Morning Note: Market News and results from Danone

Market News

Ukraine is said to have agreed with the US to jointly develop its natural resources in what may pave the way toward a ceasefire with Russia. Zelenskiy plans to visit Washington on Friday to seal the deal. Elsewhere, Donald Trump is starting a “gold card” visa program to offer residency to those who invest $5m in the US, an initiative that will launch in two weeks

Stocks, Treasuries, and other assets steadied as investors sought to move on from weak US economic data that had rattled financial markets yesterday. The consumer confidence expectations index came in below 80, a level that usually signals a recession ahead. The 10-year Treasury yield hit 4.32%, a low for the year to date. Rate cuts of up to 60 basis points are now expected this year, versus just 25 less than 2 weeks ago. Gold slipped to $2,915 an ounce.

US equities declined last night – S&P 500 (-0.5%); Nasdaq (-1.4%) – pushed lower by large cap technology. The Mag 7 stocks have lost $1.5tn in market value year to date and over $900bn in the last week. Nvidia is due to report earnings this evening.

In Asia this morning, Hong Kong equities surged (+3.1%), extending a rally that started last month driven by optimism that China’s technological breakthroughs may help revive the sluggish economy. Elsewhere, the Nikkei 225 fell 0.3%, while the Shanghai Composite rose 1.0%. China plans to inject at least $55bn into some of its biggest banks in coming months, people familiar said.

The FTSE 100 is currently 0.7% higher at 8,725. Later today, BP will lay out its vision for the company in what’s expected to be a significant strategy shift. Sterling trades at $1.2656 and €1.2050.

Brent Crude slipped back to $73.30 a barrel. OPEC+ is expected to roll over its output quotas at its coming meeting, which will keep the market balanced in the second half, Morgan Stanley said. Copper climbed after President Trump directed the Commerce Department to examine possible tariffs on the metal.

Source: Bloomberg

Company News

Danone has released its 2024 full-year results which were slightly better than market expectations. Guidance for 2025 is in line with the company’s medium-term strategic target. In response to today’s results, the shares are little changed in early trading.

Danone is a global health and nutrition company which has undergone a shift to a more balanced growth model, with 20 brands with sales of more than €500m. Under its Renew Danone strategy, the company is rolling out value-added innovations to make its portfolio more local, more appealing to younger generations, and better suited to fast-changing consumer trends. The company is also shifting towards strategic distribution channels, such as away-from-home, impulse & on-the-go, pharmacies, hospitals and homecare channels. These now account for more than 50% of sales and are growing 2x-3x faster than mass retail.

For the 2025-2028 period, the company expects like-for-like (LFL) net sales growth between +3% and +5% and recurring operating income to grow faster than net sales. This financial guidance should allow Danone to deliver a structurally double-digit ROIC and progress towards its long-term ambition of delivering €3bn free-cash-flow.

In 2024, sales slipped by 0.9% to €27.4bn, driven by the negative impact from scope (-4.8%), resulting predominantly from the exit of EDP Russia and Horizon Organic and Wallaby. However, in LFL terms (which strips out the impact of currency and disposals) sales grew by 4.3%, versus company guidance of 3%-5%. Growth was made up of 3.0% volume/mix and a 1.3% increase in price.

In the final quarter, sales were up 4.7% on a LFL basis, slightly ahead of the % forecast, and made up of a 4.2% volume/mix and a 0.6% contribution from price. Europe enjoyed its fifth consecutive quarter of positive volume/mix. Other regions grew at a faster pace: North America (+5.2%), Latin America (+4.2%), and China, North Asia, & Oceania (+8.0%).

In Essential Dairy and Plant-Based Products, the group controls a quarter of the worldwide fresh dairy product market, with brands such as Activia and Actamel, and has exposure to non-dairy through Alpro

In 2024, LFL sales grew by 3.8%, with growth of 4.7% in the final quarter.

In Waters, the group is the world’s second largest bottled water company in volume terms, with brands including Evian, Volvic, and Badoit. Full-year sales grew by 5.1%, with growth in Q4 of 5.3%.

Specialised Nutrition is divided into Early Life Nutrition, where the group is the world number two with brands including SGM and Cow & Gate, and Advanced Medical Nutrition, where the group is the European leader, with Nutricia and Fortimel. Sales grew by 4.6% in the full year and also in the final quarter.

The full-year recurring operating margin rose by 39 bps to 13.0%, versus guidance for a moderate improvement. Growth was driven by strong improvement in margin from operations, while consistently reinvesting into future growth. EPS rose by 2.5% to €3.63.

Free cash flow grew by 14% to a record €3.0bn driven by an increase in recurring operating income, as well as a strong improvement in working capital. The group has a robust balance sheet, with net debt ending the year down from €10.2bn to €8.6bn (1.9x EBITDA). The company’s return on invested capital has returned to double-digit level, up 50 basis points to 10.0%. The group has declared a dividend of €2.15, up 2.4%, and amounting to a 3% yield.

For 2025, the group expects to perform in line with its mid-term targets: like-for-like sales growth between 3% and +5% with recurring operating income growing faster than sales.

Source: Bloomberg