DAVY VIEW

Danone’s AGM update noted significant weakness in its Waters business, with Q2 sales expected to decline by c.30%. Regional commentary struck a cautious tone, with many regions experiencing slowing rates of growth. Our model already reflects a slower growth rebuild at Danone – with organic revenue growth of 0.2% forecast for FY20. We believe the equity has already priced in a more pedestrian growth outcome. To kick-start (from 2021 onwards) a runway for more sustainable earnings growth against an uncertain operating circumstance, we expect Danone to revisit productivity initiatives and accelerate portfolio management/development.