The French food company Danone is sticking to its gates after the weak start into 2021

© Reuters. FILE PHOTO: Logo of the French food company Danone at the company’s headquarters in Rueil-Malmaison

By Dominique Vidalon

PARIS (Reuters) -Danone on Tuesday stuck to its goal of returning to profitable growth in the second half of 2021 after sales fell 3.3% in the first quarter as the COVID-19 lockdowns pushed sales of Bottled water and baby food continued to pollute.

The French food group, which is looking for a new board chairman, said it expected economies to gradually reopen from the second half of this year as the COVID-19 vaccination programs roll out.

Former boss Emmanuel Faber was abruptly ousted as chairman and CEO last month after arguing with some board members over strategy and being told by activist funds to step down because of the group’s poor returns compared to some rivals.

Danone did not elaborate on the search for a new CEO, but said he would be “careful to ensure a smooth transition”. Previously, the company had been looking for a duo to be appointed, having in the meantime appointed a duo to run operations.

The company also announced that it will continue with the board changes initiated by Faber to reorganize Danone around regional hubs rather than brands as part of a “Local First” plan.

It reiterated its expectations for a return to like-for-like sales growth in the second quarter and for a full year 2021 operating margin broadly in line with the 14% achieved in 2020.

Danone, the world’s largest yogurt maker, announced that like-for-like sales fell 3.3% to € 5.657 billion in the first quarter, compared with expectations of a 3.7% decline based on a consensus of 19 analysts produced by the company.

A 1.6% increase in essential dairy and plant-based sales was largely offset by an 11.6% decrease in water sales and a 7.7% decrease in specialty nutrition.

Infant nutrition sales continued to be impacted by a slowdown in birth rates and COVID-related disruptions in China. In particular, cross-border sales fell by around 45%.

Under Faber, the company pursued a strategy that focused on diversifying into fast-growing products containing probiotics, proteins, and herbal ingredients to mitigate the slower growth of dairy products.

However, the pandemic hampered prospects for the company, which suffered as sales of products like Evian bottled water to the restaurant sector declined during government-enforced lockdowns.

“We would expect this release to support price action until we get more news of a new CEO before summer,” Citi analysts wrote in a note.

Danone shares fell 0.7% to EUR 59.91 in early trading. They are up 12% so far this year, aided by speculation about activist shareholder intervention and after a 27% decline last year. Stocks have outperformed their European sector, which is down 7.6% so far this year.

($ 1 = 0.8293 euros)

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