Analyst Note
| Ioannis Pontikis, CFA |Danone reported third-quarter results with like-for-like sales up 3.8%, slightly ahead of company-compiled expectations (3.6%). Value (mix/pricing) was up 4.6% (versus 2.8% consensus) and volume was down 0.8% (versus up 0.8% for consensus). Essential dairy and plant-based, or EDP, was up 4.1% on a like-for-like basis with specialized nutrition and water up 2.9% (volume down 5.3% with value up 8.2%) and 4.6%, respectively, with China growing double digits in the adult and infant nutrition segments. EDP's performance was particularly noteworthy since the company faced supply and logistic disruptions "hampering Danone's ability to produce and serve demand in plant-based." On cost inflation, which is top of mind for investors lately, Danone said it expects cost of goods sold inflation in the second half to be 9%, about 200 basis points higher than in the first half. In response, the company is moving from "selective pricing into broad-based pricing." Danone reiterated guidance to be back to profitable growth in the second half, with margins broadly in line with 2020 (13.9% in our model versus 14% last year and 13.7% for consensus). After this mostly in-line set of numbers, we do not expect to change our EUR 60 fair value estimate. The shares trade in the 3-star territory.