|I bought back into LWAY today. I saw them stock Pro-Bugs into the local Walmart for the first time. I also see Hain Celestial Group is also selling Kefir . |
Danone profit rallies on low milk costs, fresh dairy turnaround
By Carolyn Heneghan | February 23, 2016 print
Dive Insight: Like the rest of its competitors, particularly in Europe, Danone is bracing itself for continued global market volatility. Last week, Nestle reported a six-year low for its rate of annual sales increase in 2015 as the company struggled to raise prices. Unilever, which saw 1.5% sales growth in its food business for 2015, also said it expects a tougher market going into this year. Back in the U.S., companies are struggling with the strength of the dollar, and those revenue hits aren't slowing.
- Danone reported a fourth quarter sales bump of 2.2% to 5.38 billion euros ($5.98 billion) Tuesday, despite the impact of currency fluctuations.
- That sales boost combined with reduced costs increased 2015 profits to 1.28 billion euros (~$1.41 billion), up from 1.12 billion euros.
- Fresh dairy sales, which make up half of the company's revenue, saw a 0.6% uptick for the year, and the segment's profitability jumped to 10% from 9.3%. Quarterly revenue increased by 2.6% on a comparable basis, signaling a turnaround for the segment.
As Dean Foods reported with its recent earnings, lower milk costs are a boon to dairy manufacturers. Since milk prices are falling in Europe in addition to the U.S., Danone was a beneficiary of that market trend. Danone anticipates these costs to remain low, judging by its prediction for "solid" margin growth in the coming year, the company said in a statement.
Margin growth will also receive a boost from the continued improvement in fresh dairy that Danone forecasted for 2016. Overhauling that unit was central to Danone CEO Emmanuel Faber's plan to return the company to growth when he took over the company in October 2014. The overhaul has included facility reorganization, with the company closing several plants in Europe, including Italy, Germany, and Hungary.
After stepping down from CEO to usher in Faber in 2014, chairman Franck Riboud had assumed extra duties during the transition period that followed. But the company said it will relieve him of his expanded strategic role during 2017 so he can serve as a traditional non-executive chairman.