Danone factory

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Danone has boosted annual revenues on the back of higher prices but soaring costs squeezed the French food group’s profit margins.

Like-for-like sales, stripping out currency tailwinds, increased 7.8% to €27.7bn (£24.4bn) in 2022 at the Alpro, Evian and Activia maker thanks to an 8.7% rise in prices, with double-digit pricing hikes in the fourth quarter in Europe and North America.

However, annual volumes declined 0.8% year on year - and by 4.4% in the final quarter.

Recurring operating profits at the group nudged 1.2% higher to €3.4bn (£3bn) for the year, but margins fell by 1.5 percentage points to 12.2%, which Danone said was mainly driven by the strong negative impact of input cost inflation, with productivity gains and price hikes only partially covering the hit.

CEO Antoine de Saint-Affrique, who is attempting a turnaround at the group, said that 2022 was a year of “unprecedented external challenges and volatility” but also one of “deep transformation and solid delivery” for Danone.

“Building on 2022 momentum, we are entering 2023 with renewed ambition and confidence in our strategy. In 2023, we will pursue our transformation, and further invest in our brands, products and capabilities while delivering in line with the mid-term guidance defined last year.”

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

In Europe, like-for-like sales increased 5.2% in 2022, while in North America the top line rose 8.9% and by 6.7% in China, North Asia and Oceania, with a 4.1% fall in the rest of the world.

By category, essential dairy and plant-based registered like-for-like growth of 5.8% with volumes down 4.3%, specialised nutrition rose 10% on growing volumes and waters also rose 10.5% on higher volumes.

Shares in Danone jumped 2.1% to €53.41 first thing this morning.

Morning update

Performance nutrition group Science in Sport has released a bullish pre-close trading update with management “optimistic” about prospects for 2023.

The group said margins were “strongly improved” as a second wave of price increases filtered through to retailers.

Revenues in 2022 increased 1.5% to £63.5m against what the business called a “tough economic and supply chain environment”.

Margin performance improved in the second half as its new site in Blackburn delivered “significant” logistics efficiencies, coupled with sustainable cost savings across the business.

“This world-class asset is planned to be the bedrock of further improvements and strategic advantage in the global sports nutrition sector from 2023 onwards.”

Investors reacted positively to the news, with shares soaring 12% as markets opened before settling back to 5.1% higher at 13.1p. However, the stock remains almost 80% lower over the past year.

The FTSE 100 sank 1% to 7,899.78pts this morning.

Fallers so far included THG, down 3.4% to 55.7p, Nichols, down 2.4% to 981.7p, and Naked Wines, down 2.3% to 115p.

Bakkavor is among the early risers, up 1.7% to 109.6p, along with Greencore, up 1.7% to 80.2p, and Finsbury Food, up 0.4% to 96.4p.

Yesterday in the City

The FTSE 100 fell back 0.5% to 7,977.75pts yesterday.

Shares in Finsbury Foods crashed 2.5% to 96.5p despite solid first-half results as the bakery warned of ongoing challenges surrounding costs.

Other fallers included Deliveroo, Hilton Food Group and Fever-Tree, down 6.2% to 84.4p, 1.3% to 701.9p and 1.1% to 1,101p respectively.

AG Barr, Marks & Spencer and SSP were among the risers, up 0.6% to 553p, 0.6% to 151.6p and 1.3% to 264.1p respectively.