Danone shareholders were boosted this week by better-than-expected end of year numbers, but debate remains over how far along the dairy giant is on the path to turnaround.

Posting its annual results on Wednesday, Danone revealed like-for-like sales increased 7.8% to €27.7bn (£24.4bn) in 2022 thanks to an 8.7% hike in prices, with double-digit pricing hikes in the fourth quarter in Europe and North America.

However, this pricing action caused annual volumes to decline 0.8% year on year at the Alpro, Evian and Activia maker. This decline grew to 4.4% in the final quarter as price hikes worked their way through.

Group profit margins were squeezed by soaring costs. Recurring operating profits at the group nudged 1.2% higher to €3.4bn (£3bn) for the year, but margins fell back by 1.5 percentage points to 12.2%, which Danone said was mainly driven by the strong negative impact of input cost inflation. Productivity gains and price hikes only partially covered the hit, it said.

For 2023, Danone forecast like-for-like sales growth of between 3% and 5%, with a “moderate” improvement in its recurring operating margin.

Barclays said the better-than-expected organic sales growth of 7% in fourth quarter, despite the 4.4% volumes drop, left “slim pickings for the bears”. It particularly noted essential dairy and plant-based volumes were down by a lower-than-expected 6.5% in the quarter.

“European EDP historically has trended down for some years, and the problem with Danone was that many of its brands were cannibalising each other, but the plan now is to have a focused product range with more differentiation,” it stated.

However, Bernstein sounded a note of caution around the “encouraging” results.

“We should not lose sight of the fact we are not yet near a turnaround,” the broker stated, noting volumes were deteriorating across regions and divisions and guidance is lower than other large fmcg groups.

“The hard job of redefining and relaunching what EDP brands in Europe stand for still needs to be done [and] specialised nutrition has supported the group’s margins for many years, but is down.”

Danone shares jumped 4.5% on Wednesday to €54.66 on the better-than-expected sales volume performance – the stock’s highest level since the summer of 2022. However, shares remain more than 25% down on pre-Covid levels amid its underperformance of sector contemporaries as Covid trends hurt sales and the ousting of former CEO and chair Emmanuel Faber amid investor revolt..