Danone steps up health focus to boost growth

By Dominique Vidalon and Agata Rybska

PARIS (Reuters) -French food group Danone will step up its focus on health and medical nutrition as it seeks to grow sales and boost cash generation from 2025 to 2028, the company said on Thursday.

The maker of Activia yoghurt, Evian water and Aptamil baby food expects to achieve annual like-for-like net sales growth of 3-5% for that period, in line with the target it set for 2024.

That should allow Danone to deliver a double-digit return on invested capital (ROIC) and progress towards its long-term free cash flow target of 3 billion euros ($3.2 billion), it said ahead of a presentation to investors in Amsterdam.

Danone shares were down 3.5% in morning trade, with some analysts disappointed the targets were not more ambitious

"There was nothing in there really that would make people say 'Oh my God, this gives us new confidence'," Bernstein's Bruno Monteyne said.

"The two new and improved targets about free cash flow and ROIC are not exactly very challenging, and investors were hoping for more momentum behind the turnaround story" he added.

Robert Schramm-Fuchs, portfolio manager at Janus Henderson Investors, told Reuters on Monday the expectation was for Danone to keep targets unchanged from the ones it set for 2022-2024.

CEO Antoine de Saint-Affrique has attempted to stabilize Danone's sales and build more predictable revenues since taking the helm in 2021.

The company plans to diversify, making itself less reliant on its yoghurt and water brands while tapping into what it sees as a "tipping point" in the food industry where "health, and the role food plays in health, will become more critical than ever."

This would include scaling up, and seeking more acquisitions, in medical nutrition, de Saint-Affrique said.

($1 = 0.9334 euros)

(Reporting by Dominique Vidalon, Agata Rybska; Editing by Michael Perry and Mark Potter)