EU CONSUMER STAPLES: Danone | 1Q24 Results

(BNFP; Baa1/BBB+) 

Danone, our lowest beta pick in F&B, is moving onto its 6th straight quarter of volume and organic growth. For comparison Yankee peers General Mills and Kraft Heinz have logged 5-quarters of organic falls over that same period. Danone does have a M&A appetite (net 1.9x vs. implied 2.0-3.0x target) which was reaffirmed today. We don't think credit needs to panic; it has generally been bolt-on and investing in the higher-growth categories it operates in should be welcomed. On RV. Danone's outperformance is priced. The curve to watch is GIS; new 7y giving a sizeable +50bps above Danone. If General Mills can stop sending all its cash to equity holders and instead invest some in building out a nutrient-dense product line it may be able to close that gap.

• Q1 LFL +4.3% (volume +1.9%, price +2.4%)
  • China, North Asia & Oceania +10%, LATAM +9%, NA +3.7%, Europe +2%
  • All regions positive volume growth except LATAM which was blamed on rainy weather (water heavy portfolio there)
  • Positive volume growth in all three categories: dairy products +1.5%, specialised nutrition +3.1%, Waters +1%
  • FY guidance unch; LFL sales +3 to +5% and adj. EBIT margin to expand