French food group Danone said it expects operating margin to grow above 16% of sales in 2020 due to the synergistic effect of buying a US organic food producer WhiteWave and a plan to cut spending by one billion euro.
The world's largest producer of yogurts said that it wants to achieve comparable sales growth in the range of 4 to 5 percent in 2020 against 2.9% in 2016. The company's operating margin last year was 13.77%.
In July 2016, Danone described the plans to purchase WhiteWave, which produces almond milk Silk and Earthbound Farm Organic salad. For Danone, this has become the largest purchase since 2007. According to the company, it would double the US unit. The deal ended on April 12.
The company said on Thursday that the synergistic effect of the deal would be $ 300 million in 2020.
Danone faced tough market conditions in Spain and difficulties with the restart of the Activia brand in Europe, which limited the growth in sales of dairy products in the fourth quarter of 2016, while the pressure on the Chinese market adversely affected the sale of baby food.
As a result, Danone reported in February that it plans to cut spending by 1 billion euro over the next three years.
The purchase of WhiteWave enabled Danone to raise its forecast for 2017 in April. The company said it expects double-digit earnings per share, excluding currency fluctuations and modest growth in comparable sales in 2017. On Thursday, the company confirmed these forecasts.
Today, the French index CAC 40 rose 0.45%. As for the European stock market as whole, it rose slightly in early trading, showing modest recovery after significant losses this week, related to political instability in the US.
To date, 80% of European companies reported results, in which 65% exceeded expectations, and 8% coincided with forecasts, according to I/B/E/S. It is expected that the profit of companies in the first quarter increased by 19.4%.