Danone adjusts guidance plan in face of volatility

by Max Sosland
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Danone has adjusted its 2016 guidance plan to confirm sales growth within 3% to 5%.

PARIS — Danone S.A. has adjusted its 2016 guidance plan, said Cecile Cabanis, chief finance officer for Paris-based Danone. The new guidance plan confirms sales growth within 3% to 5% and moves the trading margin target from “solid improvement” to a range of 50 to 60 basis points. The 2020 goals set out by Danone remain unchanged.

The change is meant to take into account the growing volatility of the international marketplace, Ms. Cabanis said

“It is clear that (the global environment) continues to be very volatile, especially in some of our key emerging markets,” Ms. Cabanis noted during a June 14 conference call with analysts.

“With fast evolving dynamics in some emerging markets and notably China, we are adjusting the pace of top-line refueling for 2016 in these specific geographies,” she said.

The uncertainty of emerging markets for Danone in countries such as Russia, Brazil, Argentina and China is leading the company to avoid pushing for short-term growth, and focus on long-term sustainability.

“We are very careful not to push for short-term growth but to remain focused on making sure that we are building a more sustainable model of growth for the future,” she said.

Cecile Cabanis, Groupe Danone

In terms of rebalancing its growth guidance model toward greater resilience, Danone has extracted efficiencies from the model not only through disciplined resource allocation, but also cost optimization, mix management and growth.

In order to prepare for the volatility of the global marketplace, Danone implemented its “beyond budget” initiative. This plan led Danone to abandon the traditional budget-type approach of annual plans with predefined resource allocation for the calendar year with a flexible quarterly spending system based on rolling 18-month forecasts.

“We are now able to adjust, accelerate, postpone some of our investment plan on a quarterly basis, to make sure we appropriately fund short but also mid- and long-term initiatives at the right pace,” Ms. Cabanis said.

She provided an assurance that the change is not a sales warning when asked if that was the purpose for the change on the conference call.

“It’s not a sales warning, not at all because we are confirming the range of the sales objective that we set in February… between 3% to 5%,” she said. “It is, for me, a sign and an illustration once again that we are managing our agenda.” 
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