DAVY VIEW

Danone will release FY21 results on February 23rd followed by a Capital Markets Day (CMD) on March 8th. Cost inflation indicators remain elevated – as such we believe FY22 earnings risk (margin) is skewed to the downside. Our vigilance on margin progression is premised on ubiquitous price elevation across Danone’s major cost buckets. In the report, we present an updated snapshot of key inflation indicators. Pronounced cost inflation amid a radical transformation programme presents an unwelcome distraction for the new CEO and constrains brand re-investment flexibility. We reiterate our ‘Neutral’ rating.