Due to uncertainty regarding the situation surrounding the coronavirus pandemic, the company said that full-year guidance has been withdrawn.

In the first quarter of 2020, consolidated sales stood at €6.2 bn, up 3.7% on a like-for-like basis, with 2.9% growth in volume and 0.8% growth in value.

First-quarter like-for-like sales growth is ahead of the expectations set by the company earlier in the year at a time when the COVID-19 outbreak was impacting the Chinese market. It includes a sharp rise in sales in the month of March, at a high-single-digit rate, boosted by the short-term effects of both a shift to at-home consumption as well as consumers stocking up on products in Europe and North America.

Danone said this benetted sales in its Essential Dairy and Plant-Based and Specialized Nutrition divisions.

In terms of regional dynamics, growth was driven by Europe and North America with both regions posting mid-single-digit sales growth on a like-for-like basis, led by volumes. In the Rest of the World, sales grew at +2.6% on a like-for-like basis with slightly positive volumes but with different dynamics within this, including a sustained momentum in South East Asia and a slight improvement in Russia more than offsetting an expected sales decline in China.

COVID-19 update

Danone said its priority in dealing with the exceptional challenges posed by COVID-19 is to ensure the safety of its 100,000 employees around the world as well as that of its trading partners, in order to protect its supply chain and maintain the availability of its daily food supply to its consumers.

Danone has announced measures to strengthen its entire value chain. It said employment contracts are secured and wages guaranteed for all Danone employees worldwide until June 30; there is extensive coverage (health, childcare, quarantine) for all employees worldwide; specific bonuses for all employees working on site during the pandemic; financial support of €300m, including extended payment terms and credit to farmers, suppliers and smaller customers in its global ecosystem, financed by Danone’s cash ow, a relief fund, dedicated to supporting the entrepreneurs of Danone Manifesto Ventures’ portfolio, and support to the communities of Danone Ecosystem.

Essential Dairy and Plant-Based (EDP)

In the first quarter, net sales were up by 4.6% on a like-for-like basis, including a 2.8% increase in volume and 1.9% in value, benefiting from the triple effect of low exposure to out-of-home channels, growing at-home food consumption in March and some pantry loading benefits in Europe and North America, which both posted mid-single-digit growth rate in the first quarter.

In order to secure the manufacturing and availability on shelf of our products in those regions, Danone said it has refocused its portfolio on large formats and SKUs with a high-rotation rate. In the rest of the world, COVID-19 has so far had a limited impact on consumer demand, except in Africa with at sales in the quarter, negatively impacted by the closure in March of many traditional proximity stores.

CIS improved compared to the previous quarter thanks to a stabilization in traditional dairy and Latin America posted solid sales growth.

Overall, sales in Plant-Based grew at a mid-teen rate in the period, including high-teens growth rate for Alpro brand in Europe and Silk brand in North America; and Essential Dairy posted solid growth with market share gains in key markets and some top-brands performing particularly well such as Actimel, Danone and Danette in Europe, and Horizon and Two Good in the US.

Specialized Nutrition

In the first quarter, net sales were up 7.9% on a like-for-like basis, with an increase of 5.2% in volume and+2.7% in value, boosted by stock loading in the second part of the quarter, with a contribution from all regions.

Sales in Infant Nutrition (including breast-milk substitutes, baby food and paediatrics specialities) grew overall at a high-single-digit rate in the period while Adult Nutrition business posted strong growth.

Sales to consumers in China posted a solid growth, with Aptamil market share boosted by its strong position in fast-growing e-commerce, while travel bans and Hong-Kong border closure negatively impacted sales in other channels.

Market premiumization has continued. In Europe, sales rose by around 10% on a like-for-like basis in the quarter, with growth rate higher than 30% in the last month, boosted by increased stocks for breast-milk substitutes and rst-diet products as well as strong demand for adult tube feeding solutions on the back of higher hospitalization rates. Other regions posted very strong growth as well, led by double-digit growth in South-East Asia and in the US.

Emmanuel Faber, Danone’s chairman and CEO, said, “The first quarter of 2020 will long be remembered as the time of an unprecedented pandemic, which may change the way we live and do business for a long time ahead.

“Q2 demand and supply conditions will be broadly and deeply impacted by a global lockdown. Beyond the initial pantry loading trends we observed in March, we are unable to predict how the lockdown may affect both supply and demand, with significant differences depending on food habits and lifestyles and people’s income, all in a context of diverse local and national government lockdown strategies and exits, as well as their unknown success rate.

“As a result, the global conditions of both demand and supply will be extraordinarily volatile and unpredictable, as well as the breadth of the mitigation and optimization actions we will consider and implement, with direct material impacts on our revenues and costs. Our board of directors therefore has decided to withdraw our financial guidance for the year, while we are managing with a view to protect and leverage our strong cash liquidity situation.”

2020 Guidance

Given the global nature of the COVID-19 pandemic, and the uncertainty around the severity, the duration, and the multitude of its impacts, upside and downside, across our different markets, Danone said it is not in a position to accurately assess its impact on its 2020 financial performance beyond the initial pantry loading trends observed in the month of March in Europe and North America.

It is likely there will be significant differences on the impacts, depending on food habits, and lifestyles and the terms of local and national government approaches to lockdown execution and exit.

The current lack of consensus around how the pandemic will develop and when it will end, its mid-term macro-economic consequences, and its impact on people’s behaviors and income, adds further complexity to the prediction of the business, Danone said.

This, in combination with the latest foreign exchange rates fluctuations, has led to Danone withdrawing its guidance on recurring EPS growth, like-for-like sales growth and recurring operating margin for 2020.

The company said it expects global supply and demand to be volatile and unpredictable for the rest of the year.