Danone forecasts slower profit growth in 2017 on higher milk prices

Danone has forecast a slowdown in profit growth this year and launched a programme to cut €1bn in costs by 2020 as the world’s largest yoghurt maker prepares for a steep rise in milk prices in 2017.

Danone is targeting growth this year of more than 5 per cent in recurring earnings per share, compared to 2016, when profit rose 9.3 per cent by this measure. This year’s forecast excludes the pending acquisition of WhiteWave foods, a US food maker that specialises in natural and organic foods.

On Wednesday Danone, whose products also include Evian and Volvic water, said that like-for-sales increased 2.9 per cent in 2016, the slowest pace in 20 years. Reported sales, adjusted for currency and other factors, were down 2.1 per cent because of an exchange rate drag from the Argentine peso, the Mexican peso and the Russian ruble.

Chief executive Emmanuel Faber said that in 2016 Danone faced challenges “including a slower turnaround of dairy in Europe and major market volatility.” In 2017 the Paris-based company is anticipating a year-on-year mid-single digit rise in the cost of its strategic raw materials, notably milk.

Danone proposed a dividend of €1.7 per share, up 6.3 per cent from 2015.