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Danone to cut 900 European jobs to address downturn

By Mark Astley , 19-Feb-2013
Last updated on 19-Feb-2013 at 13:06 GMT

Danone has announced plans to cut 900 jobs across 26 European countries in an effort to address “the lasting downturn of the European economy.”

The French dairy giant has revealed - alongside its 2012 full-year results - that it intends to halve its management units across Europe by combining teams from several countries into “multi-country units.”

Danone will also seek to combine several management functions within its European subsidiaries.

The measures represent the “organisational part” of it December 2012-announced two-year €200m savings plan. Through its efforts, Danone hopes to generate savings and “win back its competitive edge in Europe.”

The announcement follows a difficult 12 months for Danone in Europe. In June 2012, the company was forced to issue a profits warning for the year to account for the collapse of fresh dairy product consumption in Spain and other Southern European countries.

Sales “exceeded” €20bn

Despite the on-going economic difficulties in Europe, Danone was able to report consolidated sales of €20.869bn for the year – a 5.4% like-for-like increase on 2011.

While trading operating income hit €2.958bn for the 12 months ended 31 December 2012 – a 1.8% like-for-like increase.

Geographically, Danone has attributed the growth to strong performances in Asia and the Rest of World, which reported sales volume growth of 12% and 4.7% respectively.

Meanwhile, European sales volume fell by 2.2% as conditions in the region “remained difficult.”

“Most of these achievements were due to our operations outside Europe, which now generate 60% of our total sales and reported profitable growth averaging over 10% in 2012. We must make every effort to pursue lasting expansion in these markets,” said Danone chairman and CEO, Franck Riboud.

“But 2012 also saw some of our business in Europe come under pressure from a severe deterioration in overall consumer demand, which led to a 3% decline in our revenues in this region and a decline of over 10% in our operating income.”

“Robust” baby nutrition growth

Danone’s Fresh Dairy Products division experienced difficulties in 2012 as a direct result of the European economic downturn.

The business reported like-for-like sales growth of just 2% for 2012 – despite strong performances from its operations in North America and Russia, and “buoyant” sales in Latin American and the Africa-Middle East region.

The firm’s Medical Nutrition division also experienced “slowing growth” as a consequence of the deteriorated conditions. However, continuing momentum from China, Turkey and Brazil ensured a sales increase of 5.9% for the year.

Meanwhile, Danone’s Baby Nutrition segment experienced “robust growth” in all geographical markets – reporting like-for-like sales growth of 11.6% for the year.

Danone’s Waters division also reported double-digit sales growth for the year. It has attributed the 10% sales increase to strong growth in emerging markets.

Negative in Europe, “favourable” elsewhere

Danone chairman and CEO Riboud has earmarked 2013 as a “year of transition” following the difficulties of 2012.

The company has set itself a sales growth target of at least 5%, a steady cash-flow target of around €2bn, and a trading operating margin decrease of between 50bps and 30bps.

Danone expects contrasting consumer demand from region to region – negative in Europe, “favourable” elsewhere. But through its cost-cutting efforts in Europe, Danone hopes to back on track by 2014.

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