1. Trading Idea - Short Danone
Thursday, September 27th 2012
Company Description Investment Case
H1 2012 reported consolidated sales growth of 7.7%, 5.9% LFL. As
expected, Europe was the weakest geographical area (-0.1% LFL;
trading operational margin decreased to 11.93% from 14.16%). Asia
and Rest of the World showed strong performances, up 18.2% LFL
and 11.7% LFL, respectively. Reflecting a lower profitability in South-
ern Europe, H1 2012 trading operating margin decreased to 13.85%
(-0.61bps). Adjusted EPS was €1.51.
Market Price Data Ability to deliver above-average top-line and bottom-line growth
52-week High (€) 54.96 could prove tougher to achieve given the more difficult macro envi-
52-week Low (€) 44.375 ronment in Western Europe. Trading deterioration in Southern
Last Price (€) 49.255 Europe (white brands are an increasing threat), mainly Spain, contin-
YTD Change 1.41% ues to be a great concern.
Mkt Cap (€bn) 31.679 At their H1 2012 earnings report, Management maintained their
Float 81.2% FY12 guidance, established at the time of last June´s profit warning.
Source: Bloomberg Nonetheless, Danone’s Western Europe Fresh Dairy businesses
could affect the group’s operational performance (sales and mar-
gins) in the coming quarters.
Analysts Recommendations:
Danone announced that it will purchase two minority shareholders
in Spain. This could cause some market concern, given the current
weak outlook for that country.
Danone is a company with attractive long-term growth prospects,
and it trades at a discount to European food peers. But, after last
June´s profit warning, the market will probably wait for increased
Source: Bloomberg
visibility.
Market Multiples Technical Comment
P/E DY EPS CAGR Debt/Equity
2011/13
2013 Est. 2013 Est. Est 2012 Est.
14.61 3.24 8.02% 1.63
Source: Bloomberg
Financial Highlights H1 2011 H1 2012
Sales (€ mn) 9,728.00 10,475.00
Operating Margin % 14.47% 13.85%
Trading Operating
Income (€ mn) 1,407.47 1,450.88
Change % (YoY) 3.08%
Source: Danone's Half Year Report
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