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Danone has raised its full year growth forecast after experiencing strong third quarter growth driven by a double-digit rise in pricing.

In the third quarter of 2022, consolidated sales stood at €7.3 bn, up 9.5% on a like-for-like basis.

Danone saw pricing rise 10.9% in the quarter, with volume/mix down 1.4%.

Reported sales were up 19.1%, benefitting from foreign exchange rates, in particular the appreciation of the US dollar and various Asian and Latin American currencies against the euro, as well as the positive organic contribution of hyperinflation geographies.

Europe posted sales growth of 6% in Q3 2022 on a like-for-like basis, driven by 8% growth in price, while volume/mix declined by 2%.

Dairy was up 2.2% growth in the region, with a contrasted performance by geography, with sales and volumes impacted by portfolio choices and temporary delivery suspensions in some countries such as Germany and Belgium. Other countries benefited from the good momentum of key brands like Actimel, Danone, Yopro and Danette.

North America sales were up by 11.2% with growth driven by accelerated pricing, up 10.2%, and by resilient volume/mix, at 1%. China, North Asia & Oceania posted sales growth of 6.8%.

Due to the strong price-led like-for-like sales growth, full year organic growth is now expected between 7 and 8%, versus 5 to 6% previously, while recurring operating margin expected above 12%.

CEO Antoine de Saint-Affrique commented: “In what remains a challenging environment, we continue to display consistent progress in all aspects of our Renew agenda, with active portfolio management and a disciplined approach to boosting our winners, fixing our underperformers and driving our core, as exemplified by the ongoing transformation of our European dairy platform.

“Q3 was another quarter of strong growth, with sales up +9.5% on a like-for-like basis, led by a sequential growth acceleration across all our categories and geographies. We now expect LFL sales growth between +7 and +8% in the full-year 2022.

“We continue to implement pricing actions in a responsible and disciplined manner, while focusing on the quality of our execution and reinvesting behind our brands and capabilities. This shows in the performance of our Specialized Nutrition business, led by Aptamil, in Waters, where our evian, Bonafont and Aqua brands continue to perform strongly in the marketplace, but also in EDP, with the resilience of portfolio, notably in the US, Canada and Japan.”

Danone shares are up 1.5% to €49.14 on the release.

Morning update

The board of Swedish Match has recommended that the shareholders accept the increased offer from Philip Morris to buy the business.

On October 20, Phillip Morris announced an increase of the price of its initial offer to SEK 116 per share amounting to approximately SEK 176.4bn (£13.9bn).

The revised offer represents a premium of 52.5% compared to the closing share price of SEK 76.06 on May 9, 2022 (the last day of trading prior to market speculation regarding a potential public offer for the company) and 60.4% compared to the volume-weighted average trading price of SEK 72.33 for the shares during the last 90 trading days ended on May 9, 2022.

On October 25, 2022, PMH announced that it had received necessary approvals from authorities for the offer, subject to its divestiture of Swedish Match’s subsidiary SMD Logistics AB following completion of the offer.

The board previously recommended the Swedish Match shareholders to accept the Mayb offer and now receomments shareholders accept the revised offer.

However, the resolution to accept the offer has been supported by all board members except for Pär-Ola Olausson (appointed by the union IF Metall).

Pär-Ola Olausson is of the view that Swedish Match has the competence and the experience to remain independent in the long-term and that the terms of the revised offer do not reflect the long-term fundamental value of the company.

Elsewhere, the BRC-LDC vacancy monitor for Q3 found the overall GB vacancy rate recreased despite rising rates putting shops at risk.

The GB vacancy rate decreased to 13.9% in the quarter, which was 0.1 percentage points better than Q2 and 0.6 percentage points better than the same period last year.

This was the fourth consecutive quarter of falling vacancy rates.

All locations saw improvements in vacancy rates in Q3, with shopping centre vacancies fell to 18.8%, down from 18.9% in Q2 2022, high street vacancies down to 13.9% from 14.0% in Q2 and retail park vacancies down to 9.7% from 10.2%.

Geographically, London, South East and East of England had the lowest vacancy rates. The highest rates were in the North East, followed by Wales and the West Midlands.

BRC CEO Helen Dickinson commented: “The overall shop vacancy rate improved for the fourth consecutive quarter; however, vacancies remain higher than pre-pandemic levels. Some locations are benefitting from a pickup in tourism and a gradual return to offices, but levels of footfall are still below those of 2019.

“This gave some businesses the confidence to start investing, opening new stores around the country, especially in Retail Parks. But the North-South divide is again laid bare in these figures. While the North has seen some of the biggest improvements in openings over the last year, they still have some of the highest vacancy rates in the country, with one in five shops closed in the North East.

“The costs of operating in many towns and cities remains high and demand will be tested by the fragile economy and falling consumer confidence in the lead up to Christmas. Higher costs are already pushing up prices and the industry faces a government imposed extra £800m business rates bill from April 2023. This will force many retailers to make tough decisions about whether to invest in new stores or close existing ones. Government should freeze business rates and reform the broken transitional relief system. This will support investment in communities across the country and help keep prices low for consumers.”

Lucy Stainton, commercial director, Local Data Company, added: “Our latest analysis of the physical retail and leisure market across GB as a whole shows a sustained level of recovery at a time when further economic headwinds have been well-documented. With a decrease in store closures compared to the same time last year, in parallel with an increase in openings, vacancy rates have continued to decline as we look to the end of 2022.

“The pandemic proved the final straw for a number of ailing retailers. The CVA and insolvency activity which typified the most challenged end of the market in the COVID years caused a significant spike in empty units, which are now slowly being reoccupied.

“Independent businesses in particular have continued to flourish as consumers remain loyal to their local high streets. However, we can’t ignore oncoming economic pressures as consumers face a winter of increased caution and reduced disposable income. Just as the market has started to find its feet, we are now about to face a new round of tests— but perhaps the lessons learned during the pandemic will help chains and independents to weather the coming storm. The latest GB figures are encouraging but should still be viewed with real caution, and we would predict that this increase in occupancy could slow as retail and hospitality businesses grapple with a tough winter.”

On the markets this morning, the FTSE 100 has dropped 1% to 7,005.1pts on weaker than expected tech stock results in the US.

Risers include Bakkavor, up 5.1% to 97.7p, AG Barr, up 2.9% to 454.8p and Nichols, up 2.2% to 1,160p.

Fallers include THG, down 6% to 58.3p, Deliveroo, down 5.8% to 84.7p and Ocado, down 3.2% to 479.4p.

Yesterday in the City

The FTSE 100 closed up 0.3% yesterday to 7,073.6pts.

Unilever ended the day down 0.1% to 3,865p despite hiking its full year growth forecast as it warned of €2bn of inflationary costs to come next year.

Fallers included Parsley Box, down another 27.3% back to just 1.6p per share, Glanbia, down 5.2% to €11.42, Kerry Group, down 3.4% to 89.5p, Coca-Cola HBC, down 3.4% to 1,840p, C&C Group, down 3% to 160.5p and Deliveroo, down 2.7% to 90p.

Risers included THG, up 3.3% to 62p, Pets at Home, up 2.9% to 298p, Devro, up 2.1% to 175.2p, Finsbury Food Group, up 1.1% to 89p, Hotel Chocolat, up 1.1% to 136.5p and Bakkavor, up 1.1% to 93p.

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