Danone (OTCMKTS:DANOY) have announced plans to initiate 1 billion euro worth in savings, in a bid to manage unexpected surges in milk production costs.
The company, which is currently the world’s largest yogurt producer, announced the measure following a fall in earnings per share growth at 5 percent. This marks its slowest in three years, following last year’s 9.3 percent surge.
Danone’s like-for-like sales for the year rose 2.9 percent to 21.94 billion euros ($23.22 billion), a decrease on the 4.4 percent growth noted in 2015. Earlier in December, Danone warned that profit growth would be below its projected target between the range of 3 to 5 percent.
According to its annual results, the dairy product giant anticipates milk prices to rise in the “mid-single digits” in Europe, and even more so in Latin American regions and across Russia. In general, global milk prices have risen consistently, with the average UK farm gate increasing by 9 percent on the year previously to 26.2p a litre for 2016.
In addition, Danone said it plans to review its financial targets after the finalisation of its $10 billion acquisition of U.S. organic food group WhiteWave, which is expected to bolster earnings for the quarter. This follows the announcement earlier this month of the acquisition of a new North American Headquarters in White Plains, New York.
The company however warned that it remained cautious of the turbulent economic climate across Europe, citing “persistently fragile or even deflationary consumer trends in Europe.” as a key concern for 2017. It attributed the slowdown in profit growth for 2016 to weaker demand across its Spanish markets and an attempted redevelopment of the ‘Activia’ yogurt brand, ultimately proved ineffective.
Emmanuel Faber, chief executive of Danone since October of 2014, has pledged his commitment to “strong profitable and sustainable growth” by 2020 for the company. The new savings initiative has been named “Protein” will among other aspects, review performance in China markets and the launch of new products.
Shares on Wednesday responded minimally to the annual results, with a fall in value by 1.24 percent as of 13.09PM (GMT).