will overcome it," said Danone Chief Executive Franck Riboud
"2013 will be a year of transition, with vigorous development in business in our growth markets and a drive to strengthen operations in Europe. A year aimed at returning our activities as a whole to strong, profitable growth by 2014," he said in a statement.
Danone said it plans to cut jobs in managerial and administrative positions across 26 European countries as part of a of its existing plan to save about 200 million euros across the region. The group said it will create regional units, rather than country-by-country management structures and will merge different management functions into one to achieve the job cutting targets. The plan will be presented to works councils today, Danone said.
Sales in Europe, excluding buoyant markets such as Russia and Eastern Europe, fell 3% to EUR8.43 billion over the year, hitting Danone's profit margin.
In the fourth quarter, like-for-like sales in Europe fell 2.3% as the economic environment "neither improved nor deteriorated," Chief Financial Officer Pierre-Andre Terisse told reporters.
Besides cost cuts, Danone is working on ways to revive sales in key markets such as France and Spain, which has been particularly hard hit by rising unemployment and austerity measures. The group has been launching new packaging for its Activia yoghurts in several European markets. It is also reviewing recipes for some of its key dairy brands and will soon launch new Greek yoghurt products in some markets.
The group said it will continue to operate in all of its European markets.
Total group sales rose 8% to EUR20.87 billion in 2012, above consensus for EUR20.78 billion as growth in baby food, waters and medical nutrition and emerging markets such as Mexico, Indonesia, China and Russia, offset falling sales in Europe. Like-for-like sales rose 5.4% over the year and net profit was stable at EUR1.67 billion.
Danone said it expects like-for-like sales growth of "at least 5%" for this year and a decline of between 30 and 50 basis points of its operating margin, which fell 50 basis points in 2012 to 14.18%.
At 0816GMT, Danone shares were trading up 4.7% to EUR 52.56.
-Write to Ruth Bender at ruth.bender@dowjones.com
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