* Sales growth slowed last year but met latest forecasts
* Danone seeks 1 billion euros in savings by 2020
* Company cautious on prospects for this year
(Adds CEO, CFO comments and details from call)
By Dominique Vidalon
PARIS, Feb 15 Food group Danone plans
to cut costs by 1 billion euros ($1.1 billion) over the next
three years, saying the turnaround of its European dairy
business was taking longer than expected while tough conditions
in China would endure in 2017.
The world's largest yoghurt maker was cautious about the
current year, given deflationary consumer trends in Europe and
rising milk prices.
Danone said it would review its financial goals after
closing its $10 billion acquisition of U.S. organic food group
WhiteWave, which is expected in the first quarter and
which should boost earnings.
The owner of Evian water and Activia yoghurt is targeting
earnings per share growth of above 5 percent in 2017, excluding
WhiteWave. It achieved EPS growth of 9.3 percent in 2016.
The new savings plan - called "Protein" by Danone - will aim
to cut spending on marketing and general expenses such as
corporate travel, and will be partly used to fund future growth.
Chief Financial Officer Cecile Cabanis told analysts that
Danone eyed "moderate" top line sales growth for 2017.
Emmanuel Faber, chief executive since October 2014, has
vowed to return Danone to "strong profitable and sustainable
growth" by 2020.
He is reviewing its business in China and is overhauling its
dairy division, where it has cut costs and launched new
SALES GROWTH SLOWS
Danone's like-for-like sales in 2016 rose 2.9 percent to
21.94 billion euros ($23.22 billion), a slowdown from 4.4
percent growth in 2015. Danone had warned in December that
growth would be below its original target of 3-5
The slowdown reflected tough market conditions in Spain and
problems with the relaunch of its Activia brand in Europe, which
held back dairy sales growth in the final quarter, while
pressures in the Chinese market weighed on baby food sales.
The market for baby food products in China has been hit by
earlier safety scandals, while China has also tightened
regulations on the purchase of foreign goods over the Internet
to favour domestic companies.
British consumer goods company Reckitt Benckiser is
expanding in the baby food formula market after agreeing to buy
Mead Johnson Nutrition for $16.6 billion.
Danone shares were up 0.1 percent in mid-session trading.
"We are strongly encouraged that management is focused on
driving sustainable profit growth as opposed to top-line growth
at any cost," said Liberum analysts, who maintained a "Buy"
rating on Danone shares.
($1 = 0.9451 euros)
(Editing by Sudip Kar-Gupta/Keith Weir)