Rise in the cost of raw materials, withdrawal of part of its activities from Russia, deployment of its reorganization plan… Danone saw its profit halve in 2022, falling below the bar of one billion euros, announced the group this Wednesday. Sales jumped 13.9%, driven by price increases to cope with soaring production costs, aggravated by the war in Ukraine.
“The last time the price effect had such an impact on our results was in the 1980s,” commented a Danone spokesperson. Net profit attributable to the group fell to 959 million euros, due to the withdrawal of its “dairy and plant-based products” unit from Russia, which constitutes the bulk of its activity in the country.
500 million future costs
The operation resulted in a depreciation of 500 million euros in 2022 and the group confirms that it will cost it “an additional 500 million euros in 2023”, according to a Danone spokesperson. The results were also affected by the implementation of the “Local First” plan, a global reorganization project for the group led by the former CEO Emmanuel Faber before he was ousted in mid-March 2021 and continued by the new management.
The giant behind the Activia, Blédina and Aptamil brands saw its current operating margin erode in 2022 to 12.2%, against 13.7% the previous year, but remains above 12%, which was the objective set for the year 2022. This drop in profitability reflects “the impact of the increase in the cost of raw material purchases, which have not been fully offset by our productivity efforts and price increases”, explained the group.