Danone cuts European jobs on weak demand

Now Reading:

Danone cuts European jobs on weak demand

Text size Aa Aa

Danone is to cut around 900 jobs in response to falling sales in southern Europe.

The world’s largest yoghurt maker said it is working on returning to more profitable growth next year, even as it forecast operating profit margins would continue to fall this year on a downturn in demand in Europe.

The layoffs – over two years – involve around 3.3 percent of the French company’s European workforce of 27,000.

Underlying sales for last year rose by 5.4 percent to 20.87 billion euros, but Danone – with just over half its market in Europe and 38 percent in western Europe – is more exposed to the eurozone debt crisis than its rivals, Switzerland’s Nestle and Britain’s Unilever, both of which achieved better growth last year.

Chief executive Franck Riboud promised this will be “a year of transition, with vigorous development in business in our growth markets and a drive to strengthen operations in Europe”.

As well as falling sales in places like Spain, Danone is also being hit by high costs for raw materials and packaging.

Activist pressure

In addition the company is under pressure from a US activist shareholder to improve its performance.

Nelson Peltz, co-founder of investment firm Trian Fund Management LP, bought a one percent stake in Danone last year.

The billionaire businessman, who often challenges companies he considers undervalued or poorly managed, said he supports Danone’s management.

But he has argued that improvements are possible through boosting operating margins, cutting more costs and abstaining from mergers.

Danone’s dairy division, which accounts for about 60 percent of group sales and nearly 50 percent of profits, is now the group’s slowest-growing business.

The division posted a sales rise of 2.0 percent in 2012 against double-digit growth for water and baby food.